FT 71, You hit the nail square on the head with this webcast on Scalping! I've never heard such an accurate precise summation of what it takes to Scalp and be a Scalper. If I may say, the Scalping person you describe, as I watched the presentation is MYSELF !! I learned over many many years where I fit as a participant in futures, virtually self taught, trial and error, research research research. I now sit here as a confident "Scalper", I trust my instincts and intuition, I have a batting rate on average of high eighty %. And yes, I totally agree, nobody will achieve satisfactory results from a laptop or basic PC. I'm running on the latest and best hardware and ten monitors, Scalping the NQ, running the ES,YM and RTY on Footprint, Profile and DOM. I write this by way of letting people know, this is real, you can do this folks. Also as a thank you to you FT 71 for your knowledge and experience, as long as I have been in this game, still your words give me validation, satisfaction and ongoing confidence. Thank you again..

FuturesTrader71 

Hello traders, To my point earlier, I talked about Order Flow being more a way to hone in on a better entry than as a trading plan in my experience. To that, I held a public webcast last week about scalping in which I discuss some of that. You may pick up a thing or two from it related to this topic. I look at some classic order flow setups, etc. See it here:

Order flow is the study and analysis of the market and limit orders within a market. Note that to do this type of analysis you need depth of market data. Otherwise there is no way to categorize market orders as buy or sell.

Market microstructure is the study of the rules of the market and how those rules can affect the order flow. There are some consistent behaviors in the order flow that remain consistent over time because of the structure of the market. Market microstructure is an established area of study within the academic community, and you can find many papers proving certain market behaviors.

For instance, the impact of large metaorders tends to follow a square root law. A metaorder is a large order split up and executed over time. The square root law means that if a metaorder of 1,000 lots moves the market 16 ticks, an order of 2,000 lots will move the market 24 ticks instead of the more intuitive 32 lots. They very nature of how a limit order book works creates this behavior.

In other words there are inefficiencies built into the very fabric of the market that will always provide some opportunity for profit. The issue with such edges though is that they are extremely competitive opportunities. The prominence of HFT robots makes these edges extremely difficult to capitalize on for retail traders. I refer to such situations as base rather than edge. Such information does not provide enough of a competitive edge to make consistent profits from, but you wouldn't want to trade against such information either. If anything they can just help you avoid taking bad trades.

That is why order flow is a necessary part of a complete trading strategy, but in modern markets is no longer sufficient as a strategy on its own.

I love orderflow but it needs to be used with other more macro-view tools. Pure orderflow trading is so past tense. It's HFT firms' battlefield now.

RickM 

watch the DOM next to a 1 minute chart for weeks and weeks. Its the imbalance of orders verus the imbalance of volume is what order flow is all about. Good luck

At first I thought Cumulative Delta was the holy grail until I realized it would take an army of Monty Python soldiers to find such a thing searching for scalping nirvana..

So Rick......I'm trying to get a handle on the concept labeled "imbalance" And wonder when you say "orders vs volume" do you mean the quantity of lots(within each order) vs the actual number of orders sending those lots? I found this thread using keyword imbalance.

It seems throughout discussions on imbalances some say heavy absorption of market orders without price moving further (in the direction of those market orders) could lead to an opposite price reaction as those getting absorbed realize it isnt going anywhere for now and want to get out of what is turning into be a futile position/effort; ut uh ...trapped!.

Am I correct in understanding that you conversely look for this imbalance to show you when persistent aggressive trades (eg market orders) take out a large opposing order, there'll be a slingshot effect pushing price the same direction of that aggressive market order attack?

Essentially the opposite reaction of the aggressors running for the hills after realizing they're up against as Crocodile Dundee once said: "you call that a knife, now this is a knife"?

Regards
Bruce

Scalpers syndrome isnt always terminal

I'm new to the concept of Order Flow Trading (OFT) so I'm open to everything in this thread!

Hi @trymph,

I agree with your observation. The imbalances between the buying/selling at the bid and ask AND the resulting direction of price after the underlying imbalance is the basis of an orderflow trader's edge.

Reminds me of this excerpt from the book:

The Art and Science of Technical Analysis: Market Structure, Price Action, and Trading Strategies 1st Edition by Adam Grimes.



If you read all the orderflow terminology everything is a variation of basic buying/selling imbalances and the reaction of price after the imbalance.

https://amstradinggroup.com/kb/knowledge-base-category/order-flow-trading-glossary/

trymph 

At first I thought Cumulative Delta was the holy grail until I realized it would take an army of Monty Python soldiers to find such a thing searching for scalping nirvana.. So Rick......I'm trying to get a handle on the concept labeled "imbalance" And wonder when you say "orders vs volume" do you mean the quantity of lots(within each order) vs the actual number of orders sending those lots? I found this thread using keyword imbalance. It seems throughout discussions on imbalances some say heavy absorption of market orders without price moving further (in the direction of those market orders) could lead to an opposite price reaction as those getting absorbed realize it isnt going anywhere for now and want to get out of what is turning into be a futile position/effort; ut uh ...trapped!. Am I correct in understanding that you conversely look for this imbalance to show you when persistent aggressive trades (eg market orders) take out a large opposing order, there'll be a slingshot effect pushing price the same direction of that aggressive market order attack? Essentially the opposite reaction of the aggressors running for the hills after realizing they're up against as Crocodile Dundee once said: "you call that a knife, now this is a knife"? Regards Bruce Scalpers syndrome isnt always terminal

Hi Phantom, could you kindly explain what was your decision to take a short here? (not sure I understood the "method" )

Thanks in advance,
S.

phantomtrader 

There's a lot of ways to use order flow. It depends on what you want to do. I'm a scalper so I'm looking for that type of setup. I like the volumetric bars in Ninja. If you spend some time studying the information, there's a lot to exploit. If there's a real breakout, like there was this morning on the long side, you're going to see it on the volumetric bars because the delta and volume are obvious. I also use the Ninza volume delta indicator which I think is excellent. ES 09-22 (1 Min Volumetric) 2022_09_07 (8_09_41 AM)

trendisyourfriend 

I think the same. If there is something better than stricly using order flow as seen on the footprint or the DOM then this is it. Structural approach first and then order flow for some refinement. But the key to seeing potential sources of orderflow which can move a trade to profit, in any market, in any timeframe, is to… … see the pain, not the price! Source: YTC the-key-to-seeing-orderflow-nq

post_Futures_io


Trend...that was relatively an "easy" one....I have "upgraded" your examle to a real mind Fu^%$^%*&

My 2cents on the matter of specifically "DOM" and tools such as JigSaw /Book map etc with heatmaps as well - is to think about these two points:

1. A PRO trader such as AL Brooks does not use them

2. JigSaw founder himself said on one of his videos that it is "Just a TOOL" and needs to be used in CONFLUENCE with other tools as well - if my memory serves me right - watching one of his earlier videos

Lastly, no order flow will help you if a sudden MASSIVE MARKET order gets executed with 10K's of contracts due to some unforeseen event (but this is the exception to the rule off course),

Also Im thinking out loud here ....if say institutionals etc are doing a mix of MARKET-ORDERS and Limit Orders - its makes it so much harder to "Reverse Engineer" their intent - from a pure BookMap/Heatmap looking at resting orders.

I think those tools may help keep you in a trade and provide higher confidence - or give you that 2 tick better entry timing "edge" - I gave to admit - those tools did NOT work for me.

I also question the probability improvement with such toold....say they got you from a 55% to say 65% (which is statistically a MASSIVE improvement ) - would one know how to "capitalize" on such as improvement and by how much would it improve your trading vs the EXTRA amount of data and the FATIGUE that comes with it worth it?

Cheers,
S.

ziggy123 

My 2cents on the matter of specifically "DOM" and tools such as JigSaw /Book map etc with heatmaps as well - is to think about these two points: Lastly, no order flow will help you if a sudden MASSIVE MARKET order gets executed with 10K's of contracts due to some unforeseen event (but this is the exception to the rule off course), Cheers, S.

So true ziggy.......in particular last week the move from Dow -200 to +700 a case in point and I'm still learning when to just jump on the train and stop picking levels/support or resistance for reversals!! At risk of aging myself still cleaning out the bag of tricks felix the cat left on the side of the road.

But as long as we're talking about imbalances I've posed this in another thread and wonder if anyone has anyone here has comments on the arithmetic between these 2 imbalance calculation methods. The basic diff between mk77ch's FootprintV2 and the NT8's default is whether to use a %age of the total bid/ask trades (footprintV2) or just the ratio bid/ask trades themselves.:

imbalance_NT8vsFootprintV2


Regards
Bruce