Order Flow in Spreads

G

greg25

Hi all,

I know a lot of spread trader are in this forum this is why i ask this question here.

Is a good idea to use order flow in spreads?

We know a spreads has 2 or more different legs, and in now days.. the delta, or the order flow in a spread can came form:
- the spread
- from the legs
- from an algo making any syntetique spread with our spread
- from the algos pushing one leg more than the other...

So considering a spread is more complex, is the order flow worth to use or not?

Thanks

Greg
 
Order flow is defined as the diff between buy orders and sell orders. Spread is price differential betw two similar assets.

So I am a bit confused with your questions.
Basically, you bet on the future price movement and you only make profit when the direction of mispricing of two assets move in the opposite direction
 
I mean order flow in a spread, which is like an asset. I know spreads are made by 2 diff assets but in market you have this assets in one.. is the spread quote (CME has for quite all the spreads).

Greg
 
greg25 said:
I mean order flow in a spread, which is like an asset. I know spreads are made by 2 diff assets but in market you have this assets in one.. is the spread quote (CME has for quite all the spreads).

Greg
More...

What kind of spread trading are you interested in? are you talking calendar spread? imho, most calendar spread trading is driven by hedgers (commercial traders who want to hedge price risk) and 80% of their trades make loss. Their primary purpose is to rollover their position from near contract to deferred contract when the near contract approaches the maturity.

If you want to make a profit, I believe you need to know well about slope in volatility term structure (which can be measured by changes in return) and price level.

That's all I know about spread trading. GL
 
Yes, order flow is used by spread traders, although your transaction costs need to be very low as you pay commission on each leg, and a lot of times your "edge" is only for 1-3 ticks. There is a trader @Wingz who used to post on here (and still may be on here) who talked a lot about about spread trading oil. He talked a lot about how sometimes a big trader would push one leg out of line, and he could get on the spread before it snapped back.

The thread is here:https://www.elitetrader.com/et/thre...ing-a-living-as-a-professional-trader.241603/

@s0mmi is another guy who has some great stories and examples of spread trading using order flow. It's NOT easy.
 
drm7 said:
Yes, order flow is used by spread traders, although your transaction costs need to be very low as you pay commission on each leg, and a lot of times your "edge" is only for 1-3 ticks. There is a trader @Wingz who used to post on here (and still may be on here) who talked a lot about about spread trading oil. He talked a lot about how sometimes a big trader would push one leg out of line, and he could get on the spread before it snapped back.

The thread is here:https://www.elitetrader.com/et/thre...ing-a-living-as-a-professional-trader.241603/

@s0mmi is another guy who has some great stories and examples of spread trading using order flow. It's NOT easy.
More...

@drm7, I just wonder what is that tick size? I have recently received questions on my minimum tick size
 
It depends on the futures contract. Oil is straightforward. Interest rate contracts like ZT, ZF, ZN, ZB are more complicated because the tick size changes with each contract, and I'm not sure how that's resolved. A lot of these spreads are exchange-supported, which means they have their own orderbooks and depth of market ladders, so if your trading platform can display them, then you can look at the tick size directly.
 
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