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Behind Price-Orderflow
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Sep 21, 2009 12:09am
|  | Commercial Member | | | | Not to be a stickler for accuracy, but this isn't orderflow trading. All your doing is commenting on market mechanics. There is no predictive value. IE- It's great that you understand the mechanics, but it isn't going to put any money in your pocket.
To trade order flow you need data from outside the chart. Level 2, a brokers orderbook, a service that gives you info about brokers orderbooks, etc. There is a fuckton of money to be made from orderflow trading if you know what your doing, but you need the datafeed.
And no, I won't tell you where to get a datafeed. Some things are better off not being shared. | 
Sep 26, 2009 3:08pm
|  | Commercial Member | | | | Orderflow trading in a nutshell: 1)Find the stops and fade them. 2)Find the barrier options and push into them. 3)Find pockets with a lack of open interest and gap them. 4)Find a sequence of stops spaced 10-25 pips apart and prepare to put your kids through college. What you need? A prime broker currenex/ebs account, IFR, Oanda open interest, some friends on the inside of a large bank or brokerage, a proper understanding of risk management, and most importantly; your psychological issues completely resolved. Its not an EA type of system. Even having the above, your still going to fail until you have developed a keen sense of the market. Intuition plays a huge part so if your stuck in the mathematical world of EA's and if-then-else logic, don't waste your time. Trading is an art, not a science. Why am I telling you this? I really don't know, but I won't be giving you any more. Ever. Do with it what you will. PS - Please stop sending me PM's asking about training or mentorship or begging for clues. If you can't figure it out with what has already been said, it would be a waste of my time to train you. Thanks.
Last edited Sep 26, 2009 3:21pm
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Mar 9, 2010 11:46pm
|  | Commercial Member | | | | Well thats kind of sad. You guys spent like 7 months working on this stuff and didn't come up with any conclusions. Anyone still interested in the subject? | 
Jun 24, 2010 3:27pm
|  | Commercial Member | | | | I'd like to try and clarify a few things... First off, what Scotty is doing is one way to trade orderflow, but it isn't THE way. The truth is, there is no ONE way to trade orderflow. As I've said before, orderflow trading is a mindset. The common thread that ties it all together is making decisions based on future orders. Sometimes those orders come from fundamental factors (econ reports or headlines), sometimes from technical (trend lines or fibs), sometimes there are simply no more orders to support the continuation of a trend (exhaustion). What people like Sauron and Pip are hung up on is the fact that we have no time and sales. There is also no way of getting a brokers real time book, so they conclude that there is no way to front run big orders. They have a valid point, but they are missing the forest for the trees. This isn't about front running (in the traditional sense). The truth is, as a retail trader there is zero opportunity to know when Toyota is going to make a block purchase of yen. So looking for a way to do it is a fool’s errand. What’s also a fools errand is assuming that a fib or a trend line will "cause" price to do anything. All the technical patterns, tools, and indicators are arbitrary constructs humans project onto the market in an effort to understand what is likely to happen. Price doesn't give a crap about a trend line or a fib, but humans do. It's the humans acting on these patterns and indicators by placing orders that impact price. It may seem like splitting hairs, but I can't tell you how many people genuinely think a trend line or an S&R level CAUSES price to reverse. Raise your hand if you have ever put your entry order 5 pips ahead of the trend line with your stop 5 pips beyond it. If you have you know exactly what I mean. The flip side has a group of people who assume that fundamental factors cause prices to move. Whether its predicated on the idea that markets are efficient or that securities have some intrinsic value, I'm not sure. What I do know is that all the fundamental factors point to the euro falling, yet it's up 500 or so pips and rising. Neither school of thought is capable of producing long term profits. I know there will be people who disagree with me on that, but I can point to the simple fact that if either were viable, someone who learned the principles out of a book would be able to instantly become profitable when trading. Even with 80k members at forex factory, I can't think of anybody who has been profitable from day one. It takes years to learn how to trade because there is a subliminal message in the market that has to be learned from experience. Which trend line bounce should be taken and which should be skipped? What news is going to drive price through an S&R to start a trend? If you've been profitable for any length of time you know it's the trades you skip which lead to bankable profits. 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. Instead of trading because there is a trend line, you examine what happens to price when the trend line is reached. You figure out that 9 times in 10 price penetrates the fib level before reversing. And that price often reverses right at the point where people "should" place their stops. And that no matter what the fundamental story, if the COT is breaking records, a cataclysmic reversal is inevitable. At the end of the day, an experienced order flow trader doesn't need to see the actual orders to know what’s about to happen. If you know why a majority of people will want to trade in the future then you can get in ahead of them and profit. It's really that simple... | 
Jun 25, 2010 3:09am
|  | Commercial Member | | | | Quote:
Originally Posted by pipmutt Boiled down that's a long-winded way of saying what I commented to Scotty a few posts back, "wouldn't it be better to try and pre-empt where and why they might enter?", and it seems (along with thousands of other traders) that's exactly what you're doing, the only difference being you're misnaming it 'order flow trading' and that's where the misunderstanding comes in. | At the time of your post the discussion was on how scotty was trading ahead of large orders he sees on the futures depth. I took your point being that he should be placing orders in front of those big orders or front running them (in support of Saurons assertion). While that?s probably true, I wasn't addressing it at all. That?s Scotty?s deal and he can argue the merits of his system far better then I. Your comments about a lack of time and sales were what prompted your inclusion in the post. Quote:
It is splitting hairs, plus (seeing as we're hair splitting) you're forgetting that every trade isn't necessarily transacted by humans.
| True, but the algos are all programmed by humans. So it doesn't really invalidate the point... As a side note, you see it as splitting hairs because you already know the difference. I can assure you that many people genuinely believe that the trend line is some magic construct that reflects price. May seem crazy, but its true... Quote:
There's no denying that price frequently respects trend lines, ratios, and patterns, so for a purely technical trader who only trades off a chart it's totally unnecessary to look or think beyond that chart, his trading is clinical rather than subjective and discretionary.
| Frequently, but not frequently enough to make long term profits with. Were it the case that trading pure TA on a clinical basis could be profitable, anyone who read the myriad tech manuals could be profitable from day one. To my knowledge, there is not a single example that we can point to which would support that assertion. Quote:
It's an age-old argument about which is the most productive, some traders advocate combining both (my personal preference, sentiment for general direction, technicals for entries/exits).
| Quite true. What IS new is a method of examining the market which can shorten the learning curve by getting to the heart of what makes the market move. I call it order flow trading and from what I can tell it has helped a great many in their quest to understand the market. You might call it something else, but the truth is pip, I don't write what I do for you. You already know what your doing and I don't need the validation of you agreeing with me. I also don't need your insight on how I can improve my methods. I write posts for those aspiring traders who are still lost in the sea of indicator bullshit. It took you and I years to learn to trade profitably because the age old wisdom is littered with garbage. From indicators to algorithms to economic theory, the hours we wasted learning useless crap is incalculable. Had we started with the single premise that we would only study things which would cause a majority of participants to place trades, we could have shaved years off our learning curve. And that?s why I'm here. Try to keep that in mind when you read my posts. Quote:
Rarely are market sentiment analysts in agreement, for every analyst who finds reasons for the market to be bullish there will be another who has equally plausible reasons why he thinks it will be bearish!
| Very true. Then again, an analyst is little more then wannabe trader who couldn't hack it. I wouldn't put much value on their opinions in either case... | 
Jun 7, 2011 10:36am
|  | Commercial Member | | | | Quote:
Originally Posted by lolpie For all the order flow practitioners in this thread - random question: how did YOU discover order flow trading? Just stumbling upon it by blind luck, or did you have a mentor?
Excluding people who learned it from order flow threads on this forum, obviously.
Thanks | I didn't learn it so much as create it from nothing. After I read Reminesences of a Stock Operator I was struck with some ideas about how and why prices change. That led me into studying microstructure and thinking deeply about the people who participate in the market. Roughly 2 years later, I started making assloads of money and felt the need to share some of what I had discovered.
When I started sharing, people asked what kind of trading I was engaged in. The answer I came up with was "Order Flow Trading" and that was the origin of the term. That was 2006 I believe.
In the years since I've made hundreds of posts here on the subject. Most of the people you read about who do order flow trading now learned it by reading those posts, thinking deeply about what they implied, and asking me questions when they got stuck. After they learned it, many have gone on to help and inspire others to learn the methodology as well.
So the long and short of it is, if someone is trading order flow, they either learned it by reading my posts here at FF or from one of the people who did so. There is no other way. | 
Jun 7, 2011 6:38pm
|  | Commercial Member | | | | Quote:
Originally Posted by Adal What do you think this research was done for? Fun? Unfortunately all of those articles are still not free.
From one except:
That sound very much like tradable stuff.
Another one:
Orderflow imbalance? That sounds like Darkstar
Don't forget that a market maker is basically an order flow trader by definition. | There is a big difference between order flow and Order Flow Trading. Order flow is a common Market Microstructure term used to describe a sequence of orders. It is neither a method nor a science... it is simply a description of a process. There is plenty of academic literature that utilizes the term "order flow" because there are plenty of articles that discuss market microstructure and you can't get very far in microstructure without acknowledging that orders occur in a sequence. On a related, but substantially different note, there are many institutions that utilize the principles of market microstructure to exploit their internal order book for profits. Some examples of this are front-running, intermarket arbitrage, and high frequency trading. All of those examples exploit order flow (a sequence of orders), but that does not mean they are engaged in "Order Flow Trading." Order Flow Trading is a metagame analysis technique for predicting future trader behavior. It short it relies on the premise that by knowing what traders are going to do, you can construct an approximated order book and THEN exploit the sequence of orders for profits. And as far as I can tell, prior to its development, by me, in 2006, the concept did not exist. Does that mean I am the only person in the 3000 year history of financial markets to exploit the market in this way? Probably not. However, I am the first person to turn it into a unified trading methodology, which can be taught to aspiring traders (that I know of anyway). So unless or until a document can be found that describes that concept outline above (under any name), I'm going to continue to believe that I created it, from scratch, on my own, and taught it (directly or indirectly) to everyone who is currently engaged in the discipline. Hopefully that clears things up a bit. | 
Jun 7, 2011 7:28pm
|  | Commercial Member | | | | I can agree with that. | 
Jun 8, 2011 6:09am
|  | Commercial Member | | | | Quote:
Originally Posted by triger88990 | Says the guy who showed up in 2009...
Care to elaborate? | 
Jun 14, 2011 10:19am
|  | Commercial Member | | | | Mysticgenie joined feb 2007
fti joined nov 2007 - He has been trading for ages and may well have came up with/learned some of these things back when I was still learning to read. Unfortunately, I can't decipher his posts, so I can’t say how close any of what he does or says fits into the subject... The one thing I do know is that if he did come up with any of this stuff, he didn’t say anything about it on FF until after he joined in ’07.
BillyRayValentine joined apr 2006 - but he was all about ea's and indicators until at least 2008 when he started the no-brainer trades thread.
skfx joined may 2006 - In http://www.forexfactory.com/showthre...13#post2160713 (from august 2008) he outlines how he had been trading for the previous 5 years. He clearly states that he uses price action - no doubt learned from his year long stint posting in the james 16 thread where mqb11, who I personally taught order flow trading, is an important contributing member. He does use the term "flow" in the intro to that thread, but it is in the context of the daily trend.
I started the ohh sweet liquidity thread on april 30, 2006. That’s where I outline the order flow stop hunting system, showed how to exploit DNT options, and went into some of the logic behind the metagame analysis that made it all possible.
Unfortunately, as I outlined in the book intro, I deleted this thread (as well as several posts re the subject inside a few others) from the forum back in 2006. The good news is that I have a complete copy of that thread, which I will be posting to my blog in the next few days (need to strip all the FF formatting from the content).
Anyway, I think there is a good chance that all of those people have at some point posted something related to order flow trading at FF. But unless they were doing so under a different name, they did so AFTER the ohh sweet liquidity thread. Therefore, I am still standing by the assertion that I created the concept.
I am sure many of you are thinking that I'm talking out my ass about creating this stuff. However, I know in the deepest recesses of my soul that I did. I know this because in 2006 I read EVERY SINGLE THREAD that existed on FF. From the start of this forum (2004) until I wrote OHH Sweet Liquidity, nobody had even considered that market microstructure and/or order flow sequences might be useful in forex. Everyone assumed that because the OTC market had no central exchange or time and sales info, that those concepts were totally inapplicable. I changed that with my thread and everything that you will find, order flow trading related, can be traced back to that point.
So feel free to look long and look hard for something that will prove me wrong. I have no trouble with you trying because I KNOW you’re not going to find anything. | 
Jun 14, 2011 2:48pm
|  | Commercial Member | | | | Quote:
Originally Posted by lumesh Relax bro, i'm not attacking you  | I know you werent brother. I was just trying to address the various names that came up and give a little background. Sorry if it came off as agressive.
The thing is, while it doesn't matter in the grand scheme who created what, I take a great deal of pride in the work that I have put into the subject.
Most people who come to forex these days just assume that this shit has always existed. Thats great because it means that those traders will have an easier time accepting the principles and turning them into profits.
Unfortunately, it also means that people who are using the shit I gve them to earn their living can laugh and "whatever" me when I suggest that if it weren't for me they would still be trying to EA their way to breakeven. That pisses me off because I DO take pride in what I've done and feel I deserve just a little credit.
Thats not to say that they owe me money, or praise. They don't. Everyone who has started down the orderflow path has had to put in their time and effort to create something that worked for them. And I'm truly happy for anyone who has achieved success.
All I'm asking is that people not effin laugh at me or call me a liar when I try to take credit for something I did in fact create. |  | |
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