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Charting VS orderflow
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Charting VS orderflow

  #1 (permalink)
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Charting VS orderflow

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.
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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.
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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.

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  #2 (permalink)
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  #3 (permalink)
harpers ferry, WV USA
 
 
Posts: 5 since May 2017


I do mainly charting, but after I get signals and know what to expect, I also watch price action as well when it gets near that level. Overall I like charting / TA way better, as the advantages of PA seem to be fleeting sometimes where as with TA I can catch bigger move, with less stress.


I am sure a lot of this could just be personal experience / preference, but this is how I see it.

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  #4 (permalink)
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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.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



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.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).




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.

I use both.

I view these all as tools of the trade.....pun intended...lol...

So let's take a look at another profession that uses tools.... Cabinet Maker. They work with wood. Different tools do different things. Some tools might get used more than others. But still these tools have great importance even though they are not used a whole lot as far as minutes in the day. The Cabinet Maker might use the plainer for a few minutes for a project but use clamps for hours and hours.

Same with the DOM, I feel, or more importantly Jigsaw's Depth and Sales (D&S, the combining of the DOM and the tape...genius!)

I don't stare at it. I did for a few years to learn what it was telling me. But not anymore.

Do I need to use a market order to get Long or Short or can I get away with a Limit order and keep a tick? I can learn this from the D&S.

I can also learn from the D&S the aggressive tone of the market on a particular day. Which goes hand in hand with which order types I need to use relating to the above point. Together with market internals, the charts over many time frames and different asset classes (Index Futures, Interest Rate Futures, Energy (CL) and FOREX) I can make my decisions using all my tools...just not all of them all the time.

Ron

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  #5 (permalink)
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What is order flow?

What does order flow mean to you? You ask which is better but I'm not sure I understand what specifically you are referring to. Thanks.

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  #6 (permalink)
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wmueller View Post
What does order flow mean to you? You ask which is better but I'm not sure I understand what specifically you are referring to. Thanks.

@Blash summarised it perfectly. One is not better than the other. That discussion is indisputable -the preference is down to the individual.
For me orderflow can be seen from 2 different perspectives:

Chart: shows origination.
Ladder: shows intent (and a few other things you dont get from a chart).

Both are orderflow. Which one works for you?

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  #7 (permalink)
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Posts: 88 since Jan 2014
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For me, I see order flow as: the exchange of shares/contracts at the BID or ASK results in price movement. Inventory, available shares/contracts, is transferred from the trader with the resting BID or ASK order (supplier) to the trader with the market buy or market sell order (consumer). Each trader’s goal is to detect shifts in bullish and bearish forces as soon as possible so as to be able to enter and exit a trade with as much profitability and little risk as possible. The trader, by reading price action, bid volume and ask volume, and (perhaps) resting bids and asks (offers), can infer what the four "trader types" (bids, asks, market sellers, market buyers) in “the market” are doing and who has the upper hand, so as to become more profitable.

Therefore, I need to be able to see the following:
Price action (PA) and volume action at the same time. Developing bid and ask volume. Volume at price. When and where Bids are preventing price from declining; and when and where asks are preventing price from increasing. When and where bids or asks are being pulled (difficult).

I deal with crude oil (CL) and I have seen times when resting bids and asks do give clues; but I also see LOTS of times when the changes in the ladder is noise or, even worse, misdirection.

I don't know if this makes sense to anybody.

Thanks.

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  #8 (permalink)
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wmueller View Post
For me, I see order flow as: the exchange of shares/contracts at the BID or ASK results in price movement. Inventory, available shares/contracts, is transferred from the trader with the resting BID or ASK order (supplier) to the trader with the market buy or market sell order (consumer). Each trader’s goal is to detect shifts in bullish and bearish forces as soon as possible so as to be able to enter and exit a trade with as much profitability and little risk as possible. The trader, by reading price action, bid volume and ask volume, and (perhaps) resting bids and asks (offers), can infer what the four "trader types" (bids, asks, market sellers, market buyers) in “the market” are doing and who has the upper hand, so as to become more profitable.

Therefore, I need to be able to see the following:
Price action (PA) and volume action at the same time. Developing bid and ask volume. Volume at price. When and where Bids are preventing price from declining; and when and where asks are preventing price from increasing. When and where bids or asks are being pulled (difficult).

I deal with crude oil (CL) and I have seen times when resting bids and asks do give clues; but I also see LOTS of times when the changes in the ladder is noise or, even worse, misdirection.

I don't know if this makes sense to anybody.

Thanks.

Yeah, your explanation makes sense. Are you making money with that knowledge?
How do you identify and deal with all the ladder noise and misdirection?

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  #9 (permalink)
Milwaukee, WI
 
 
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Grantx View Post
Yeah, your explanation makes sense. Are you making money with that knowledge?
How do you identify and deal with all the ladder noise and misdirection?

It helps me understand things and certainly helps me to loose less! It is not a complete system - just a way of identifying what is going on. I think you use it as the basis of system. Honestly, I don't look at the noise in the ladder other than to see if there are changes in the average amount of orders in a range of prices. The problem today is that bids and asks can be pulled instantly by algorithms. Every once and a while I do see a big standing order at one price and it often happens that if price gets going in that direction it will almost certainly get to that price. It seems that one must integrate price action, bid and ask volume (delta volume) action, tape reading, ladder action (minimally), volume at price, and support and resistance to get a reasonably complete picture of what is going on. I wish the ladder could indicate intent; but when you think of it, how could it? If it did, traders would be giving away the store. A major goal for a big trader is to fool you into making a bad trade so that he can take your money. Thus, what is in the ladder must be, to a significant extent, deception. Anyway that is how I view it and it seems to help me loose less!

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  #10 (permalink)
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wmueller View Post
It helps me understand things and certainly helps me to loose less! It is not a complete system - just a way of identifying what is going on. I think you use it as the basis of system. Honestly, I don't look at the noise in the ladder other than to see if there are changes in the average amount of orders in a range of prices. The problem today is that bids and asks can be pulled instantly by algorithms. Every once and a while I do see a big standing order at one price and it often happens that if price gets going in that direction it will almost certainly get to that price. It seems that one must integrate price action, bid and ask volume (delta volume) action, tape reading, ladder action (minimally), volume at price, and support and resistance to get a reasonably complete picture of what is going on. I wish the ladder could indicate intent; but when you think of it, how could it? If it did, traders would be giving away the store. A major goal for a big trader is to fool you into making a bad trade so that he can take your money. Thus, what is in the ladder must be, to a significant extent, deception. Anyway that is how I view it and it seems to help me loose less!

I totally agree with you, I also consult the DOM but mostly I consider it to be a lot of deception, smoke and mirrors. There is one thing that cannot be disguised easily and that is absorption. When one side is throwing orders into what looks like a weak level, and the price level is hardly moving anywhere, then you normally see a pause in the attack as the antagonists wait to see if a counter move is about to occur.

The problem though is that sometimes this absorption level does break which makes the whole clever analysis a little bit pointless IMO. That is why, like you, I try to see the bigger perspective by looking at volume, PA and S/R.

Ive also noticed that the auction process is inquisitive. Big standing orders oftentimes get probed and eaten. As for intent, I believe that only comes from the chart, if you watch from different timeframes and methods then sometimes it can be quite apparent what is happening and the trader simply needs to wait for a suitable entry to join in with the theme.

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