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Order Flow is Rubbish?


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Order Flow is Rubbish?

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  #1 (permalink)
 rdaytrader 
Netherlands
 
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Does anyone know Simple Ton? He seems to be a Forex trader. I don't know anything about his profitability. No disrespect to this guy. I think he's a good trader, but I disagree with him on his view on order flow. He should be a comedian too imo. His video is hilarious though. If you want to laugh watch this:


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  #2 (permalink)
 choke35 
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The video may be funny in some sense.

But if I'd have to bet if more money is made a) by software vendors selling order flow products to
retail customers or b) by retail customers using order flow products, my bet would be clear ...

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  #3 (permalink)
 rdaytrader 
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yes, I think so too...

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 TWDsje   is a Vendor
 
 
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Looks like a bunch of confirmation bias to me. Play a little bit of what a guy says, and make fun of it. No statistical proof that what the guy is saying is true or not. He probably does this because it doesn't sound like he understands the order flow concepts being explained.

Anyways I wrote a strategy once that basically looks for the big numbers at the top of a footprint chart. Basically I wanted to know if when we hit an iceberg at a low or a high if it tends to go through or not. So it's not exactly what they are talking about in the video, but it's somewhat similar. I tried a bunch of different setups and filters to see if there was any threshold where it became a sure thing. The best I ever got it was 55% win rate, but the risk/reward wasn't working out. Might be able to turn it into something profitable with a bit more work, but I mostly just wanted to know what the probability was on that one trade. Here's the code of what I had:

https://github.com/twdsje/Ninjatrader-scripts/blob/Fish/Strategies/BigFish.cs

Anyways after this I stopped paying attention to big prints so much. Such areas definitely create an imbalance that often has to unwind, but there's simply no way of knowing which side will win until after it happens. It's a great way of understanding why the market did what it did after the fact, but the predictive edge on its own is not enough to be profitable. Now I pay more attention to cumulative delta, price movement, and VWAP. So I'm still trading based on orderflow as I see it in Jigsaw, but I don't necessarily use big numbers as my entries or exits. For the most part I break even. Lately my problem seems to be mistakes or misreading range bound days. I record every session and put it on YouTube. So take from that what you will. There's plenty of consistently profitable traders on the Jigsaw trade leaderboards.

On a side note I don't believe every impulsive move we see in the market is a stop run. Sometimes we get to a level, and that just makes everyone excited. That excitement may cause another leg higher, or that impulsive move may retrace. The only way you know if it is a stop run or not is if the orders all hit at once. Since the stop orders sit on the exchange they can execute before robots can respond to it to pull their orders. So you'll see multiple levels all go off at the same time. You can only see this if you are watching a reconstructed tape.

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  #5 (permalink)
 rdaytrader 
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Hi TWDsje,

Not everybody can laugh at this obviously. By no means was this supposed to make fun of him. I find it just hilarious the way he comments. No offense made. He's definitely not a believer in order flow, and probably very good at what he does. He's also viewing a video from NOFT which is a vendor that sells order flow probably like it's the holy grail, so that could explain the reaction of Simple Ton.

Cool that you wrote a program scanning big numbers. Besides big prints I've learned from an institutional trader that single prints could also be significant as well as the ratio of the top 2 ask prints in a down bar and vice versa in an up bar.

Besides the things you look at -which are great imo- I would suggest also to look at the macro context, if you're not already doing that. Yes, sometimes it's hard to make an educated guess whether range or trend. If you take trades with a trend in mind within a range day it messes up trades.

About stop runs, everybody can try to guess where they are. Whether retail traders can take advantage of them or not, remains dubious imo as HFT's are playing in this area.

Could you explain what's special about the reconstructed tape? I can create multiple Time & Sales windows filtered by size and combined by price, type or time in Sierra. Also, I did a replay of the tape of a blip in FGBL this afternoon and I saw a strange thing, namely that some earlier T&S timestamps followed later T&S timestamps. Never seen that before. I guess it was a stop run.

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  #6 (permalink)
module0000
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TWDsje View Post
Since the stop orders sit on the exchange they can execute before robots can respond to it to pull their orders. So you'll see multiple levels all go off at the same time. You can only see this if you are watching a reconstructed tape.

There is a slightly more accurate way to look at that - not just watching jigsaw's reconstructed tape. In your code example you are examining delta tick-by-tick(I like that your variable names are whales/fish! Mine are whales/minnows). You can additionally examine the order book tick-by-tick in each cycle. A "stop run" indicator only needs to see if the order book remains unchanged during consecutive ticks in the same direction that occur at the same time.

Example.. price is 100'00. A string of buy-ticks comes in that ends with the price at 100'05. During each tick, the limit offers remain unchanged(other than their subtraction of incoming market buy orders). This means not a single order was pulled/added during the string of buy ticks. That's a stop run. It's also not something that most people look for or talk about though - a non-programmer will have a very difficult time digesting that much data coming across in a handful of milliseconds.

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 TWDsje   is a Vendor
 
 
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module0000 View Post
There is a slightly more accurate way to look at that - not just watching jigsaw's reconstructed tape. In your code example you are examining delta tick-by-tick(I like that your variable names are whales/fish! Mine are whales/minnows). You can additionally examine the order book tick-by-tick in each cycle. A "stop run" indicator only needs to see if the order book remains unchanged during consecutive ticks in the same direction that occur at the same time.

Example.. price is 100'00. A string of buy-ticks comes in that ends with the price at 100'05. During each tick, the limit offers remain unchanged(other than their subtraction of incoming market buy orders). This means not a single order was pulled/added during the string of buy ticks. That's a stop run. It's also not something that most people look for or talk about though - a non-programmer will have a very difficult time digesting that much data coming across in a handful of milliseconds.

That sounds like an excellent way of determining if a stop run has occurred in code. I might try programming that. How would this look different from if one big market order came through that required multiple levels to fill? I don't ever see this in bonds, but couldn't it be possible in thinner markets?

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 rdaytrader 
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Hi module0000,

Thanks for your explanations. Aggregating same side/ time orders can also be done in Sierra. "Fuzzy" is not possible in Sierra. But I doubt aggregation is anywhere useful, since how do you know whether those small orders where split orders from a large trade or genuine small orders? By only looking at timestamp? I trade on the Eurex exchange, which as far as I know, doesn't do split orders, so I don't care about it. However even if there were split orders on Eurex, I doubt the benefit of aggregating small orders. I look mostly at big orders anyway, since small orders don't really move markets.

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  #9 (permalink)
module0000
Little Rock, AR, USA
 
 
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TWDsje View Post
That sounds like an excellent way of determining if a stop run has occurred in code. I might try programming that. How would this look different from if one big market order came through that required multiple levels to fill? I don't ever see this in bonds, but couldn't it be possible in thinner markets?

I have a method I've been experimenting with, but it's unproven over time. That said... I'm looking at the intra-day open interest on the reconstructed orders. You should not see any increase on OI with stop runs, but a big market(entry) order has at least a 50/50 chance to cause OI to go up. I report the change in OI by taking a reconstructed order(say 500), and printing the percentage of the order that incremented OI. So a new position order for 500 would have 100% reported OI, whereas a stop run for 500 would report 0%.

The part that makes it all experimental is that CQG tells me "intra-day open interest calculations are only accurate for CQG's orders". So we won't see valid(or any) OI on orders from other exchanges. I'm not sure if this applies to Rithmic and other feeds, but I'm stuck on CQG for the time being.

Regarding bonds, I'm trading the same bonds you are, with an eerily similar layout of our Jigsaw tools

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 Mabi 
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rdaytrader View Post
Does anyone know Simple Ton? He seems to be a Forex trader. I don't know anything about his profitability. No disrespect to this guy. I think he's a good trader, but I disagree with him on his view on order flow. He should be a comedian too imo. His video is hilarious though. If you want to laugh watch this:


Orderflow is rubbish if you are not scalping or doing arbitrage that is.

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