Pvpn,
Same here, nice post.
Its organization brings one to thinking where order flow is most effective.
[real order flow] "In stocks ....Everything is "clear" at least when compared to FX. Guess what? Stock pros have come up to all sort of gimmicks to hide their intentions....The outcome is that OF-T/S-L2 has some predictive value, but that value is very limited in time and expires moments after being obtained ...."
[order flow's influence: overview] What you need to do is move to the next level. You must absorb all information that is given to you and then "sync with the market". ... You can "feel" what the composer wanted from you: and you execute. Learn the music, forget the music, play!
Same goes for trading. You float in the ocean of information, rumors, charts etc. You must sync with this ocean. You must feel what others are doing and you must know where to put your bets to profit from other people actions. Let me say it again: You don't focus on the market....
[charts: indicators] Take a chart of a cross. Look at different time frames. Identify S/R levels (you don't need to draw them, just paint them in your mind). Think about M/A, Fibs, high/lows and other potential areas. Orders tend to cluster around these areas. You don't need to see orders. All you need to know is that they're there ....
[charts: price action] Now watch what price action is when price reaches those areas: Is there an acceleration ? Is there hesitation ? What the speed is ? What the direction is ? Is there oil poured on the fire ? ....
[charts: order flow language] Look at different TF and try to feel what each trader might be thinking when starring at the same chart. Would they be buying ? Selling ? Panicking ? You get the idea....
With all that, I'd use order flow only when I had enough at a pace I could take. That leaves a wide berth for other approaches, leaving order flow usually somewhat invisible.
No news...
Reading their chart patterns alongside news events reveals a lot of truth, especially enhanced with overall reading of stock group leaders.
With single-story, small-cap stocks, order flow is a distant second to news and about on par with fundamentals, even if order flow is as clear as fundamentals is difficult. There's only the occasional big order that changes things, and even that makes the news.
I'd like to see a book that measures crowd behavior, how it may break down the chart patterns of it. Would combine your 'ocean... synch'ing and price action nicely.
__________________ Nice save, Veronica. Mercy ad.
Last edited Jul 6, 2010 5:48am
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