Understanding price action

[Erin]

It's not what she's talking about...that's part of my point.

I'm stating its the same price action via a different point of view just like I'm stating that she uses the phrase Sell Orders / Buy Orders and others uses the phrases like Support, Resistance, Delta High/Low, Supply/Demand or whatever...

Its the same wheel.

Yet, as stated, if she's using DOM / Order Flow analysis with her chart analysis...I would then understand her use of the word "Orders" as if she's looking at additional info beyond just the chart itself. Info she has yet to discuss until she explains the basics.

Also, considering this is not a trade journal...its ok to post a different chart perspective of the same price action.

Once again...same wheel...not reinvention.

P.S. I could post a different chart via the same price action by what others call as Pivot Point Analysis.

wrbtrader

Actually supply and demand and support and resist are totally different...buy sell analysis is one more step above supply and demand. Feel free to post your charts, its always good to see another persons point of view. I stand by my position of understanding how we view orders within the bars.

 

[Erin]

we trade differently.
so leave it as it is.

View attachment 226033

Actually that was the next step was looking at how the swings are made, how we determine direction from them and how to trade out of them - nice chart but it is tradable

 

[wrbtrader]

With all dues respect I do not htink you have the necessary perspective to judge what she is doing here. I do not mean at all to imply that you do not have a profitbale trading plan and the discipline to trade it. I specifically am referring to a difference between how traders such as @Erin, @volpri, and myself understand market context and the motive force that casuses price action and how you may understand that context.

Let me ask you, Mark: In your trading, does any of your analysis or decision making involve the thinking in terms of what bulls and bears or buyers and sellers are doing from moment to moment in the market? When you get a trade signal, is that signal at all based upon an interpretation of bulls/bears, buyers/sellers? Or is it primarily based on some other observation, e.g. S/R, range expansion/contraction?

Do you, for example, view a lot of price action as noise, or do you attribute import to each and every tick, especially when identifying entries, exts, targets, etc?

As stated, if this was a trade journal...I wouldn't be posting anything about my perspective because I consider a trade journal somewhat sacred as its about that person's views and trades. I'm well known to respect trade journals here at ET and if I do post in them...its just questions about a specific trade without any recommendations how they should have done something.

This is not a trade journal...its just an understanding of the price action from Erin's perspective and we at this public forum have the right to engage / disagree / agree / differ from her perspective...

It is constructive criticism as she stated.

...These threads are only viable when the conversation is constructive...

Simply, its not a conversation if its one sided and no one else is allowed to express their opinion of topic at hand.

Now to answer your questions...there's no judgement...no requests...no one way.

It's my different perspective of the exact same price action. I highlighted what I've seen others post including today's chart. Others have different names but its still the exact same price action.

Yet, I am questioning the use of the term "Orders" when its just a chart without any shown times & sales info nor DOM info...nothing. Yet, this thread is young and maybe (hopefully) she will explain the term "orders" because its a term you use when look at certain info that's not in the chart itself.

As stated, I hope there's an explanation about the use of that term that only she can answer.

Let me ask you, Mark: In your trading, does any of your analysis or decision making involve the thinking in terms of what bulls and bears or buyers and sellers are doing from moment to moment in the market?

I don't view the market in terms of bulls / bears but sometimes I view it in terms of buyers / sellers. To be specific...I view it in terms of change in volatility. Regardless how I view it...its still the same price action regardless whom posts the chart and uses a different phrase.

Tomorrow I can call it Jack & Jill...its still the same price action and just because I use a different name does not make the price action different.

When you get a trade signal, is that signal at all based upon an interpretation of bulls/bears, buyers/sellers?

For the record, I do not discuss my trade signals nor trade performance at Elitetrader.com but I will tell you that I do not use price action blindly all by itself nor am I implying that's what Erin does. I'm just answering your question considering you asked me and not everyone (sarcasm).

Extreme example, if a meteorite hits the planet and destroys Asia...U.S. markets responds via dropping hundreds of points...

I'm not going to get a buy signal and if I see a buy signal...I'm going to ignore it. That meteorite destroying Asia is my market context and I will be looking for Short signals to enter the price action and re-entry into the price action.

Or is it primarily based on some other observation, e.g. S/R, range expansion/contraction?

No matter the name used on the exact same chart...its still the same thing...key changes in volatility, expansion/contraction, range analysis, trend analysis, s/r analysis, pivot point analysis...

Just change the timeframe. Seriously, change AusUsd to a 1min chart instead of a 120min or 240min chart...we'll be talking about trend analysis via using things like trendlines (horizontal, slant, designation points)...it does not matter...its the same price action via a different timeframe.

It's why I hinted I can do my Pivot Point Analysis (different name) and almost get the same lines as Erin and as my 120min chart example. Seriously, there's no one way to understand price action and any price action trader knows that.

Do you, for example, view a lot of price action as noise, or do you attribute import to each and every tick, especially when identifying entries, exts, targets, etc?

Yes, I do view a lot of price action as noise nor do I watch every tick.

In fact, based upon someone posting a chart via the timeframe of 240min...they too are not watching every tick. If they did, they would then talk about specific numbers in the tick count at specific areas in the price action...

That has not occur in this thread but I'm hoping it will soon occur considering Erin is already using the term "orders". Regardless, I don't look at tick counts nor am I a scalper. I doubt Erin is a scalper too. Yet, I could be wrong because recently I've met a scalper that uses the daily chart timeframe (mention in another thread).

By the way, I rarely see price action traders think a like when it comes to their actual entries and exits due to differences in our cognitive decision making process (behaviour finance). It's the primary reason why a room of traders using the exact same trade method while trading the exact same price action will get different trade results.

Constructive Criticism (no debates)

Why did I zone in on the AudUsd chart ?

I saw someone else the other day use the phrase "Eclipse" for the exact same price action and designation points as Erin's. Its just a different name for the exact same understanding of the price action. As stated...we can call it Jack & Jill (sarcasm). The price action will not change because we changed the name nor will our understanding of the price action change just because we changed the name.

Actually supply and demand and support and resist are totally different...buy sell analysis is one more step above supply and demand. Feel free to post your charts, its always good to see another persons point of view. I stand by my position of understanding how we view orders within the bars.

I disagree because too many people use them as the same. Thus, its still the same chart.

Yet, your definition of "orders" is interesting and I suspect you'll eventually explain it. No right or wrong...just a different perspective of the same chart.

• What do you mean by "orders" and you using something else with your chart analysis of the price action ???

P.S. First chart I ever saw about supply / demand...the person used the phrase Jack & Jill as a joke. It took me awhile to catch on...its very old school...same understanding of the price action.

wrbtrader

 

[NQurious]

Seriously, there's no one way to understand price action and any price action trader knows that.

I don't think anyone here would disagree except those who have found themselves unable to understand price action by any means.

Yes, I do view a lot of price action as noise

That is quite a different persepctive from some price action traders. But probably common among most.

its still the same price action regardless whom posts the chart and uses a different phrase.

Yes, the same price action. But not at all the same understanding or interpretation of that price action.

 

[wrbtrader]

I don't think anyone here would disagree except those who have found themselves unable to understand price action by any means.



That is quite a different persepctive from some price action traders. But probably common among most.



Yes, the same price action. But not at all the same understanding or interpretation of that price action.

I've met a few into the bar to bar analysis. Thus, each bar or interval has a story. Well, of course it does but not all intervals has a an important story to tell. Thus, its just price noise to me if it does not represent a key change in supply / demand.

By the way, my perspective of supply / demand is from the view point of those I learned it from...institutional traders (not retail traders) that's puts value on other things besides just looking at charts.

Thus, I don't blindly use TA nor price action which is why I gave the prior example via a hypothetical Meteorite strike on Asia.

wrbtrader

 

[volpri]

Actually supply and demand and support and resist are totally different...buy sell analysis is one more step above supply and demand. Feel free to post your charts, its always good to see another persons point of view. I stand by my position of understanding how we view orders within the bars.

Actually supply and demand and support and resist are totally different...buy sell analysis is one more step above supply and demand. Feel free to post your charts, its always good to see another persons point of view. I stand by my position of understanding how we view orders within the bars.

As you wrote on your chart here “If there were no buy orders then price would fall off your screen and roll under your desk!” ROFLMAO! Yep, you just made a point (par excellence) about orders! I might add if there were no sell orders price would crash thru one’s ceiling and end up on one’s roof.

Of course the orders are there. And you don’t need a DOM to know that. There are orders on every bar all day long. Each tick price moves is because of an order. Somebody hit the bid or somebody hit the ask. That is exactly what forms the bar...executed orders! I do not understand WRB’s concerns about orders and that nothing is an order or that no order flow analysis can be done unless we see it and do it on the DOM. What is there to explain? Again, the bar forms because of executed orders. Executed orders are actually a more precise method of determining buying/selling pressures than say order flow analysis on a DOM (looking for imbalances) as prices are stacked up on the bid and ask sides. There are alot of games and deception played there. I used to trade stocks years ago and when I would see a specialist open the spread up enough I would jump in and take a slice out of the middle. In those days 1/8, 1/4, 1/2 Also if I saw the size getting unbalanced on the bid/ask I would hit the one that would likely render me a profit. Those days were fun and lasted until some dipstick decided we should go to decimals and that game ended. However, the chart does not lie. It shows which side is winning or has won. Therefore, executed orders need not only be seen on a DOM. I watch them on a bar chart as they are going down. I use the DOM to place orders but I don’t do order flow Analysis from the DOM. The chart tells me what I need to know. In other words, I can see the imbalances on a chart which is what I think Erin is trying to show us. That is, I believe she is showing us her manner of reading these imbalances as the orders are being executed and the bars are being formed.

 

[Erin]

If we understand that every bar has its buys at the lower end and sells preventing it from moving higher at the top end then the next step is understanding swings and when they fail and how we play them. Swing highs stop going higher because it hit sell orders and swing lows stop going lower as it hit buy orders. So when we have a bar that breaks the higher low we anticipate price action - trend is reversing as it meant we had more sellers on board to break that low. Now we have a range of price, in opposite trend, and we want to play the swap level short out of it.

 

[_eug_]

@wrbtrader

Would you agree that you can read "order flow" through the use of a tick or CVB chart? It technically represents the same Information as your DOM but in visual format. If you can see price start to slow down a head of a possible level, is this not reading a change in ordeflow?

Example:

We sell off with a bunch of red 1600 tick candles towards a proper level marked on your chart. As we approach the level all the sudden the chart starts to print big green 1600t followed by more red candles but it is evident that momentum slows down as buy orders enter the market. Once enough buy orders overcome the sells price will reverse. This tends to happen at a reference point from the left on the chart.

To me this is ordeflow analysis via naked chart.

 

[Sprout]

Price action develops by how buy and sell orders are filled. We can interpret these orders in the bars on the charts we trade with some simple understanding of what is occurring within the bar. If we have a bar that stops going higher we understand that it hit sell orders at that level. In the same manner if that bar stops going lower then we understand that it hit buy orders. That one bar does not give direction the next bar does. When the next bar opens and heads higher then the previous bar we know we have more buyers then sellers if we did not then we could not have gone above the sellers. We also understand because we have more buyers then sellers when the third bar opens it should not go lower then the bar that just closed. Now in saying this the close of the bar matters. For us to see commitment in the buyers going above those sell orders we want the bar to close above the previous bar. This thread is for the traders interested in reading a chart without using indicators or oscillators.

In your example, all during the building of a single bar; sell and buy market orders are being filled by buy and sell orders at limit.

When the bar fails to go higher, the re-supply at limit equals market orders entering and crossing the spread. There are transactions at each price, since there are standing limit orders at each price. When you say, “once the buyers took over price ran up to the nearest sell orders” that would be true only in illiquid and thinly traded instruments.

It sounds like what you mean by nearest “sell orders”, you are referring to this state of re-supply at limit that can absorb current market orders entering.

Perhaps, you’ll clarify.

 

[wrbtrader]

@wrbtrader

Would you agree that you can read "order flow" through the use of a tick or CVB chart? It technically represents the same Information as your DOM but in visual format. If you can see price start to slow down a head of a possible level, is this not reading a change in ordeflow?

Example:

We sell off with a bunch of red 1600 tick candles towards a proper level marked on your chart. As we approach the level all the sudden the chart starts to print big green 1600t followed by more red candles but it is evident that momentum slows down as buy orders enter the market. Once enough buy orders overcome the sells price will reverse. This tends to happen at a reference point from the left on the chart.

To me this is ordeflow analysis via naked chart.

Sometimes when I talk about how I was introduce to something in trading...I will tell the story behind that introduction. In this particular situation...Order Flow Trading / Pheasant Hunting.

For many years I thought Order Flow trading was not possible (profitable) and thought I was a wise man for believing it was not possible. Reality, due to the fact that I'm not a DOM trader and prior bias against level 2 bundle with the fear HFT...that was my bias against such.

Yet, I never attacked anyone nor challenge anyone to prove the merits of trading via Order Flow if they believed in it.

Back in 2014...I was travelling back from a quick vacation (wild pheasant hunting with my old man's best friend in South Dakota) and I had a one day stop over to see my mom and another long time friend in Chicago to drop off some wild pheasants for them.

At his home, he introduce me to another trader and this trader was demonstrating his use of tick charts to read Order Flow while he was trading Eurex DAX futures...live in front of my two eyes.

I do remember clearly the green / red visual bars with tick numbers and on the right of the chart was some sort of couleur histogram.

It was a visual chart of the Orders that he refer back n forth as Tick Counts. Although it was just one real money trading session and a very profitable one in the few hours he traded. It was interesting to see but I was more interested in getting some sleep before my flight back to Canada.

I no longer have any biases against Order Flow trading after watching him trade in front of me but he did seem a little offended when I jokingly called his charts...Sci-Fi charts.

Regardless, it was an interesting reminder / contrast to my own trading but it was also a reminder that there's other ways to trading without traditional charts and price action understanding.

Yet, there are a few things I will not forget. He too used a lot of Sell Orders and Buy Orders terminology about how the tick numbers represented footprints. On his order flow charts there were highlighted areas (he stated he automated) from the tick intervals plus what looked like a few pivot point lines. He is a scalper.

It was not enough to merit me trying to learn a new trick but it was an interesting brief live real money trading experience. Besides, I wasn't there to learn something new about price action trading. I just wanted to drop off some of my birds...get them in cold storage and not miss my flight back home.

I think he was in shock when I demonstrated how to clean wild pheasant with my bare hands without any game shears and a bunch of corn came falling out of one of the birds.

I wrote him some wild pheasant recipes in French (his wife is French) in appreciation of his sharing of his Order Flow trading. He wasn't talkative as much after that and I left.

Flew back to Canada but it did prompt me to look up a few conversations about Order Flow here @ Elitetrader.com (there wasn't much nor any visual pretty chart examples).

I stay in contact with his wife...we share recipes. Once in awhile she'll mention he still does very well in trading. I still do not use order flow trading but when I see certain words / phrases...it will trigger a memory for me.

wrbtrader