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Hi,
as far as I know, InteractiveBrokers does not deliver tick data. So it appears not to make sense to work with order flow under these circumstances.
I agree that you need a separate data service (other than IBKR's internal filtered tick data) in order to use order flow to trade futures with IBKR.
I'll try to answer the more general question: how to apply order flow to spot forex trading (regardless of broker).
While there is no centralized exchange, I have found that using tick-count volume as an analog to true volume is perfectly close enough. People will argue with this, and I am not saying it is precisely the same. I am only saying that using tick volume as an analog for real volume is good enough for purposes of applying order flow analysis.
Further, we have the question of how to differentiate between aggressive buys and aggressive sells, i.e, whether the trade or tick (because ticks are our volume measure) is an aggressive buy or aggressive sell. The way I've done this, is to look to which price the transaction or tick occurred at--whether it occurred at the bid or the ask. Each tick (which is an item of data) contains a value for bid price, a value for ask price, and a value for last price.
Remember that the "forex market" is really just your broker's dealing desk or the ECN that your broker sends your orders to. And for every tick that you receive from your broker or data provider, the tick (or transaction) will (at least 99% of the time) occur at either the bid or the ask. So if the "last price" equals the "bid price" than the transaction occurred at the bid, and I call it an aggressive sell and passive buy. If last price equals the ask price on that tick, I call it an aggressive buy and passive sell. Fairly simple, really.
In sum, knowing the tick volume and whether the tick was an aggressive buy or aggressive sell is really all the data you need to apply order flow analysis to spot forex. You can build footprint charts, cumulative delta, volume profiles, VWAP, etc with that data.
Now, the question is, does your forex trading platform support this type of analysis as applied to spot forex data? NT8 order flow package does if you set delta type to "up/down tick", which might be slight different than what I explained above. I just can't remember, so maybe to their support forum for better info than what I can give.
An additional question is whether the forex market tends to "respect" order flow analysis in the same way that the US futures market does. It does but to a lesser extent than the futures market does, imo. But it's all about how you use the tool, rather than how "good" the tool is on its own.
Bottom line, yes order flow analysis can be used in the spot forex market. Whether it is effective will depend on the user, as is the case with order flow on absolutely any market.
Thanks. Sorry if I answered with delay, as I was researching on Order-Flow matter for a while. Do you mind answering to below:
1- Do you mean even IB does not have paid/subscription-based-with-fee Tick-data nor free Tick-data?
2- Purchasing Level-II market data from IB will worth the fee? As there are some prime brokers I heard that offering Level-II data for free for their customers?
3- Can I do Iceberg on IB with Multicharts-v14/MotiveWave-Ultimate as the platform?
4- If I get Tick-data from a reputable Tick-data provider for platforms like Multicharts-v14/MotiveWave-Ultimate and connect these two platforms to the IB TWS, will I be able to do Order-Flow analysis and trading with IB?
Thanks. Sorry if I answered with delay, as I was researching on Order-Flow matter for a while. Do you mind answering to below(Considering trading for Spot Forex major pairs mainly):
1- Do you mean even IB does not have paid/subscription-based-with-fee Tick-data nor free Tick-data?
2- Purchasing Level-II market data from IB will worth the fee? As there are some prime brokers I heard that offering Level-II data for free for their customers?
3- Can I do Iceberg on IB with Multicharts-v14/MotiveWave-Ultimate as the platform?
4- If I get Tick-data from a reputable Tick-data provider for platforms like Multicharts-v14/MotiveWave-Ultimate and connect these two platforms to the IB TWS, will I be able to do Order-Flow analysis and trading with IB?
5- I don't see Volume data in IB's paper account, does IB's paid account does have free Volume data or does not have Volume data at all(like the Tick-data that IB likely does not offer them), or if the IB offer's Volume-data in a live account, is it free on the account or its a subscription-based(e.g. like Level-II data that is likely subscription base in IB)?
6- What Tick-data Volume has the most accurate Tick-data Volume in the market? Is there any free one(e.g. like we can open an account in one broker that offers it for free and deposits some money to keep the account active and do the minimum monthly trades, etc)?
7- If there is no free accurate Tick-data Volume, where can I get the most accurate Tick-data and Volume information(Ask-Volume/Bid-Volume) in the market?
8- About 'Now, the question is, does your forex trading platform support this type of analysis as applied to spot forex data? NT8 order flow package does if you set delta type to "up/down tick", which might be slight different than what I explained above. I just can't remember, so maybe to their support forum for better info than what I can give.'>
I see there aren't enough Technical Analysis studies available in NT8, thus I moved to Multicharts+ASP_v14 and MotiveWave-Ultimate and there are some add-on's available in the market for MotiveWave-Ultimate that do more than what platform by itself offers in Order-Flow but it's pricy for about ~1300USD+500USD as two add-on package. I don't know anything for Multicharts+ASP_v14 on the Order-Flow add-on for now, but I will research this later?
9- About 'whether the forex market tends to "respect" order flow analysis in the same way that the US futures market does. It does but to a lesser extent than the futures market does, imo. But it's all about how you use the tool, rather than how "good" the tool is on its own.'>
Do you mean the Spot Forex Order-Flow analysis is different that Futures Order-Flow analysis?
10- How can I measure that my Technical Analysis tools crafter accurately, in the case of Order-Flow, how shall I test to be sure my Order-Flow tools are accurate and they do not program wrongly and producing wrong results? As I want to purchase an add-on for Order-flow for MotiveWave-Ultimate for about ~1300USD+500USD but as it's pricy, I want to be sure it's a real deal and it is not programmed wrongly and produces wrong results?
