Order flow trading

[mfbreakout]

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

You only need couple of traders for discussion and make it a learning experience. I have been trading futures and have experience with them. I have never traded FX and therfore do not post.

I do however read your post daily.

Thx

 

[Low Salubrity Thug]

Well it seems this thread has attracted very little interest thus far...

There are probably a lot more people reading this thread than you think. I only skim through ET about once a week and usually don't post. However, this is one of the threads I read.

 

[JJayFX]

Thanks guys for your messages, and I'll keep on posting for you ;-)

So I'm back in the usual saddle now...there's been a slight uptick in volatility but even so, my focus will probably have to stay on Crude and YM more than FX. But I have some unfinished business with FX.

EurUsd 4H chart with relevant levels I'd feel good shorting into...at least so long as the ECB doesn't throw a wrench in proceeding this week.

EurCad 4H chart with a huge stop level that was hurdled at 1.4410s and a minor 2-way stop level at 4350 for shorting the euro too.

And finally:

Crude 4H chart with levels I'd like to look for longs at.

Getting back into the groove this week but the themes seems to be:

- Tug of war for risk appetite between expectations of QE from the ECB and geopolitical risks from the Ukrainian crisis. As of friday, markets diddn't really care about the unofficial Russian “invasion” of Ukraine.

- ECB unlikely to start QE but could see some tweaking of policy

- US payrolls likely to print a good number

- Other central banks, including BoE, expected to leave policy unchanged

- In China the official manufacturing PMI is expected to have declined in August, albeit less dramatic than the HSBC manufacturing PMI.

Good luck going into the week!

 

[Low Salubrity Thug]

If I traded crude on this timescale (which I don't) I'd be looking to accumulate around an average price of 94.5. Wouldn't want to see it dip below 93.7 without extremely strong evidence of further accumulation by the big boys.

 

[Low Salubrity Thug]

If I traded crude on this timescale (which I don't) I'd be looking to accumulate around an average price of 94.5. Wouldn't want to see it dip below 93.7 without extremely strong evidence of further accumulation by the big boys.

Bounced off 94.52 at 9:30am. Looks like the volatility is picking up too after yesterday's painfully slow day.

 

[Low Salubrity Thug]

Bounced off 94.52 at 9:30am. Looks like the volatility is picking up too after yesterday's painfully slow day.

The bounce yielded very little professional interest between 9:30am and 10:30am. Nothing but churn for an hour. A sure sign a move up wasn't on the cards yet. Good opportunity to get short when the 94.5 level went in such definitive fashion as well.

Nice to see things have picked up after Labor Day. Sometimes the day after a public holiday can be slow as well.

Hope your trading is working out well this week JJay.

 

[JJayFX]

The bounce yielded very little professional interest between 9:30am and 10:30am. Nothing but churn for an hour. A sure sign a move up wasn't on the cards yet. Good opportunity to get short when the 94.5 level went in such definitive fashion as well.

Nice to see things have picked up after Labor Day. Sometimes the day after a public holiday can be slow as well.

Hope your trading is working out well this week JJay.

Hey LST,

thanks for your replies! Yeah this week went surprizingly well...the reaction levels on EurAud and EurCad held up to inspection, and I also played long UsdJpy as there was continuous chatter throughout the week about large bids in the pipes, looking for a burst of 105.50 Option Barrier. So it's been good.

This week will probably be a little more "technical" as there are few market moving events.

I'll be looking for continuation shorts on the Euro via EurAud and EurCad especially, I'll be looking for UsdJpy longs and maybe some AudNzd longs if things continue.

Sure, we're at some really tough levels on EurAud, GbpUsd, and UsdJpy printed a neutral candle on Friday at a key level...but until the tide turns on these trends, I'll continue to favour the divergences in monetary policy that are at the core of the moves.

Good luck to you as well going into the week!

JJ

 

[achilles28]

Great thread. Following with interest

 

[JJayFX]

Well it's been quite a dull start to an exciting week.

Last week I was able to jump on the Gbp train heading south on monday and tuesday, but then the Scottish yes-no-maybe just dealt me out of GbpUsd and I'm still waiting for some clarity. 6280/6350 is the main fulcrum here and what I expect is for the "yes" to send GbpUsd down to 1.5500 and maybe even lower as uncertainty looms, or for the "no" to send GbpUsd back up the ladder. So both bases are covered.

Sentiment influences this week are quite clear:
- ECB TLTROS/QE influences...what will be done and how much...
- SNB
- FOMC
- Scottish vote
- Carry trade liqudation

The main things i'm following, in order to milk these themes, are AudUsd short (9100/50 region), UsdJpy Long (from 107 or 106.50s), Gbp wait-and-see, EurUsd slightly bullish short term but bearish longer term, UsdCad long from 1.1040s (maybe later or early tomorrow morning London Time).

So that's that...YM still uncertain to me. I'm actually going to take part in the Ultimate Trader Education Course the guys at Orderflowtrading have created, after some good results from the first batch that went through it in August. The course is heavily directed towards YM and futures (my achilles heel) so it should help me become even a more well-rounded trader.

On another note, one of the sources I used for sentiment gauging has closed up. FXBeats is shutting it's doors down and it's a pity. Guess the business model just doesn't work..those guys have gone from Forexlive to FXbriefs to FXBeat...tough times...so for my sentiment influences I'll be sticking with what comes through the grapevine in the (now private) OFT live trading room. Seems that all my eggs are in one basket with them right now...hope they don't disappoint me.

Good luck to all this week!

 

[DionysusToast]

After studying different approaches to day trading, the one that convinced me more of it's efficiency is ''orderflow'' trading, as you are watching the market participants' actions closely so you can decide the most likely direction of price in the day.

But i'm having some problems watching the price/order book on key price levels and really ''deciding'' wheter it will break or just run stops and then reverse, so it's difficult for me to initiate a trade with confidence.

Could you point to me some things you watch for in these spots to decide the probable direction of the market?

I understand there's no concrete approach in orderflow trading, no ''system'' as people like to call it, and it's more of a discretionary method and getting a feeling of the flow, but as a more experienced trader, i would really appreciate if you could try and describe some characteristics of price that you look for in these situations.

Thank you very much.

JC

Best answer to this is "it depends".

Depends on the market - FX has no visibility of order flow (although you can anticipate it), Equities have a lot of order flow you can't see, Futures is the most transparent from an order flow perspective.

Then it depends on how liquid the market is. Reading order flow on Crude & 10 year notes is very different but you basically have 3 major things to look for.

Absorption - when bidders/offers step up and absorb actionable orders
One side fading away - e.g. when a market moves up and buyers stop buying
The other side stepping in - e.g. when a market moves up and suddenly sellers step in

All reversals involve one or more of these things. Of course, you also have to learn how to spot momentum which isn't that hard but you cannot focus just on trying to learn how reversals occur from an order flow perspective.

So which market are you looking at?