I would disagree with your logic. Price action has to do with actual sales so the tape is price action. The bar is just this price action, time and sales, limited to a particular time frame. Price cannot move without orders being executed, it is the execution of an order which signals a price move. I look at it as price action is execution then there is movement or not which is the result of that price action. Price action or executed trades is the effort and movement is the result. It really does not matter how you define things as long as it makes sense to you. But for me time and sales has information in it that candles or the book do not. Although candles and time sales both show price action, in time and sales there is detail which is available no other place. But you still need candles to see the big picture and where and when to look for the detail. Time and sales is a precision instrument for order entry.
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The only issue I have with T&S ("the tape") is that you are only viewing market orders with no heed to the accompanying depth of limit orders at that price. Since every market order buy was into a limit offer, and vice versa for shorts, what market orders "mean" is difficult to determine without regard to the behavior of the depth. IMO.
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I would highly recommend Pete Davies (aka FIO member Dionysus Toast) free videos at his Jigsaw Trading website. He has some excellent videos that explain the way the market works and how that relates to order flow in a way that a complete beginner can understand and a veteran trader can also watch without getting bored.
If you wish to pursue order flow further, his Jigsaw tools are one if the best values in the trading industry. Professionals used to pay insanely huge monthly fees for tools that weren't half as good.
The key point is that for most people, order flow is a tool to refine their entries to an existing system. As Pete puts it, "it is icing on the cake". If you don't already have the cake (a profitable system), then order flow will probably not help you.
There is one source that uses it for the icing and the cake, and that is John Grady. He's has several webinars in the archives here.
Last edited by Heph333; October 2nd, 2016 at 11:57 AM.
This makes sense but even with market depth or a count of the pulling and stacking of bids and offers, it's difficult to determine what it all means. Can you use market depth to your advantage? I have not been able to. depth could be real or a feint. And even if it is real how do you know beforehand it's going to be enough? If you stick to price action there is less predicting and more following.
And that is perfectly OK. Everyone has to find what works for them. I believe some of the most successful traders use price action as their primary tool. I was a price action trader for years, until I got frustrated with being late to the party on every move.
For a very long time, I believed entry points didn't matter & that only exits and money management were important. Then I realized that my entries were crucial to my exits. My goal now is to enter trades as close to the stop loss as possible. But that often gave me the price edge at the sacrifice of trade probability (i highly recommend the webinar from FT71 on risk and probabilities).
Enter Order Flow. It allows you to increase the odds some by often, but not always, seeing where and when a pullback is going to stop. This allows me to turn 1:2 risk:reward trades into 1:3 or 1:4.
Order flow is very abstract. It is not a rules based system. It is simply a window into the behavior of the market participants who control the market. You must still interpret what their behavior means.
Order flow is a refinement for an already functional trading approach. If it is for you, you will know when the time comes. I purchased and watched John Gradys basic course years ago. It sat unused in my library until recently. I simply wasn't ready.
Last edited by Heph333; October 2nd, 2016 at 09:00 PM.
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Price can move without orders being executed, thus price moving does not mean orders were executed.
Also, in many markets (including futures), orders can be executed and not show up in the time and sales or reported volume. So those are two problems I like to exempt myself from. However, if I am watching those things more closely for whatever reason, I just keep in mind that there's no way I will ever completely trust what I see.
Pice fluctuations = objective data
Volume and T&S = inaccurate/incomplete data (but that doesn't make them useless)
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Respectfully I disagree on your posts.
How in futures can orders can be executed and not show up?
Price moves because of aggressive buyers and aggressive sellers.
Your conclusion is the opposite of mine.
Volume and t&s shows what actually occurred.
An axe or three could easily run price past stops. They do so daily, its called a flush. Pump and dump. That is why I disagree with your assesment. This will affect price action.
I am going to say it is your way of organizing and sorting volume and t&s is the issue. That is why you find it inaccurate and incomplete.
Printed volume is a fact. What is incomplete about it?
Price action is a derivative of printed volume. It doesn't show how many aggressive buyers there were or what level had what aggressiveness. Where there was a fight and where price just ran.
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The only fluctuations that you can see when no orders are executed would be limit orders either being added or being pulled from the bid or offer. Such scenario seen on a DOM provides the illusion of price movement, but that does not affect price action per se. It's only at the next trade (i.e. the next order) that you will see the effects of the above.
Say it's NFP time, and it's 5 seconds before the data release. What you would see quite often on 6E is the spread between bid and ask widening considerably. But the chart is not moving because there are no orders being executed.
Last edited by xplorer; October 4th, 2016 at 05:36 AM.
Sounds like inside bid/offer being confused with last price. The inside bid or offer can change without any trades being executed. But last price is by definition a trade that was made between a buyer and seller.
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