I have been reading allot of Darkstars posts and found this order flow stuff very interesting.
So I have been looking around the net for Order flow info and just found things about "tape reading" and level 2 orderbooks etc but here is my take on it:
Since the FX market is OTC, there is no "center" orderbook or whatever I should call it. What we have is FXCMs orderbook, OANDAs orderbook etc. which wont help at all because no big banks or big indivduals trade their order thru these small retail brokers.
Now, the second thing is that the FX market moves so god damn fast, how would ANYONE be able to process all that fast moving info and reading a fake hand on bid/offers to take a counter trade?
What this boils down to is really my question, is there any way of localizing where the orders MOST LIKELY will be ON A CHART.
I?ll give you an example, as a rookie: I think as a FX loser. And this was once portrayed to me by the market in a way that made me think "what the FUCK are you doing".
This is what happened:
The market trended down strongly, then was in a consolidating or congestion, easily drawn by two horizontal lines.
Fair enough I thought, I put up an upper and lower horizontal lines which also created my boundaries.
As smart as I am, I put up breakout orders BOTH directions (I know, I'm a sharp, greedy little kid.. Trying to catch both movements!!)
So how does the market humiliate me? Well it trades up and hits my order so I'm positioned LONG. Up a couple of pips and then moves waaay down and hits my stop-loss at the bottom boundary (remember the two horizontal lines?).
What does that tell me?
That tells me that I am STUPID. That tells me that my entry was someone elses short and my stop-loss was someone elses take profit. It almost feels like someone took my girlfriend really.
So this made me think, I have seen allot of traders using order flow in the stock market (obviously because it's easier since it's centralized) and almost all other markets but not the FX.
Let's say it's impossible to use a order book in FX: how would we then go about order flow? Is there any possible way of "thinking" about where the orders may lie?
The first thing that hits my mind is that there should most likely be stop-loss order below a consolidation range. And also there should be some market orders SHORT.
And reversed, there should be long order above the range, trying to catch a breakout.
But this can't be it, can't it? There has to be something more! (Ofcourse I understand that there is no way of knowing 100% where all the orders are).
So this is my take on what I have found on order flow and I am looking for more, it sounds extremely interesting!
And hope you guys (n' gals) can help me out here, how to "think" where the orders should be and perhaps point me to the direction of getting more info about order flow.
Thank you and hope you all had a great new year celebration!
PS. Sorry for my English, if you do not understand what I mean I will happily try to explain it more.
Had you inversed your orders (short at the upper limit, buy at the lower) it seems like you would have been fine.
Ah yes but you see, this goes for every single trade that is a loss.
Every loss trade should have been reversed right?
But it is rather that the THINKING on my part has to be reversed, which is why I started to ask the questions.
Hope you don't misunderstand me, I found your post very valuable.
There was a third post here, which has been erased now that contained much info and the guy seemed like he knew what he was talking about. Where did that post go?
Your thinking process seems right to me :
- you studied the chart and found a trend ;
- you used previous experience to create an analysis that can have an edge ;
- you invested based on all that, you lost and now you're trying to understand why and move forward.
The progress will be slow but at least you might become a profitable trader that way later on.
Hint : in my opinion, going the way of market orders/indicator signals isn't really profitable.
I didn't see the third post you are talking about....
Hmm interesting thing you stated there, that the progress was slow. Are you of the idea that there is a smarter (and therefore a faster) way to go about the learning process? If so, please tell me!
Ah, yes, maybe I read it in a wrong thread never mind that.
Yes, you are very correct in this, being it's OTC and we'll never have good access to data unless we're a big market maker. But this is my point!!!
Is there any other way to go about order flow if not by Market Depth or Level 2 order book?
My idea was that you most likely should be able to see inefficiencies and a misbalance in supply and demand just by looking at the chart.. But the question is how to go about this
Thank you for the link on the blog, but as I stated above I already know about futures and well aware that there may be correlation but the way I see it is that if others can see it on FX Spot, I should be able to do it also if I study properly.
The way I'm seeing this is all about price, and the chart trends and consolidates as a function of a 'war' if you like to call it. If demand wins the war against supply there is a inbalance and we have a trend until they meet at another area to fight on (consolidation). Now this is really economics course 1 and I need to study more, because there is no way this can be applied to trading.. Not in this simplicity.
Thank you guys.
Only looking at charts and guessing here and there are sitting stops - it doesn't work like that.
There are lot of different stop hunting pattern because the participants act different in handling their weak positions if they are trapped.
You will never know where stops are and how far it needs to drive the price to liquidate that pool.
Yes I understand that and you are very correct in this. You can't just guess where the stops are because in the end you'll get burnt bigtime.
The last things you are mentioning here are of very much importance. The ones with the weak positions and how they handle their positions. I didn't even THINK about that group which shows how little I know because this is the group I should be targeting. So thank you for that one!
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So it's essential to know the size of that pool and how it could be hunted depending on the market condition.
Furthermore you have to identify which market participant is trapped and who is in control.
This is also a very good comment, Darkstar mentions this also, that one should find which participant is doing which move etc. And I have an answer to how I am going to learn it!
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Originally Posted by Darkstar
Carnegie my friend, you are wise beyond your years. That is EXACTLY how you find the orderflow. Nice work.
Thanks for the encouragement Darkstar, being from you, I really feel like I have a chance at this
Anyway they're all your own words, so it's nothing that I have figured out myself!
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Originally Posted by seagreen
I know Oanda orderbook is open for public, but haven't heard of FXCM. Or did you just mean that they have their book but don't disclose it?
Oh sorry for that one, I just chose these two brokers as an example. So you could say Interbank or something (although I don't know if they disclose their book).
Anyway what I was trying to say in this post is that I should try to get my shit together and gain more knowledge about the market. Every newbie is looking for systems and don't understand that if you don't learn the simplest concept of WHY PRICE MOVES.. Every single system will fail in your hands.
First off I'll read Trading and Exchanges: Market Microstructure for Practitioners and leave some comments and questions in either this post or start a new thread. We'll see about that.
Hopefully in a couple of months I will have gained more knowledge of the market.
In the meantime..
Good luck to you all and I hope I will talk to you soon.
threads like these always fade in nothingness...
come on guys, we learnt that to be consistent we need to exploit market inefficiencies, and orderflow gives you a chance in that, but how with only a chart?
Let's get some new ideas here.
Very good initative there, Scott. Thank you.
I have also noted that the order flow threads always end abruptly. But in this case I have written in the first page why I stopped writing. You cannot see order flow blindly.
The amount of reading necessary to understand the structure of the market is incredible but I am more than willing to spend my time at it.
Dragan:
Thank you for your comments. It is obvious for everyone that this is not a place to spend one month and become a millionaire on. If banks or brokers are our counterpart in the transaction then it is obvious that he who created the game will be the one winning.
But here on FF we have a couple of guys that have proved that if you do your homework then it is very possible to be in the winning 5% or whatever that number is.
Congratulations on your wins btw. I have also read about that but it is not in my interest as I want to read as much as possible about order flow. And btw, there is a thread on FF about these kind of trades, i.e. looking at what the "herd" is doing and fading them.
Thank you for recommendations (books), I have already read T.W as I was interested in VSA a while ago. A good read.
I do like the language style you present your thoughts in, your English is quite fine.
Just out of curiosity do I ask this... Why do you think your thought process needs to be changed? Just because one of your stops was taken?
The thought of process needs to be changed because I understood that I have not a single clue about WHY things are happening. Why did it fail? How was my counterpart thinking?
Now, I have attached a picture to let you all know how I am going about all this.
This is EURUSD 1HR recent price action. Let's say we shorted on the break of the pinbar. We are in big profit at the consolidation I have marked on the chart, with a blue and black horizontal line.
When this consolidation happens, there is a phase of accumulation/distribution. We don't take any position inside the consolidation, we just wait and see which way price will break out and this is how we do it:
Since we're already short we place our Stop-Loss just ABOVE the consolidation. You may ask why?
If the price would break out on the LONG side of the consolidation, most likely the downmove is over, and our stop-loss in this case is a order for closing our SHORT trade which results in our broker seeing this as we are going LONG.
Likewise, techincal traders anticipating a move up here since it is a Support and Resistance area have their stops (MOST LIKELY, NOT GUARANTEED) just below the consoldation area, and if price moves down there their stops will result in SHORT orders and price will cascade down.
The idea is that there are technical traders trying to catch a long BREAKOUT from the consolidation by setting up orders above the consoldation price action. Equally, there are breakout traders trying to catch a short movement (i.e. having stops below consolidation) and there are those with stop-losses below consoldation.
See what I mean? In each case (up or down) price should cascade in the direction. BUT IT DIDN'T. And I have to know why, I just can't live with the idea that something happens 95% of the time and 5% not. I have to atleast know WHY.
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Originally Posted by dragan53
thanks for all ur comments,i mostly learn all this stuff,as i make a trading mistake then fix it up and get my money back,lol
Well I believe it is the best way to go about this (I don't know much so don't rely on me though) IF you are the kind of person that learn from your mistakes. But as long as you get your money back it's better than allot of us
Take care and good luck.
Quote:
Originally Posted by scott89
So you mean that you cannot see it on a simple candlesticks chart? That's what I'm trying to do.
I know, market structure understanding is needed, otherwise it's like playinga tetris game without knowing what you have to do...
Hey Scott,
In all honesty, I would be lying if I told you yes or no. I will from now on spend my time reading until I understand all of this, because as of right now, I don't have a single clue.
I do believe though, that it should be possible to do it from a candlestick chart, and the only way to know this is continue to study and PRACTICE all of your ideas on the market to see if it works or not!
Yes, I agree with you on that one. Knowledge of the market structure is needed because that will most likely give answers to allot of the questions Technical Anlysis cannot answer to us. But that is another discussion.
Thank you all for contributing. Take care and happy trading.
Also consider that even if there are good sized sell orders below consolidation, there can be already existing shorts that push below consolidation and buy back their positions from the sell orders below consolidation, thereby consuming the breakout/stop loss positions without causing a price cascade to the down side - in fact if the existing shorts are larger than the sell orders down there, their buying back will likely cause price to go right back up (and then the new shorts will have floating losses and will start buying back their positions...
Your comment here is very good and I quoted the part most interesting. Isn't this what is referred to as "stop hunting"? Triggering the stops and the big guys buy into the short orders that are triggered in the move down?
Thanks eurotrash, happy that you could join the thread. I have read many of your posts and you are one of the few in this forum that have knowledge about market structure.
Following along with and trading along with the healthy appetites of liquidity takers, while they remain hungry. Using recent balance-of-power (pivotal) areas to see who's chewing though who's orders and positions. That's a way of viewing market activity that works for me - of course, it will forever be a work in progress.
Thanks for the great posts, guys!
P.S. With this post, I will bring back my liquidity-consuming pac men avatar!
Hey FXSurfer, thanks for your posts! btw, maybe the name should be liquidity hunters instead of stop-hunters right? Although I have to say that stop-hunters sound more evil.. maybe that's what they're after
Anyway I have a questions about something that I don't understand and tend to read allot.. What exactly are these "pivotal" areas?
Obviously I understand what a pivot is and also pivot points, but do they mean something else in order flow trading? And what is a "balance-of-power"?
Trizzle & Sauron:
Thanks for both of your contributions guys. Trizzle you had a nice eye-opener there and explained everything well, and Sauron thank you for your advise.
I think the problem here was that you guys focused a little bit to much on this particular chart I added in my last post, the chart was only an example fo HOW I am thinking about the stops and where they would be. In either way, you guys made a good effort in explaining and thank you very much for that. Let's continue our discussion!
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
These are the prices that the market found the liquidity that it was looking for thus, causing price movement to halt. The amount that was encountered is shown by the price movement back the other way. I myself just watch the market as it goes to see where they end up showing themselves. Mathematically calculated pivots? Not for me. Of course, they are used by many.
None of this is really "Order Flow" though, right? Just kind of the "flow" part. Oh well, we've got to work with what we have!
Hmm.. Interesting that is what you wrote there, it seems as if liquidity really does play a major part in the order flow mindset.
Now my idea from this is that maybe there is liquidity at a certain place, maybe a support area or something, then major banks will trade to that area in order to execute their order there.. Would this be possible?
So in reality, we are looking for where the most likely "order-flow" area is, and trading toward that direction? But what happens when we're there??
Anyway I have another question that has been bugging me for a while and I will ask it here.
Anyone been looking at dominos price-order flow thread?
I found dominos thread interesting but it seems to me as if it only is a part of breakout strategy? Does anyone have any experience with it?
Thank you very much.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I would agree from a microstructure standpoint that a sideways market is highly liquid zone. As trade moves sideways, more players take a side and those who are wrong are inevitably squeezed out. This is a fine idea in theory, but you need to find a way to test your premise, see what the numbers really are.
Yes I also thought about the sideways market being liquid because there are buyers AND sellers there, instead of in a trending market where there are either only sellers or buyers (now obviously not ONLY, but I think you get what I mean..). I have been thinking about "quantifying" my ideas, i.e. testing them but I don't really have any idea where to start. First of, what is a balanced market? Or even better, what is an UNbalanced market? How do I define this? How do I predict future orders? How does the market look when it is efficient/not efficient? How do I find the "trades" to capitalize on? Is it candlesticks? Now you see there are a million questions I have to ask before and in all honesty right now (without any knowledge) I don't even know if it's in or out.. So I really don't know what to test!
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My views continue to adjust as I learn more. If a trader has a chart pattern that is profitable over the long term, he/she is an orderflow trader in a certain sense, that is he/she can successfully predict future orders in some way.
Yes but I think there is a difference in what we view in orderflow traders. I wouldn't like to trade the "classical" orderflow and what that means.. By that I mean I don't want to trade L2 + DOM etc. I want the orderflow mindset rather. So in reality, are we predicting future orders, or are we just following along the existing ones and watch how they develop?
Quote:
My only advice would be to figure out a systematic way that quantifies your idea. For example, how do you define market compression? How do you define an entry and an exit? I would be careful not to rely on a manual/visual approach. I'd suggest looking at something like a simple standard deviation indi in your tests--what better to see compression?
Yes I agree with you but I commented this earlier, I don't have any idea where to start. Therefore I need more knowledge, got to get reading ya know I don't even know what a 'market compression' is?
Also, I don't know what to look for in order flow, and how the trades look.. So how could I define entry and exits?
Thanks for contributing Scotty, I have read allot of your threads and hopefully you can continue to comment as you seem to know about this subject.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
scotty i would suggest for ur question that the answer is to read master the markets by tom williams
i also have a question,right now im demoing with oanda,as i want them to become my new broker,and in my trading activity it says that i earned interest ,
now im wondering how did i earn that interest,could that by any chance be a swap,
i found some basic info on swaps on wiki,and basically what they say it means,is that we are exhcnaging from a variable interest to a fixed interest between counterparties,
Please remove your questions as they do not have anything to do with the thread.
Thanks.
PS. I can't really see Scotty's question and really don't see where Master the Markets gets into the picture. It's mainly about VSA with some point about how the maket works and how smart money trades.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Yep its basically everything... Liquidity is to a market what oxygen is to humans.
P.S why does everyone keep saying "premise". hehe
Interesting thing you said there cindy. Could you explain more? (I'm still going to read Traindg & Exchanges, but I still want some ideas on the topic).. what's liquidity to the market? Why is it so important? Why do traders care, and how can one use it in their trading?
Thanks.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Thank you both for your good comments and explanations. It seems as if liquidity really is the backbone of order flow trading.
Silly me, I have always turned to the next page when I read info about liquidity and volatility, had me a nice heads up there, thank you guys (don't know about you tho' cindy ).
Quote:
Originally Posted by grkfx
Predicting future orders is all about knowing what will generate order flow. Get into the minds of the market participants that are generating order flow and moving prices and figure out what will cause them to start executing billion of dollars in aggressive orders.
I have been thinking about this and to be honest it kinda scares me. And I'll tell you guys why, maybe you can explain to me what's wrong in my thinking here.
If order flow isn't about candlesticks or bars or anything in those 'manners'.. then WHAT is it? Are we looking for an area?
Let's say the idea is that we are looking for areas where order flow info tells us to short. How do you handle Risk/Reward? How do you not get stop-hunted ON YOUR OWN stop hunt? So if it's an area, what is the boundaries of it?
Many of you might wonder 'why is this guy talking about candlesticks all the time when it is order flow'.. well in all honesty, I don't know how an imbalanced market looks like, I don't know what to look for, so if it would be a candlestick in a certain area, that would be easy! Easy idea of where to place entry, stops etc.. See what I'm trying to say?
But in reality, my mind is telling me that it is impossible to be candlesticks or ANYTHING technical.. since we are HUNTING for the technical guys/girls (cindy..). So it really is a question for me to find out, where we're looking for!
Quote:
You don't need candlesticks or any other chart for that matter to execute trades based off of order flow. Now a chart may be helpful, it could also be deceiving. If the reason for the market moving and order flow being generated has nothing to do with a chart, then you don't need one.
OK so this is what I was talking about, Gaston also mentions that there is info OUTSIDE of the charts. What is this info? Is it news? But order flow has to (by SOME means) be generated from a chart, because we're selling/buying from uninformed technical traders and watching what they're doing to profit form their mistakes, and this was exactly the idea with this post, what is IN THE CHARTS, regarding to order flow!
PS. Thanks for the encouragement and thank you for sharing your thoughts, they where very informative.
Quote:
Originally Posted by Scotty B
You'll get there eventually, just keep on keeping on. All I meant by compression was consolidation. I mentioned standard deviation as an example of seeing consolidation numerically. If you see SD falling, it tells you that volatility is settling down and or, the prices are tightening up around the mean. I can't say what your trades will look like, that will be your final conclusion after you've studied.
Good luck,
Jim
Aha allright sorry about tht one, English isn't my first language and I'm also not familiar with the maths/trading words.. yet
But Scotty I was thinking, how could you measure a consoliadtion "numerically" and how to do so with standard deviation? Have you done any studies with this (I assume you have..)?
Thanks everyone, take care.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Ok so we all know Darkstar would never give his trading ideas to anyone but only leaves bits and piece here and there, and since we cannot see what he does we can analyse it. (watch darkstar analize the market @ brazzers.com btw )
I'm sure many of you remember that Darkstar posted a thread called "Smexy trades". Well, in this trade he left TWO pictures of his two latest smexy trades. Now as said, he would never SAY what he did, but we can atleast take a look at what happened in the market when he entered.
I have attached an EURUSD 1HR chart (the one he had was OANDA 3HR) to this post.
There are three arrows in the picture. Two up and one down, obviously the two ups are long and the arrow down is closing posistion.
I can't read the chart (why he took the trades) as I don't understand yet what balance/misbalance is but from the 1HR it seems like he bought right on the low of the tail on the pinbar (the candlesticks is irrelevant).
When I change to the same chart in 15 min I realized something. They're all trades at round numbers.. Any ideas? Options?
The first LONG order is at 1.2150, second is sitting perfectly at 1.22. He closed the trade at 1.2450.
The only thing the second long order tells me is that it is an area that has been touched several times before, but what about the first trade at 1.215?
This is for me to understand. Take care everyone!
Oh and BTW. I just go my Trading & Exchanges book
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I can tell you that your close to figuring out the stop hunting thing though.
Knowing how it ends I know exactly what piece your missing, so I'll give you a hint:
Think about how price change and the distribution of liquidity interact. Your looking for a disequilibrium in that distribution which should give you a highly predictable outcome. Trade with the anticipation of that outcome and you have the makings of a high probability system.
Now we're close guys, let's make this happen!
I'm thinking so much my brain is on overload, but how the hell am I going to use 'disequilibrium' in this?
Thank you.
__________________
First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I think I have an idea here.. Darkstar says we're soon there on the stop hunting patterns, and MAYBE, that has to do with all the intelligent explanations form all you guys + my chart about where stops are located
But this made me think.. Aren't there two (atleast what I know of) different stop hunting patterns?
Think about it, or maybe I'm wrong here but let me explain:
Stop-hunting pattern #1:
This kind of stop-hunting pattern is what happen to all the noobies. Let's say they want to short, so they get into a position short and places their stop at a round number, say 1.3400. What happens is that the market SPIKES up to 1.3405 (random number, just the idea that it spikes and stop hunts) and takes out all the stops at the round number.
What happens after this is that the market then trades down just as the noobie expected, but this time it does that without him/her on the trade.
This type of stop-hunting pattern SHOULD BE (in my mind) created by those who NEED the liquidity to dump their existing inventory to someone, i.e. the noobie whos short trade has a stop-loss triggering LONG, so he has to BUY from someone and that buying is going to be from the stop-hunter who dumps his inventory to the noobie.
This kind of stop-hunting pattern does look like this picture(I think):
Let's say the noobie shorted on the bull bar just before the big pinbar. He placed his stop on 1.34.. He got stopped out by a stop-hunter, and his long order bought the stop-hunters (in this case really he is a LIQUIDITY HUNTER) inventory.
To repeat myself once again, the stop-hunter hunted these stop because he needed the liquidity that the stops had, so that he could dump his existing shares/currency into that liquidity. See how I mean?
Stop-hunting pattern #2
This is another type of stop-hunting pattern, it looks more like the breakout pattern. It is the reason why I started this thread so a picture is in the first page. Let's say we have a consolidation, and stops are just beneith the consolidation, and they are at a round number. To trigger the trending move down, the stop hunters trade down to the round number where they know that the technical traders who were long have their stop-losses. And their stop-losses are SHORT orders so this will result in price cascading down.
Look at this picture, it is a bad example but it's just to make a point. Marked moved down there and then consolidated for a while, obviously there is some take profit there and let's say that some where long, their stops were at the round number 1.2250.
Stop hunters would trade price down to 1.2250 where they know the technical traders short orders sit causing the price to blast down.
These are my two ideas of two different stop-hunting patterns, and obviously, different mentality should be applied to both situations.
Am I correct in this or is T&E starting to make me fucked up?
Thank you, have a great weekend. I won't..
__________________
First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
heres my vsa take on this
im just finishing reading mtm
Hehe dragan my man, I can see you like Master the Markets and it's really good that you have found your way of trading (being VSA) but this thread really isn't about VSA it is what is happening BEHIND what we see.
I'm 100% certain you can contribute but put that VSA thinking on the side and think about what's happening with liquidity etc. as that is what we need to understand in this case! But thanks for your post, there was a time where I really was into VSA, I read like three books and several pages in a really short amount of time, but couldn't get my head around what was happening, so I moved on, but maybe you understand more about it than I do (or, I'm sure you do!).
Take care and have a great weekend.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
IMO the more you try and turn what's being discussed (loosely) here into a pattern search - you start drifting off course.
Let's look at what IMO drifting completely off course would be:
(Static, hopeful, lazy mindset)
Identify a particular pattern.
Predict the future, place your trade and cross your fingers.
In contrast to:
(Actively engaged, aware of change, working mindset)
Working toward developing a market generated feed-back oriented view of the market.
Placing your trades within a discerned condition and holding, adding, exiting based...
It's easier to predict the future and cross your fingers
Unnamedplayr: I think I know what you're talking about now, about global money/liquidity shifting. But I need to think about it a little bit more, but I think I'm on the right track.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
If you can crack that code you will be able - with some practice - to "read" the intentions of the big players before price will move in that direction.
Triggering some stops is then just a byproduct.
Identifying the imbalance before the outcome occurs puts you in the first best seat.
It's also a kind of front running.
I see what you're saying but I have no single idea how to get there. Darkstars hint + your hint gave me some ideas about the stop hunting thing, but I think I need to study a little bit more before I present them.. but I am actually quite sure about them.
It is the identifying of the imbalance I am on the quest for, I really want to understand what it is. But I really don't know what to start with and what to look for.
Quote:
Originally Posted by robdee
Carnegie, I like your question. Developing the ability to visualise stops in 'clusters' in a measurable and consistent way is a very useful goal.
One thing I look for is an accumulation of stops above retraces in a downtrend.
For example when price action is making lower lows and lower highs then it is safe to assume that traders who are in profit are motivated to protect their profits by moving stops down with each lower high.
When the distance between the 'lower highs' is more significant (say 150-200 pips) then the profitable short traders...
Hey robdee glad you could join.
I see what you're saying here and it makes sense 100%. But still I have a feeling that it cannot be just this?
You see domino (as I see it) uses the exact same approach, and to me, it feels like it is more or less a breakout trading pattern.
I like the chart you posted, and it demonstrates what I mean by breakout pattern. See what we do here is place orders just above/below recent high/low, and if there are several dips to that area then the market has accumulated much more stops below it. BUT STILL, it makes me feel like it is an incomplete (or even IS NOT) stop-hunting/order flow pattern.
Maybe someone could explain where my thinking gone wrong here..
Thank you.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I now understand why all the order flow threads fade out. Because nothing of value has been said. What does FF market sentiment have to do with order flow mindset/stop hunting?
My intention here is not to argue with anyone but what I really would like to say is that if you have questions about VSA or other types of order flow PLEASE START YOUR OWN THREAD.
I am currently studying the shit out of T & E but I wanted this thread to still be active with IDEAS about order flow stop hunting. But this is not the case now, the last pages of the thread looks more to discuss VSA than anything other.
Please stick to the subject.
Thanks guys, hope no one got offended because it's not directed toward anyone in particular.
Take care
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I hear ya, Carnegie. I, too, am reading Trading and Exchanges. I big read...but I am tackling it...chapter by chapter. All fascinating stuff. THis thrread has been awesome. Thanks for starting it. I have printed out quite a bit of the posts and taken many notes. I really want to figure out how the internal market ...the REAL market ...really works. Not learn about some technical indicator, pattern, etc....other than perhaps how it might affect the orders coming in. Keep up the journey and questioning/understanding.
Good luck, I can tell you that you wont find anything here.
I am really thinking about reading EVERYTHING out there about market structure and then figuring out my own little trading system around it; i.e. how I see the market. Maybe it's the only way, it feels like the right thing to do now. It will take time but I guess it's worth it.
Take care
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Hmm.. in reality, wouldn't we need some kind of news service or something to complement it with our new understanding of how this imbalance looks like?
What I mean is that now that we know what it is, we have to know what OTHERS think about it, and therefore we have to understand MARKET SENTIMENT.
As I recall, darkstar used IFR right? Because it would be impossible to see this just on a chart, it would only be possible AFTER the fact?
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
It seems to me as if I am the threadstarter, and I am the one who right now knows/UNDERSTANDS the least of all of you.
SMJones you have pointed out to me what (I don't know what a stop hunt really looks like because I don't believe in my ability to find a stop hunt) a liquidity disequilibrium looks like, if that is what that USDCHF picture is?
Then this gives me an idea of what I should look for.. First I was thinking along the lines that I would see stop hunting(and liquidity disequilibrium) with candlesticks, then I thought it was an area.. Now it seems like it is a little bit of both.
I have attached your picture there once again jones and this is my take on it. I assume this is not a stop-hunt but rather a liquidity disequilibrium. (If it was a stop-hunt then please explain to me, where would these stops be? This doesn't seem like an obvious place for stops..)
Now I don't understand much of liquidity and equilibirum/balance YET, but I am reading more and more.
Anyway, this is how I see it and PLEASE explain to me if I am really wrong now.
In the green box we had an equilibirum or balance where the price was trading sideways because traders agreed upon the value/price. Then someone decided that it dollars was worth more he/she traded it UP and this spike was caused due to disequilibirum? = Much more bidders than sellers. Now after this there was a balance in price again but it broke down and I have a read line there of where I believe the stops should be.. Since price moved down like that there I am certain that there wasn't any balance (that's why it trended down).
But I am 100% sure I am missing some large parts here in my thinking. Why did it move down sharp instead of staying in a consolidation like before the sharp move up? Did the guy who bought have to sell his position causing this sharp move down?
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
A real hunt from today with stop liquidation:
Initiative move began with block orders backed up with hidden liquidity on the passive side
How, when and why was it a stop hunting move instead of a regular up move.
Now it's your turn to find out.
Hey unnamed, you always come with great stuff!
Hmm I have no real idea, maybe som were short with Stop-losses above parity number.. So those who were long could liquidate their inventory to the traders with the stop-losses?
But I need to more time to think.. I will think about this one.
Thanks!
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
SMJones post was quite illuminating now that I understand.
I have attached yet another picture, and if jones picture was to describe inefficiency.. then I have found another one that was 5 hours later
If you look at the USDCHF 5 min chart you will see that the moves look more or less like eachother but reversed:
The first one with the big yellow box spiked up and fell down right where it came from, and I would short on the red line.
The second box basically spikes down and retraces fully and I would have bought at the green line.
Is this what these efficiencies look like?
I have drawn a picture in paint. It appears to me as if inefficiencies look this way, the market moves sideways (or has an agreed value) and then it spikes causing imbalance and if someone fades it then it will most likely move up (in this case). But it cannot be this simple.. impossible
Quote:
Originally Posted by Trading & Exchanges page 79
Stop orders accelerate price changes. Price often changes because traders on one side of the market demand more liquidity than is available. When these price changes activate stop orders, the stop orders unfortunately contribute to the one-sided demand for liquidity. Stop orders accelerate price changes by adding buying pressure when prices are rising and selling pressure when prices are falling. They demand liquidity when it is least available. Ttraders say that stop order add momentum to the market
My question here is really.. WHY ARE WE FADING IT? Why not let the price cascade to next area of liqudity? Isn't that also stop-hunting?
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Hey Darkstar, I want you to read this post and really try to understand what I mean, and while you read it (and even before you began reading it) please understand that this is really meant with all respect in the world and I am trying to learn here.
You cannot understand the amount of SHIT about market microstructure I have been reading since I started this thread. To continue, you cannot understand the many questions I have been asking BESIDES the one in this thread.
I don't think the proper word for this is "lazy". Really I don't want to come forward as "the retail trader who never gave up"-bullshit but really I have been studying as a bitch and still I am not getting anywhere. I don't think it is a matter of laziness but rather it is a question that not many of us know WHAT and WHERE to look for things.
For you this might seem obvious (i.e. what to search for) because you already know this. And in my mind, you must be some kind of a ultra code-cracker something in the way of Tom Hanks in the Da Vinci code.
Why am I saying this? Easy.. When I started reading T&E I found some stuff and immediately understood what he was talking about in the book, because these concepts have already been explained to me by you and other people. BUT HOW THE HELL DID YOU FIND THEM?
I don't know how to explain how I'm thinking but look at it in this way: We are reading/searching the book because we already know what to look for.. When you started, YOU DIDN'T KNOW.
It is of utter interest for me to understand, how did you do this?
Really this post may seem as some kind of bullshit or something, but I'm really trying to learn how "to think" outside the box and the way I see it, you have to start thinking (about "the box") to think outside the box to start with
For you it's lazy, for us - we're just looking around and not finding shit because we don't know where to look and what to look for. This is also, WHY I THINK, most order flow threads just mess up in the end.
Look at the first page of this thread and continue to page 5. If you wouldn't have posted anything there (i.e. the clue you gave), this thread would not have been anywhere near where it is - and by this I mean infomation-wise and post count-wise.
I hope you will understand that I am not asking you this just because I want to learn more about trading, no, this is not the only reason. The fact of the matter is that I possess the exact kind of "what to look for"-mind as you do, but unfortunately, NOT when it comes to trading.
It appeared obvious for me and my teachers when I started school that everything within philosophy and psychology was pretty damn easy for me to find. I.e. "what the author meant", and was super-easy to comprehend. But it is unfortunate, that I do not have this sort of thinking when it comes to other stuff.. like trading..
Hopefully one of you will understand something from my jibber-jabber here.
Take care everyone.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
No offense guys but you re just not gonna learn this in a week. There is so much info on this thread already that if you can't see it yet then maybe you re just not ready
Personally I think it went down hill when people started posting price charts but each to their own. Now get out of this rat hole and go study
Funny thing you say there cindy.. Yesterday I looked at the thread and had the feeling that everyone knows more than I do and was really on overload trying to understand.. So I went to sleep, you know why?
Because in the back of my mind this has happened before.. Funny thing you said there: "There is so much info on this thread already that if you can't see it yet then maybe you re just not ready". That is exactly what I thought to myself.
So I went to sleep and said to myself I wont think "firmly" about this thread until I have finished T&E. Because at the moment, I'm just guessing on what you guys said with help of my vague concepts of what "liquidity" is (for example).
So, I agree 100%. There is more than what's on the surface. But I'm not ready yet.
Take care!
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
The way I see it, the most interesting part of Darkstar's picture is the area I've highlighted with the blue rectangle. That is the liquidity vacuum created by the shift lower in price - there are no (or few) remaining orders there. If large buy orders start coming in, price should pass through that area very quickly searching for liquidity higher up. I would want to be in a position to capture that move should it happen.
Which I suppose is visualized in your third picture, Scott.
This liquidity vacuum stuff is KILLING ME. So what if there is a liquidity vacuum there, in theory it might be, but it is impossible in practice because the dealers MUST have liquidity there, so there is no vacuum in reality? Also, I'm more than 100% that more orders will start pouring in and "block" that liquidity vacuum that was there (with sell orders) resulting in that price could never move back to that price area again. What is it that I am not understanding here?
Quote:
Originally Posted by dr_who
DS, its great to be able to communicate with someone else who has an IQ bigger than the size of his dick and I'm sure your million years of experience stands you in good stead, however, are you in profit trading FX ? Or are you a theoretician ? Nothing wrong with being a theoretician of course and I've read your posts and learned stuff I didn't know, however, making money by trading FX (or any other instrument of course) needs more than theory and it would be interesting to know if you're able to profit from your undoubted intelligence.
He is/will soon be a millionaire. I recall I read somewhere he said he was like 5k pips from becoming a millionaire.
Quote:
Originally Posted by scott89
So, a stoploss it's different from a limit order? a stoploss becomes a market order as soon as the stop price is reached?
As I'm seeing it, a stoploss NEEDS to be a market order, so that it can be filled even at worse prices, but still be filled, rather than not being filled because of a fast changing in price.
And I think that's why stoplosses are not viewed as limit orders on an orderbook
T&E: Stop orders accelerate price changes. Price often changes because traders on one side of the market demand more liquidity than is available. When these price changes activate stop orders, the stop orders unfortunately contribute to the one-sided demand for liquidity. Stop orders accelerate price changes by adding buying pressure when prices are rising and selling pressure when prices are falling. They demand liquidity when it is least available.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Hey DS, just curious if you recommend a specific couple of chapters to focus on in T&E. I recently got the book, but was overwhelmed with all the intrical information. What sections of the book will give me the best jumpstart on contemplating orderflow inefficiencies in the market? Thanks!!!
+1 to you. I never even thought about asking him to point out "good" chapters regarding order flow.
Today I have seen something really interesting in the market. Really, really interesting. I will try to build on it and see if it works out.
Thanks guys!
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Today I found something interesting (it seems to me that I still cannot see the moves until AFTER they happened) and even though I dislike pictures in this thread I will attach one to show you what I have been looking for.
There is a yellow box marking the move I'm talking about.
IF order flow thinking is that price moves because it has to find liquidity at certain places then in FX it is more than 100% that it will find liquidity at round numbers.
The move down below 82.00 is a perfect example of what Darkstar illustrated to us in the liquidity distribution (think: vacuum) pictures. Look at how the market spiked up on that bull candle (dont' look at the price cascade, look at that one bull candle starting from 81.90 to 82.10) erasing all of those short candles down.
I figured in this movement illustrates the exact same kind of movement Darkstar is talking about. The price moved down (price shift) and left a vacuum behind it, this caused an disequilibrium in the liquidity distribution (needs to find liquidity.. can't find it.. turns around and moves higher instead, why shouldn't it? It's a open one way UP. Nobody there to block the road (VACUUM)). And the funny thing here is that price moves up to the exact same zone it started the downmove from!
Now interesting thing here is that it is below a round number. The more interesting thing is that the liquidity distribution had an equilibrium after it moved up (see it stays in a consolidation between 82.10 - 82.20) and after that you can see that price exploded up.. Wonder why Obviously this was an disequilbirium in liquidity once again.
Another interesting thing is where price FOUND EQUILIBIRUM in LIQUIDITY AGAIN... GUESS WHERE?
You got that right - 83.00.. ROUND NUMBER
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
Auxesis my intelligent friend, as a matter of fact I took a long walk and thought about this right after I posted my last reply.
I wonder if this vacuum really works in real life, and if not how could we think about it if it doesn't.
Let's say this vacuum got blocked immdiately after the move down, then this high probability move up looking for liquidity UP will not happen.
So.. If this vacuum got blocked by more short sellers (latent) interested in shorting a retracement to the last area price moved down from (vacuum) wouldn't this mean it is the usual support turning into resistance idea?
Think about it.. If it was equilibirum there, then there is support. If it broke down and moved up to the last area there were equilbiirum (and can't move thru it) it becomes resistance.
So isn't this, in reality, what we see every day in the market by PA?
I don't know if I'm right or wrong here, maybe I'm way off.. But this was the thing I was thinking about...
Take care
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
As pointed out, the vacuum happened in cable at 3:30 AM central 1/21. you won't see it in the larger time frame. just the shift in market direction after the fact. If you have access to a trade simulator download this time and watch what happens. You can see it better in the minute time frame after the fact. By the way dark, thank you for all your past posts. Good nuggets in there if a person spends the lots of extra time mining.
Post a chart Louie I think people will have difficulties finding it. My GBPUSD 1 MIN on MT5 doesn't work. MT5 just freezes
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
The vacuum as I presented it does exist but it's on very short timescales. 1-3 seconds usually... never more then a few minutes. The market isn't THAT inefficient.
The vacuum on its own isn't an exploitable opportunity; it is merely a piece of the price change sequence. Its value is that it can be combined with other phenomena. The combination is what can become exploitable.
Luck be with you
Hey I might be really stupid here and I apologise for that but IF the market "fills" that vaccum. Doesn't that mean that the market is inefficient and wrong?
I recall I once read you said that stop-hunting doesn't have anything to do with real value. That in reality it 'distorts' real value. And in that case, that means that the stop hunt is usually in the "wrong" direction (because someone wants to unload and make a shift in his/her position).
In that case.. IF people suddenly start jumping on the traing i.e. filling up that vacuum (with short orders, when the true value in reality is HIGHER).. wouldn't that mean that the market is MORE inefficient when it has filled the vacuum?
So in reality, you could say that the market has been filled with "wrong" orders?
Darkstar do you see what I mean?
Take care.
PS. When I think about it.. This might be what is referred to as "weak holders".. Because they're wrong and they will close their position sooner or later because it is in a loss?
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I hope this chart loads ok. If not I will try again. As a note. If you do not have a trading sim you can download one on Indicator Free Trading thread post 21. Vhands sim. If you don't know how to run it Blue Ray explains this. I would not spend any more time on this thread other than to get the sim. That is just my opinion. I would read Darkstars The Structure of Forex Brokers paying attention to post 1 and 2 and then ponder on the why it was opened up to retail and how it is exploited every week in this market. Of course in my opinion this is...
Louie send me a PM.. I got some questions about this + vHandstrade?
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
CINDYYYY.. I KNOW YOU'VE BEEN SPYING SOMWHERE.. YOU BETTER TELL US WHERE....
"Efficiency exists only so long as equilibrium exists in the underlying dynamic..."
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
2. I've sent you an email to your website regarding the book. I'd love to have a copy.
3. Look further down.
Quote:
Originally Posted by Darkstar
The concept of order flow seeks to focus a traders attention on the subliminal message. By constantly asking yourself what is going to compel traders to enter and where, you cut right past all the TA/FA bullshit to what really matters... the orders.
+
Quote:
Originally Posted by Darkstar
For my one quick post today...
The vacuum as I presented it does exist but it's on very short timescales. 1-3 seconds usually... never more then a few minutes. The market isn't THAT inefficient.
The vacuum on its own isn't an exploitable opportunity; it is merely a piece of the price change sequence. Its value is that it can be combined with other phenomena. The combination is what can become exploitable.
Luck be with you
I've been looking at USDJPY hourly chart. That pair has some nice ass reversals that turn right on the dime at many round numbers.
You say in your first post I found somewhere else that as a order flow trader you should think about where orders will come in or "what is going to compel other traders to get it".
In your other post in this thread you say that the vacuum phenomena isn't an exploitable opportunity, a combination with it is.
As I look at USDJPY, I see price moves below round numbers like 5-10 pips more or less and then turns on a dime. This must be the vacuum you're talking about as price has nowhere else to go in search for liquidity but to turn the other way around.
Interesting thing is that price turns (reverses on the stop-hunts) at areas of old support/resistance OR areas where there has been other turns because of price inefficiency/liquidity disequilibrium.
By the way, someone should really clear this thread up on what all these different terms are, because I believe if we know or atleast understand the terms, things are bound to get easier.
What's the difference between:
In my book, they all mean that something isn't BALANCED. Might be wrong tho', as it is used in different "sequences".
Take care
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
I'm bored so if you don't mind I'll have a crack at this one - its quite simple don't let the graphs scare you
In economics equilibrium is found where supply meets demand as shown in the 1st graph below... In a competitive market the demand curve slopes down becasue as price increases less people are willing to buy. The supply curve slopes up becasue as price increases more people are willing to sell (supplies). Its all about price. You want to sell something for as much as you can get and likewise you would want to pay the least for something...
Thanks cindy that actually explains quite a bit. I really should have studied supply and demand before even thinking about order flow but hey.. you learn
You explained it quite well cindy and this is my take on what you said and applied to the market:
Equilibirum is when supply and demand are even. In this case liquidity is evenly distributed so every seller has a buyer and vice versa. In this case, price doesn't move much when large orders are executed?
Efficient price is when it is the value of the currency that is "agreed" upon. In this case liquidity should be evenly matched/distributed also because there is not anyone who is regarding the value undervalued (for example) thus bidding more and causing inefficiency.
Balance is when there is equilibirum in the market and the price is efficient. I.e. it is a equilibrium in liquidity distribution and the price is efficient i.e. "agreed upon".
Right?
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
You know I haven't slept properly since I started this god damned thread. There are so many questions but they become less each day. I really wish there was a way for me to study this by my own and test my own ideas but since I can't see the whole picture yet - there is no meaning in testing it on the market.
I was about to summarize the thread, but it hit me that there is no meaning to do so, because each and every post in this thread actually does contribute.
I have wrapped my head around what happens "behind" the chart on stop-hunts; like the liuqidity vacuum that Darkstar explained. I don't know how I would have solved the "behind the scenes"-thinking without it. It plays a major part in understanding the function of price behind the stop-hunting.
The last piece of puzzle now sits on what the other phenomena is. And the more I look at the charts the more I see that it has to bee old s/r areas.
When I only "listened" to technical analysis, I would regard a big move down or up (a large candle) with no tail as a major indication of price continuation in that direction. As I look at stop-hunting.. It really dictates a reversal.
If you take a look at the chart I attached, both times you will see price moving below a round number and then reversing sharply in the other direction with really big candles.
If you look at the second circle you see a really big bear candle down (think Technical Analysis.. Doesn't this candle dictate a further move down?) price snaps immediately up the other direction with some big bull candles.
What is interesting both times (and I looked at several other charts) is that price stops and reverses at old s/r-areas.. This might be the "other phenomena". This is the last piece missing for me.
Now obviously there are still some questions about stop hunting. I.e. why does it become liquidity on the other side which causes price to snap back up? Is it because latent and fundamental/value traders believe that this isn't the "real" value thus reversing the price?
Does stop-hunting only occur at round numbers and over/below? And if NOT, then WHEN do we know it's a stop hunt?
Obviouslu, every little tail on a candle below a support or resistance area isn't stop hunting. And what is to define WHEN and WHERE there is a stop hunt?
Take care. Hope you had a great weekend.. my eyes hurt
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
What I will say here is not directly related to finding stops but it's about orderflow. I'm reading Master the Markets by Tom Williams and here's how he explains why previous ranges act as supply zones in stock market.
Lets say the market formed a range and then the price went down. The buyers from the range are now in a losing position and want to get out at least at breakeven so they place their sell orders at their entry and thus create supply at that previous range.
I'm curious if the same scenario also works in fx. If it does it will...
This works in all markets. This is how price "moves".
J16:ers call them PPZ (price pivot zones). Resistance turns into support when it is broken and vice versa.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
So... Have you found an answer to this question yet?
Yeah the truth is that I have not found an answer to it yet. But I have understood ALL OF THE REASONS BEHIND IT.. Maybe that will take me to the next level now. Hopefully. Maybe
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.
BTW as you guys know I am moving into some depth of market as someone told me it is the way for a beginner order flow trader. Since FX doesn't have that I said to myself to atleast learn it on stocks!
So I have a couple of questions.. Obviously the disequilibirum in liquidity exists in stock market alos (price efficiency/inefficiency) and also stop hunting should occur also. But how "often" does stop hunting occur in the stock market? Is it as often? I am thinking to choose a stock, and then sitting and staring at it all day long to figure how it moves when it apporaches old S/R. Round numbers etc..
What do you think?
Take care.
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First I will learn thousands of different brush strokes, and color theory, and an untold number of other techniques. Then I will start painting.