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Charting VS orderflow


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Charting VS orderflow

  #11 (permalink)
 
matthew28's Avatar
 matthew28 
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Grantx View Post
The problem though is that sometimes this absorption level does break which makes the whole clever analysis a little bit pointless IMO.

It does allow you to use a much tighter stop though. Instead of just putting a stop beyond the nearest swing high or low like people tend to do, if you see that your level stops absorbing and price gets through it by a few ticks and now the bids or offers are quickly being cleared out and pulled you can hit out too and reassess. Smaller stops gives better R/R on the winners and less fear of taking a loss. And If price clears out a few stops then comes back through that level you can always re-enter with more confidence.

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  #12 (permalink)
 
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 xplorer 
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matthew28 View Post
And If price clears out a few stops then comes back through that level you can always re-enter with more confidence.

Great point - something for me to work on...

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  #13 (permalink)
wmueller
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A Jigsaw Trading webinar pointed me to a website with some DOM trading exercises. The info is free. I don't use Jigsaw but the info still looks like it might be useful.

Preparation for Trading Exercises | PriceSquawk

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  #14 (permalink)
 
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 xelaar 
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I subscribe to using both charts to find zones and orderflow so see what is happening there

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  #15 (permalink)
 captaindavidb 
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Grantx View Post
Advantages and disadvantages of the DOM



Advantages order flow:

1.You get to see the action as it is happening. With practice, you can identify right now who is in control.

2.You get to see absorption and when orders are pulling or stacking.

3.Precision placing of orders at speed on the DOM and easy managent of orders, moving stops and targets.

5.Volume histogram alongside price makes it very convenient and easy to see levels

6.You learn and understand a lot more about the movement of price and get an appreciation for the rawness of this game.



Disadvantages of orderflow:

1.You can’t watch it for long periods. Fries your brain.

2.You have to be watching to see things like absorption, iceberg orders. See point 1.

3.A lot of information at all times. Dom is constantly flashing and jumping around as price twitches up and down between bid and ask.

4.You start seeing too much. Are you being lured, herded, is the big scalp flip imminent?







Advantages and disadvantages of the chart:



Advantages of the chart:

1.Levels and reversals signals are very easy to see. Easy to setup alerts. You can set an alert for a level and go have a coffee.

2.A lot less noise. Do you really have to see the constant jittery price flickering and assaulting your eyeballs?



Disadvantages of the chart:

1.You cannot see the battle that is going on at a level.







Scenario 1:

In the chart below you can see an indication that price has respected resistance and being rejected down at point A. You could have got at least 3 ticks out of that without any hassle. At point B, another basic reversal indication with an easy target at my old level. Pretty simple.







Scenario 2:

In the DOM image below when price gets down to the low of the day, there is a lot more effort to translate what is going on:

Step in the volume profile at A and B creating a value area. The trades I encircled in black is a great indication of buyer strength but where is the signal prior to that move? If you wait for price to get to POC then its too late because that the middle of the value area. But if you simply pull the trigger at the bottom, and take the view that you are ‘leaning’ on the profile step, well what kind of analysis is that? I may as well just do that off the chart.









In scenario 1, I can sit calm as a hindu cow waiting for that candle to give me a signal of intention.

In scenario 2, I am being mentally abused with possibilities and game play. Sure, you gotta pull the trigger sometime and jump in, but I can do that on a chart, do I really need to be looking at every fidgety price movement?



Im still new to the order flow concept and I will give it time. These are questions I am starting to ask myself though. If anyone here has any comments or experience on this I’d appreciate your insight.



For a long time I was always trading with just the price action, but have lost a lot of money doing that over the years. Something always seemed to be missing as the movement of the market was always so unpredictable. That's where order flow comes in. It allows you not only to see the quantum of the orders, but also the speed at which they're being placed.

In the example that you give with the volume profile, how quickly were orders being placed at the extremes of the value area? Was there a lot or little volume? Answering those will give you the key clues as to whether or not you should trade them, and in which direction.


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  #16 (permalink)
 
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 Sazon 
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I think this guy does an impeccable job at assimilating both chart reading and order flow using Wyckoff and VSA. He's probably among the best at explaining this stuff that I can recall.


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  #17 (permalink)
 Grantx 
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captaindavidb View Post
For a long time I was always trading with just the price action, but have lost a lot of money doing that over the years. Something always seemed to be missing as the movement of the market was always so unpredictable. That's where order flow comes in. It allows you not only to see the quantum of the orders, but also the speed at which they're being placed.

In the example that you give with the volume profile, how quickly were orders being placed at the extremes of the value area? Was there a lot or little volume? Answering those will give you the key clues as to whether or not you should trade them, and in which direction.


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I see where you are coming from, Ive actually got to a stage where I mostly ignore the orders in the buy/sell column. The speed of change in this column makes my head spin.

Watching order count actually committed gives a much better idea of where the battlegrounds are and where pain areas are for those that are playing in the short term.
I traded gold this morning and saved a screenshot of the DOM as I saw absorption at a particular level. It was a successful trade based on absorption and the following is a post analysis explanation but Im trying to explain what I was seeing at the time:


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  #18 (permalink)
wmueller
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If you want a chart and DOM together you might take a look at this scheme.

This is constant volume chart (for CL). In this case each bar represents 128 contracts traded. The picture was taken at about 1:30 CT the end of the "pit session" (which doesn't really exist anymore but still has some meaning. The yellow background is there for the last 3 minutes of the seesion because there is a lot of trading activity then. The upper study is price and the lower one is cumulative delta.

Arrow A shows a down price bar with an asterisk and an up delta volume bar. If you zoomed in on the delta volume bar you would see that it didn't end at the high. So someone pulled the bids and price closed 2 ticks lower than it opened at. The program detects that and places the aserisk below the bar. Arrow B shows price not moving at all, yet cumulative delta dropped a lot. Thus the bids came in heavy and absorbed all the market sell orders indicating absorption. The program detects it and places an up arrow under the price bar. Arrow C shows absorption but in the other direction - Asks came in heavy and absorbed the market buy orders. The program placed a down arrow above the price bar.

Arrow D points to a gigantic bid order of 555 contracts on the DOM graph. Arrow E points to the inside Bid and Ask and the bids and asks surrounding them. It is kind of bowl shaped which is typical. Arrow F points to the evolving POC. Arrow G points to a notch in the volume-at-price graph which coincides with a swing high, not shown. Besides the DOM graph I also have the trading DOM and I can initiate trades by right-clicking in the green column to place a buy order and right click in the red column to place a sell order. You can see the bid and ask quantities in those two columns. In between those two columns are (from left to right): bid stacking/pulling, recent bid volume, recent ask volume and ask stacking/pulling. Down in the lower right corner is the tape.

The DOM integrated in with the chart can take some of the pressure off of having to stare at the DOM all the time; and you are able to get recent historical context which might help your trading.



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  #19 (permalink)
 Grantx 
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wmueller View Post
If you want a chart and DOM together you might take a look at this scheme.

This is constant volume chart (for CL). In this case each bar represents 128 contracts traded. The picture was taken at about 1:30 CT the end of the "pit session" (which doesn't really exist anymore but still has some meaning. The yellow background is there for the last 3 minutes of the seesion because there is a lot of trading activity then. The upper study is price and the lower one is cumulative delta.

Arrow A shows a down price bar with an asterisk and an up delta volume bar. If you zoomed in on the delta volume bar you would see that it didn't end at the high. So someone pulled the bids and price closed 2 ticks lower than it opened at. The program detects that and places the aserisk below the bar. Arrow B shows price not moving at all, yet cumulative delta dropped a lot. Thus the bids came in heavy and absorbed all the market sell orders indicating absorption. The program detects it and places an up arrow under the price bar. Arrow C shows absorption but in the other direction - Asks came in heavy and absorbed the market buy orders. The program placed a down arrow above the price bar.

Arrow D points to a gigantic bid order of 555 contracts on the DOM graph. Arrow E points to the inside Bid and Ask and the bids and asks surrounding them. It is kind of bowl shaped which is typical. Arrow F points to the evolving POC. Arrow G points to a notch in the volume-at-price graph which coincides with a swing high, not shown. Besides the DOM graph I also have the trading DOM and I can initiate trades by right-clicking in the green column to place a buy order and right click in the red column to place a sell order. You can see the bid and ask quantities in those two columns. In between those two columns are (from left to right): bid stacking/pulling, recent bid volume, recent ask volume and ask stacking/pulling. Down in the lower right corner is the tape.

The DOM integrated in with the chart can take some of the pressure off of having to stare at the DOM all the time; and you are able to get recent historical context which might help your trading.



Thanks for sharing your chart. Nice looking setup.
What did you do to get D? Does it paint a bar where large orders are sitting?

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  #20 (permalink)
wmueller
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Grantx View Post
Thanks for sharing your chart. Nice looking setup.
What did you do to get D? Does it paint a bar where large orders are sitting?

D is just one data point in the Chart DOM. For some reason CQG started providing 50 levels of bid and ask data on CL so now the Chart DOM displays a lot of levels and every now and then a whopper shows up. Often it is pulled a little bit later, but sometimes it sticks and sometimes price starts heading towards it. Sometimes price even gets there. It can be a useful target.

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