Any good Order Flow Trading Strategy book suggestion?

[They]

Attempting to read order flow off of time & sales on a product like the Emini is just going to end up with you wearing glasses, having a headache or both. See if you can get your hands on a recording of the NQ realtime T&S during last February's sell off, watch it and then let me know if you want to become a master of order flow.

There are a lot of tools out there that amalgamate the information into something usable but they just have to fit your trading personality. Most of them allow you to filter trade size and change the segmented amounts but with the allowance of icebergs and the fact that certain markets have more hedging than others dilutes what one is actually seeing with the naked eye.

 

[GloriaBrown]

Look like making money out of order flow is harder than gambling in world cup

 

[danielc1]

I'm surprised by this because anytime I use the live feed from IB, its not possible to use their data for studies that involve BID/ASK volume. Its simply gibberish, and they state so as well. When I reload my charts, through the data feed that Sierra uses, its accurate, but not in real time, unless you are paying Sierra for their realtime data.

I have tested this myself, going back and forth between IB data and Sierra Charts data, and the differences are obvious. When I researched the possibility of using Cumulative Delta this drawback became apparent, but in the end I realized there was limited value in this anyway, so I stuck with the IB data, and the option to get accurate 5 second intervals. The DOM is fairly accurate, although it doesn't seem to update as quickly, but this also wasn't a real issue either.

Yes, you are absolutly right. I did not want to mislead you. I thought IB had 'fixed' it all ready because this was the case years ago. I have posted before and after charts, you can indeed see a difference in the indicators that uses bid/ask volume trough IB. My appoligies.

 

[Gotcha]

Yes, you are absolutly right. I did not want to mislead you. I thought IB had 'fixed' it all ready because this was the case years ago. I have posted before and after charts, you can indeed see a difference in the indicators that uses bid/ask volume trough IB. My appoligies.

No problem at all since I don't use it. The premise of why this would work just doesn't hold up. You think that buys on the ask mean aggressive buyers so price should go up, but often times, price does the exact opposite. Many profitable traders I believe are also only entering and exiting the market via limit orders. Well, a limit order is the exact opposite of an aggressive market order, and yet, it is still used to indicate that you're wanting to be long the market.

Anyway, my point is that even though some of it is interesting, there just wasn't enough of an edge there for me. Sometimes the stars align and it would help you get in, other times it prevents you from taking a trade, which would work, or sucks you into a trade that doesn't work. To add another variable into the decision making process which is perhaps only 50/50 anyway isn't always a good idea.

 

[danielc1]

I used it in a context with support and resistance levels. If I see it devolping before my eyes and it make sence I put on the trade. If it doesn't, I pass. I feel that order flow helps to see if it holds or goes trough the support or resistance. If you are looking to see how it works, I suggest too put up a chart and cummalative delta. Look at it when you are at a support or resistance point. Maybe you can see what I see. It can be a tool in your trading if you see it. Give it a day or two. If you do not see it, move on to something else and forget about order flow.

 

[traider]

Very tough to learn, happens in seconds and gone, matter of watching and not reading material. Years of watching you might come up with a few maybe repeatable patterns. But it more of watching when trend lines or fibs are near, what is order flow doing then, more or less volume coming on, is bigger volume coming in to trip the stops or is it a justified move to break through an area. You develop as you go to find answers to your questions as you go. Much harder in futures as you don't know if 10 traders buying 10 lots each or one trader doing 100 lots cause of offsetting in Globex. I prefer watching the Dome more around those areas and watching either more volume coming in or out and especially on "traps" of retail, traps often occur near end of a trend, retail might be trying to get into last wave of one direction(cause they couldn't pull the trigger to enter early so they prefer to get in late) and larger traders kept market from going retail direction. You need to watch long hours and keep good private journal.

Hi Handle, you mentioned that you run automated systems using level 2 data. Is there anything commercial out there or the only solution is to write my own level 2 backtester. If writing one, what guides are there to get one started?