Order Flow w/o charting

221bazookas

221bazookas

...or is charting and order flow the more practical approach?

All my 8 month experience has been on light FX trading using momentum strategies basically, plus a RSI in there. But now, Im beginning to look into future contracte, and ONE of the big differences I notice is how more reliable volume and level 2 is on futures.
Since I have never used volume or level 2 in my FX stage, I wonder what the best way to approach using them...should I forget previous charting queues ?

Im concerned I will screw up by being more biased to what Im used to...

Appreciate any comments or links that might be a good read to help out...
 
Volume, fine. But level 2? I've heard of people trading on this, but that seems crazy to me. Large traders use L2 to trick smaller traders. They put up fake sizes and use other methods to hide what they are doing.

I doubt anyone makes money on L2. Sure a poster who has internet balls might say they do, but I wouldn't believe it. And if they do, they should grab a seat at Carnegie Hall and put their skills on display. They are the Yo Yo Ma of trading.

Did you make any money on FX? That, to me, seems like another money hole (crooked brokers).
 
treeman said:
Volume, fine. But level 2? I've heard of people trading on this, but that seems crazy to me. Large traders use L2 to trick smaller traders. They put up fake sizes and use other methods to hide what they are doing.

I doubt anyone makes money on L2. Sure a poster who has internet balls might say they do, but I wouldn't believe it. And if they do, they should grab a seat at Carnegie Hall and put their skills on display. They are the Yo Yo Ma of trading.

Did you make any money on FX? That, to me, seems like another money hole (crooked brokers).
More...

hft use L2 data to make money, humans just find it hard to compete. It's not that L2 data is useless
 
I blew 2 accounts after I making some money, not even yet but on my way, and yes, since I was day trading only, I did feel the brush of the broker going against me.

In re to L2, yes that's why I was wondering if L2 would be something I could use considering that all orders come from only one regulated exchange.

So, by what your saying its basically internet yahoo..?
 
there are many traders who don't look at charts (perhaps they don't know about charts).
they stare at ladder and order flow.

I look at charts.

so either way, we can earn money provided we know how to do it.
 
maxinger said:
there are many traders who don't look at charts (perhaps they don't know about charts).
they stare at ladder and order flow.

I look at charts.

so either way, we can earn money provided we know how to do it.
More...

What is the timeframe you use for your charts?
I like to use tick charts for timing entries...
Higher timeframe charts for trying to guess big boy games...
 
traider said:
What is the timeframe you use for your charts?
I like to use tick charts for timing entries...
Higher timeframe charts for trying to guess big boy games...
More...

my chart is not time based but volume based.

one candlestick can be say 20 contracts (for say heating oil) , to 15000 contracts
(for say ES ) depending on the financial instruments.
 
Some personal pros and cons of using L2:

Pros:

Over the years I got a good feel for reading order flow by looking at a chart, then watching order flow at certain levels or times of the day (around news). You eventually can pick up a feeling of whether the market is strong or weak (sale of 1k shares - market doesn't move, buy of 500 shares, market moves etc).

It is useful when working orders, usually HFT will play games with you, especially when trading smaller cap stocks, but you can also learn to play games vs HFT. Also, you get a good feeling of a markets strength with how it reacts to your orders. Drop in some decent size to start, does it move? If so, does it recover quickly? Or does it show some continuation?

Cons:

Can be overwhelming at first, with algos dominant in most markets, prices move quite rapidly, bids/offers are constantly pulled/swept/refreshed and it's hard to tell how much volume is genuinely resting on the b/o at times. In a sense then, volume charts (footprint or cum delta) can be just as useful in chart format.

Sometimes you see larger sizes stacked on the Offer, so you may think Sellers are in control - yet price keeps rising. Sometimes markets will in fact move towards size in order to test liquidity, this can be confusing and counter-intuitive for someone new.

Finally, when looking at order flow of 1 market, you are seeing a snippet of info, especially in FX. Most FX is traded OTC so you won't see that volume. The volume traded on futs @ CME will be a tiny % of global volume. Also - you have to consider volume in spot, forwards, swaps etc...it's just too much info that will affect your product. This includes almost all other prods, for example, with something like Crude Oil - what are you looking at? Just the current front month? That is only 1 contract, what about the spreads being traded by hedgers/producers/merchants/specs? These can go out several years and are probably much more important to market structure than the prompt.

Anyway - quite a bit of info there but hope it helps. FWIW I would only ever use the DOM/L2 when trying to work an order.
 
I developed two systems automation only on L2, watch anything long enough, a decade and test patterns, you be surprised. It trades 24 hours a day and I use filters so it doesn't over trade, watches less than 100 symbols during the night and more during the day, it not like making a killing cause fees do add up and just doing scalping for a few of ticks, handful of pennies or Euros. For me trading is not how much you can make, it is how much can you keep on a consistent basis.
 
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