Order flow trading

[JJayFX]

So today should be another dull day...the market should pick up slack tomorrow anyhow. Looking forward for today, there are a couple of events on calendar.

BOE's Broadbent will be listened to, regarding the outlook for the economy. That should overshadow the econ releases from the UK today. Then in the afternoon we'll have some US data, the most important of which is the Home Price Index and the Consumer Confidence. The market is bearish on home prices and bullish (slightly) on the Consumer confidence print. Actually there's a case for downbeat data, given the most recent UoM print which was below expectations. So going back to a trade we looked at earlier:

and the orderboard from Orderflowtrading.com

and some background news that came through the wires yesterday and today:

101-102 DNT interest well-documented. We've been to 101.99 so far. Talk is that there is circa $600 mln on offer on the platform between 101.99 and 102.04. 102.04 is the 100 dma while 102.10 is the 200 dma. $600 mln wasn't very much back in the day for UsdJpy...but in these low-vol times it might prove to be a temporary cap in price.

So, I've closed my UsdJpy possie at 101.98 this morning after having legged back in yesterday with a whooping 1.2:1 RR -_- What's a guy gotta do these days?

 

[JJayFX]

So we're going into the end of the month and it's time to see what type of flows we may encounter.

Looking at the ES, the FTSE, the Nikkei, and Eurostoxx, the biggest moves have been seen in the Nikkei since the beginning of the month (+3.12%) and the Eurostoxx (-1.64%). If the next 2 days more or less confirm these values, we might be seeing some Euro buying into the 11AM ET fix, and selling of Jpy. So yeah...i'll be looking at EurJpy unless something changes.

 

[JJayFX]

So today is the first day where it actually might get interesting. We've got some data coming up this morning in the EU and this afternoon over in the States...

regarding the EU confidence/sentiment reports for this morning, the market is positioned (guess?!) bearish, expecting worse prints than last time. So watch out for any confirmation of the bearish sentiment on the Euro. Morover the Euro is flirting with 1.3400 and is finding bids there, ahead of the well-touted barrier...so watch for any upward surprize to shake out late/weak shorts.

The DXY remains the protagonist going into today, strong across the board and in particular against Euro and Nzd. But the rally in the dollar might find trouble up here in the 81.30/50 zone.

so from a technical perspective, it makes sense to wait for a higher odds pullback instead of positioning for a stright breakout of this zone of prior resistance.

On the data front, the market is bearish on ADP which could already start some sort of retracement..but the market is bullish on GDP but given the weaker retail sales and trade balance there is room for a disappointament. This would be quite a surprize and would probably trigger more of a retracement before the FOMC this evening.
I don't trade the FOMC and usually there aren't many moves pre-FOMC (if you were a big gun would you front-run Top Tier data?). So I'll probably just sit and wait.

Keep you eyes on the month end flows as well... Jpy selling (so the XXX/JPY pairs could gain traction) and Euro buying (so EurUsd and EurGbp could gain traction).

 

[JJayFX]

The market reminds us why it's better to go with the flow...on the GDP beat, USD rally has awarded patient players with some extra pips And leaves me a little frustrated for not managing my UsdJpy differently yesterday...oh well... wash-rinse-repeat...

On another note, some common sense from the guys at orderflowtrading.com today:

Goes back to my rationale from post #1: betting before top-tier news releases is certainly exciting. It's like the red, noisy, colourful part of a Casino, where players are lured in search of some excitement and riches. But your odds are against you, in the noisy part of the Casino as before big news events. Best you can get is a 50-50 chance. And there's no edge there.

Trading properly, in a disciplined manner, is more like frequenting the green, dull, silent part of the casino, where they play Blackjack. The odds are in favour of the client, not the house, IF you know the rules of the game...

 

[JJayFX]

Is there any legit news service you guys use that has everything in one place that shows the most important things for the day? Metastock Xenith(rueters eikon)?

Fwiw, this just came through the newsfeed from OFT..seems that they have some sort of agreement with Metastock Xenith...

and this is the link it points to:

http://go.metastock.com/

 

[JJayFX]

So we're going into the end of the month and it's time to see what type of flows we may encounter.

Looking at the ES, the FTSE, the Nikkei, and Eurostoxx, the biggest moves have been seen in the Nikkei since the beginning of the month (+3.12%) and the Eurostoxx (-1.64%). If the next 2 days more or less confirm these values, we might be seeing some Euro buying into the 11AM ET fix, and selling of Jpy. So yeah...i'll be looking at EurJpy unless something changes.

As expected, Euro (EurUsd/EurGbp/EurJpy) are benefitting from month end flows and the usual buying from Bundesbank. Jpy selling had already started the past few days.

...and after my post, it became official through the wires:

 

[JJayFX]

Something I'm looking at right now

AudNzd pulling back to the current week's lows. No bullish news on the wires YET... however price is reacting around 1.0950s and it could be a value ticket north towards this week's highs...

 

[JJayFX]

As a side note, traders will be limiting their exposure ahead of NFP tomorrow. Also, tomorrow is the first day of the month. Is it really necessary to be a hero and risk getting chopped up by all the conflicting events?

Stay safe & stay classy, and I'll catch you next week

 

[JJayFX]

Quick update on my thoughts for EurGbp trade

 

[JJayFX]

Well it seems this thread has attracted very little interest thus far...so before I leave for the holidays here's a few thoughts that i'll leave you with:

When you are trading, you are competing against other traders and some of them are powerful players with 15+ years of relevant experience and deep pockets/deep connections. Without losers, there would be no winners. Start thinking about how you can exploit the characteristics of other participants. As price moves, some participants will start to feel pain and will have to close their positions. Frequently, it's the shorter time frame players that feel the heat as they give themselves less room to manouvre. Hunting stops in the market place is not just about retail traders: professional traders also get stopped out or are forced to cover as the position moves against them. One of the most important things I've learned by practicing Order Flow Trading is to exploit the weaker side of the market. You want to take the high probability opportunities and go with the flow.

How to think like a predator:

1) What are the key themes in the market currently?
2) Pick a future/currency and write down if your read of current sentiment is positive, negative or mixed. What are the main factors driving current sentiment? Don't make it complicated. Keep it short in form of notes.
3) What is price action telling you? As prices moves further, compare it to your sentiment analysis.
4) Think about the stops of other participants and their characteristics. For example, don't just see simple "Support/Resistance levels" but instead think about what it means for bulls if a key support level holds. Will they be buying the dip? Does the price action upon arrival indicate decent demand or are the rallies quickly running into further selling? What if the support level breaks? Wwhere does the pain start for the bulls?

Keep it simple to stay profitable in this business!

JJ