Order Flow Trading

[Alphafuturestrading]

@bone, thank you for sharing your perspective as professional. I agree with you that one is unlikely to decode intentions of large players(unless they want it to be known). However, I think/assume most using these tools are much more short term oriented. Your statement above actually confirms that orderflow is used (even if to decieve) and thus is usable. Why would spoofing be illegal otherwise?
@Alphafuturestrading, are you attempting to do what bone suggesting is futile, or are you closer to quick hit and run trading? I think it's a very important distinction to make for this discussion.

I am not attempting anything to be honest. I have been trading based on my own way to use OF for 9 years and doing well. Some people disagree and come with points and reason why it is is waste of time to look at the order flow and this is fine. I used to be an institutional Broker too and crosses (off the book) do happen indeed and you can not see them etc. Still fine.

Regardless, I don’t scalp and I tend to swing and position trade watching the order flow so DOM manipulations do not affect what I do. Everyone is different and everyone had their way to do things and what they believe and don’t believe in for all things in life.

So if other traders do use the order flow or want to understand more about it and different aspects of it (original point of the thread) let’s do it but coming with a counter example of why it does not work and some other guys do something else is not helping us achieve much in that direction.. !

 

[sillyw10]

if the ES price is approaching an intraday high or low..to think that it is not beneficial to be able to analyze the buy/sell orders in relation to continuation or reversal..is..well..rather silly

 

[qlai]

So if other traders do use the order flow or want to understand more about it and different aspects of it (original point of the thread) let’s do it

K, I am not really understanding what the point of the thread is. You are not sharing how you are using it. Are you expecting people to share how they are using it or you want them to ask you specific questions? While you are correct to say that everyone has their own methods, there's a value in questioning/arguing to get a better understanding (not to prove someone is wrong).
Maybe you could start by rebuttal of what bone said. Specifically, how do you find "footprints" reliably enough to take position when it's pretty easy to hide and deceive (not to mention some flow is hedging or spreading). I remember when I was playing with CME order books, the implied orders were messing things up for me.

https://www.cmegroup.com/confluence/plugins/servlet/mobile?contentId=78446963#content/view/78446963

 

[Alphafuturestrading]

K, I am not really understanding what the point of the thread is. You are not sharing how you are using it. Are you expecting people to share how they are using it or you want them to ask you specific questions? While you are correct to say that everyone has their own methods, there's a value in questioning/arguing to get a better understanding (not to prove someone is wrong).
Maybe you could start by rebuttal of what bone said. Specifically, how do you find "footprints" reliably enough to take position when it's pretty easy to hide and deceive (not to mention some flow is hedging or spreading). I remember when I was playing with CME order books, the implied orders were messing things up for me.

https://www.cmegroup.com/confluence/plugins/servlet/mobile?contentId=78446963#content/view/78446963

Ok I will put a video together with
some ways order flow can be looked at.

Thanks

 

[Alphafuturestrading]

There we go, a little longer than I intended but trying to put in a lot within little time period..

 

[They]

Algorithms generate stacked bids or stacked offers in order to create the illusion of buy side or sell side bias imbalance. It’s rampant in electronic markets.

If stacking of bids and offers is creating the illusion of a buy or sell side imbalance is 'pulling' of bids and offers the revealing of reality?

 

[bone]

If stacking of bids and offers is creating the illusion of a buy or sell side imbalance is 'pulling' of bids and offers the revealing of reality?

If you read any number of CFTC Complaints on spoofing you’ll find that each one of these Algos are cancelling and replacing hundreds of thousands of unfilled orders in a given trading session. As I’ve mentioned earlier - outside of the trading exchange regulatory compliance department no one has access to individual order identifier tags so you cannot with certainty ascertain the disposition of a specific order.

These strategies will, for example, quite literally offer thousands of contracts slightly away from the best offer and be on the best bid for fifty...

So - the frightened punters who collectively buy or sell into the “thin” side of the market are giving up the bid-ask spread and filling the spoofing Algo at a discount. The spoofers then cancel the “heavy” side of the book and “flip” the bias on the punters by populating the formerly “thin” side of the book with orders.

There are a few variations on the theme, but the strategy is the same - collect the bid/ask spread differential and shake down the naive punters who stupidly believe that order book imbalance is sincere.

If making money in markets were as simplistic and low risk and transparent as buying or selling into the “weak” side of the order book; or that higher traded volume at price indicated a strong speculative intent - trading would be so easy. Nothings ever that obvious or simplistic when it comes to successful speculation.

If anything, the amount of TIME spent at a particular price area is more revealing than volume per se (Steidelmeyer). Markets accept or reject a valuation. Markets deem a price to be fair, overvalued, or undervalued. Price moves markets and attracts or rejects order flow - not volume. And the more TIME that a market spends at or better than a price area - the more accepted that valuation is. (again, Steidelmeyer)

The more TIME that a market spends at or better than a particular price area - the greater number and range of market participants have come to observe, consider, and ACCEPT that valuation as Fair. And it is for this reason why Volume is deceiving and overweighted by speculators - big Specs and Commercials of consequence who are already long or short the market at different valuations aren’t universally constantly adding or lightening up on their positions. It is VERY common for prices to move off-hours on light volume, and for those newly printed valuations to be accepted and even improved upon during prime trading hours.

And if VOLUME at price were of such great importance - then all off-hours trading moves would be rejected by prime hour traders. And we know that is emphatically not the case.

 

[Alphafuturestrading]

If you read any number of CFTC Complaints on spoofing you’ll find that each one of these Algos are cancelling and replacing hundreds of thousands of unfilled orders in a given trading session. As I’ve mentioned earlier - outside of the trading exchange regulatory compliance department no one has access to individual order identifier tags so you cannot with certainty ascertain the disposition of a specific order.

These strategies will, for example, quite literally offer thousands of contracts slightly away from the best offer and be on the best bid for fifty...

So - the frightened punters who collectively buy or sell into the “thin” side of the market are giving up the bid-ask spread and filling the spoofing Algo at a discount. The spoofers then cancel the “heavy” side of the book and “flip” the bias on the punters by populating the formerly “thin” side of the book with orders.

There are a few variations on the theme, but the strategy is the same - collect the bid/ask spread differential and shake down the naive punters who stupidly believe that order book imbalance is sincere.

If making money in markets were as simplistic and low risk and transparent as buying or selling into the “weak” side of the order book; or that higher traded volume at price indicated a strong speculative intent - trading would be so easy. Nothings ever that obvious or simplistic when it comes to successful speculation.

If anything, the amount of TIME spent at a particular price area is more revealing than volume per se (Steidelmeyer). Markets accept or reject a valuation. Markets deem a price to be fair, overvalued, or undervalued. Price moves markets and attracts or rejects order flow - not volume. And the more TIME that a market spends at or better than a price area - the more accepted that valuation is. (again, Steidelmeyer)

The more TIME that a market spends at or better than a particular price area - the greater number and range of market participants have come to observe, consider, and ACCEPT that valuation as Fair. And it is for this reason why Volume is deceiving and overweighted by speculators - big Specs and Commercials of consequence who are already long or short the market at different valuations aren’t universally constantly adding or lightening up on their positions. It is VERY common for prices to move off-hours on light volume, and for those newly printed valuations to be accepted and even improved upon during prime trading hours.

Time + Volume is key

 

[Alphafuturestrading]

If you read any number of CFTC Complaints on spoofing you’ll find that each one of these Algos are cancelling and replacing hundreds of thousands of unfilled orders in a given trading session. As I’ve mentioned earlier - outside of the trading exchange regulatory compliance department no one has access to individual order identifier tags so you cannot with certainty ascertain the disposition of a specific order.

These strategies will, for example, quite literally offer thousands of contracts slightly away from the best offer and be on the best bid for fifty...

So - the frightened punters who collectively buy or sell into the “thin” side of the market are giving up the bid-ask spread and filling the spoofing Algo at a discount. The spoofers then cancel the “heavy” side of the book and “flip” the bias on the punters by populating the formerly “thin” side of the book with orders.

There are a few variations on the theme, but the strategy is the same - collect the bid/ask spread differential and shake down the naive punters who stupidly believe that order book imbalance is sincere.

If making money in markets were as simplistic and low risk and transparent as buying or selling into the “weak” side of the order book; or that higher traded volume at price indicated a strong speculative intent - trading would be so easy. Nothings ever that obvious or simplistic when it comes to successful speculation.

If anything, the amount of TIME spent at a particular price area is more revealing than volume per se (Steidelmeyer). Markets accept or reject a valuation. Markets deem a price to be fair, overvalued, or undervalued. Price moves markets and attracts or rejects order flow - not volume. And the more TIME that a market spends at or better than a price area - the more accepted that valuation is. (again, Steidelmeyer)

The more TIME that a market spends at or better than a particular price area - the greater number and range of market participants have come to observe, consider, and ACCEPT that valuation as Fair. And it is for this reason why Volume is deceiving and overweighted by speculators - big Specs and Commercials of consequence who are already long or short the market at different valuations aren’t universally constantly adding or lightening up on their positions. It is VERY common for prices to move off-hours on light volume, and for those newly printed valuations to be accepted and even improved upon during prime trading hours.

And if VOLUME at price were of such great importance - then all off-hours trading moves would be rejected by prime hour traders. And we know that is emphatically not the case.

In the last sentence : Volume at price is not time related when off-hours/prime hours is ..

 

[bone]

Time + Volume is key

That’s true on the face of it with an important caveat - we know as a fact that traded volume is gamed through order crossing. The Time continuum is impossible to game at present.