Has anyone used Jigsaws Auction Vista to assist in orderflow trading?

I’ve used it. To me it hasn’t been very helpful. Just my own opinion of course

I am using it. It is an amazing tool.
But honestly, you need years in front of it to make sense of it.
And you have to be willing to see and accept when the market changes and learn it all over again.
H.

Here's my thoughts on this genre of tools. Trainer wheels. Something that highlights activity while you are still getting used to the DOM. I'm a DOM man personally. I have a low attention span and need the activity.

That was the intent anyway - hence the way the cirles work - just showing up in specific spots just like the same action does on the DOM.

Not that anyone has to follow the vendors approach to using tools. People always find ways to use tools that the creators never thought of.

Here's my thoughts on this genre of tools. Trainer wheels. Something that highlights activity while you are still getting used to the DOM. I'm a DOM man personally. I have a low attention span and need the activity.

That was the intent anyway - hence the way the cirles work - just showing up in specific spots just like the same action does on the DOM.

Not that anyone has to follow the vendors approach to using tools. People always find ways to use tools that the creators never thought of.

I've been working on using the Auction Vista to identify price action (my settings are 15 seconds with a 4 circle tuner setting) near zones/levels of interest.

For example: If I saw a big blue buy circle occur at or above the high of yesterday but it immediately gets taken out to the downside, my first thought is it is a false breakout and I look to position myself short.

Did you hike up the tuner when COVID hit? That's what it's for...

I will take a stab at this. A lot of what was said on that post at reddit is correct.

I am a professional trader. One of my strategies is based 100% on "order flow" but its nothing anyone has ever seen or based on what is available for sale via courses or tools these days. It can never be. But I am faced with the same challenges this person is talking about so I can tell, he knows what he is talking about.



Agree. Retail folks look at various structures like cumulative delta, market/order profile, LVN/HVN in various ways and try to find reasons to establish their bias. I dont use any of these. I have not been able to generate a backtest that consistently performs based on any of these theories.



Agree. I learnt many of these theories - NoBS, L2ST, JigSaw... etc. cannot even remember the rest but he is right. These theories came from traders that scalped thick markets were you could see the order book. There was only one type of refreshing order - an iceberg which was a clear indication that someone had a large order and he did not want the world to see that. He kept it hidden in order to get filled. Apparently, this observation would help people establish a short term bias for scalping purposes.



This is the meat of what happens today on the screen. What this means is that now orders are not limited to one particular market. An order could span multiple contracts and instruments. Normal people can never tell which trade is getting filled. For instance, in the commodities markets (I cannot speak for anything else), if someone is bullish WTI outright and wants to establish a long position, he will probably never buy just the front month. Instead, he will employ an "aggregator" type of order that will start filling the front 3-4 months, the front few spreads, cracks, WTI to Brent etc. Basically, he would express his bias in WTI relative to forward months and other markets. If you are monitoring just the front months using some of these retail tools, you are looking at a flea on the tail of a dog - completely missing the dog itself.

There is rarely an outright bias for a commodity being expressed in the markets these days. The bias is expressed mostly relative to either time or correlated markets or both.

OTC markets are where block trades are executed by communicating your order to a broker. Most retail price feeds do not disseminate these trades. And even if you had a feed that did, these are reported to the exchange (I am talking mostly CME/NYMEX Clearport here) with up to a 7 to 8 minute delay so you cannot make sense of it anyway. If you want to know the % volume of these trades, just look at the volumes page for that contract on cmegroup.com.



A stale order is one that has been on the book for a long time. You can see this if you subscribe to a data feed that disseminates MBO. I dont know what he means by professionals screening stale orders to lean on. I dont fully agree with this statement. OTC venues do not dictate the bias. They are just like the screen - no one really knows where the market is headed. But having access to OTC data definitely helps in different ways. I havent found an electronic way to get this data. I dont know if there is one but if I had the OTC order book electronically, I would be very very happy.


Scalpers do this. I mean, this is a different class of traders that have a very short term trade duration. But it has nothing to do with what he has been talking about earlier. 2 very different types of algorithms.



Yep, this I agree with. If you are trading NatGas, you are monitoring electricity and weather for sure. If you are trading Crude oil, you are monitoring Brent, Gasoil, gasoline, diesel both forward in time and across. This ties into what he says earlier and like I explained. If an outright bias isnt being expressed, you wouldnt look for it. Instead, you would focus on monitoring relative bias. Simply put, if WTI is bullish, then its bullish relative to what? Look at the WTI and the RBOB gasoline charts since Feb 21. Look at the front month and then look at the Apr/Dec or May/Dec spreads. Also look at the front RBOB crack and the front RBOB vs HO spread during this time. You will go nuts trying to figure out what you should have traded and when.



This is the statement I agree with the most. I wish everyone that reads this statement above, believes it and acts on it. But I know, no one will.

So... still aspiring?

I will take a stab at this. A lot of what was said on that post at reddit is correct.

I am a professional trader. One of my strategies is based 100% on "order flow" but its nothing anyone has ever seen or based on what is available for sale via courses or tools these days. It can never be. But I am faced with the same challenges this person is talking about so I can tell, he knows what he is talking about.

Agree. Retail folks look at various structures like cumulative delta, market/order profile, LVN/HVN in various ways and try to find reasons to establish their bias. I dont use any of these. I have not been able to generate a backtest that consistently performs based on any of these theories.

Agree. I learnt many of these theories - NoBS, L2ST, JigSaw... etc. cannot even remember the rest but he is right. These theories came from traders that scalped thick markets were you could see the order book. There was only one type of refreshing order - an iceberg which was a clear indication that someone had a large order and he did not want the world to see that. He kept it hidden in order to get filled. Apparently, this observation would help people establish a short term bias for scalping purposes.

This is the meat of what happens today on the screen. What this means is that now orders are not limited to one particular market. An order could span multiple contracts and instruments. Normal people can never tell which trade is getting filled. For instance, in the commodities markets (I cannot speak for anything else), if someone is bullish WTI outright and wants to establish a long position, he will probably never buy just the front month. Instead, he will employ an "aggregator" type of order that will start filling the front 3-4 months, the front few spreads, cracks, WTI to Brent etc. Basically, he would express his bias in WTI relative to forward months and other markets. If you are monitoring just the front months using some of these retail tools, you are looking at a flea on the tail of a dog - completely missing the dog itself.

There is rarely an outright bias for a commodity being expressed in the markets these days. The bias is expressed mostly relative to either time or correlated markets or both.

OTC markets are where block trades are executed by communicating your order to a broker. Most retail price feeds do not disseminate these trades. And even if you had a feed that did, these are reported to the exchange (I am talking mostly CME/NYMEX Clearport here) with up to a 7 to 8 minute delay so you cannot make sense of it anyway. If you want to know the % volume of these trades, just look at the volumes page for that contract on cmegroup.com.

A stale order is one that has been on the book for a long time. You can see this if you subscribe to a data feed that disseminates MBO. I dont know what he means by professionals screening stale orders to lean on. I dont fully agree with this statement. OTC venues do not dictate the bias. They are just like the screen - no one really knows where the market is headed. But having access to OTC data definitely helps in different ways. I havent found an electronic way to get this data. I dont know if there is one but if I had the OTC order book electronically, I would be very very happy.

Yep, this I agree with. If you are trading NatGas, you are monitoring electricity and weather for sure. If you are trading Crude oil, you are monitoring Brent, Gasoil, gasoline, diesel both forward in time and across. This ties into what he says earlier and like I explained. If an outright bias isnt being expressed, you wouldnt look for it. Instead, you would focus on monitoring relative bias. Simply put, if WTI is bullish, then its bullish relative to what? Look at the WTI and the RBOB gasoline charts since Feb 21. Look at the front month and then look at the Apr/Dec or May/Dec spreads. Also look at the front RBOB crack and the front RBOB vs HO spread during this time. You will go nuts trying to figure out what you should have traded and when.

This is the statement I agree with the most. I wish everyone that reads this statement above, believes it and acts on it. But I know, no one will.

So... still aspiring?

Good post & interesting insights. Not sure what you do but I am sure you will agree that the title "professional trader" covers a hell of a lot of different skills.

I don't know of any prop traders that did any backtesting. It has always been 'get trained, earn your live account' or cases of people getting in based on their performance. I've seen a lot of introspection and reviewing trades though.

NoBS is thicker markets. Wasn't really Jigsaws thing, nor was scalping if you mean trading the spread.

Never heard of leaning on stale orders but have heard of MMs looking to trade the other side of a large order - see it get taken out & then market reverts back. A strategy for very specific conditions.

Lots of different ways to do this. But you have to actually chose one of them and that seems the biggest problem for retailers - hopping about too much.

To me, it just means I get paid to trade as opposed to using my own capital. And that the size I trade requires a significantly large risk appetite.

I have a lot of respect for NoBS, L2ST and Jigsaw. I was your customer years ago. Actually, you guys started me off in this path. What you all had to offer made a lot of sense to me but being a programmer and coming from a binary world I just couldnt build my belief system without solid rules and some proof that whatever I am trading actually has worked in the past. Backtesting is far from perfect, but it helps me execute without hesitation. Even if it means I have to manage terabytes of data. I got lucky to have found the required support to be able to do this but there was no way I would have been able to do this sitting at home trading my 50k account.

Scalping to me means intra-day trading. Trade durations less than a few hours. I couldn't do that consistently and scale up my portfolio at the same time - in terms of adding size and markets. I cannot imagine consistently trading 5-10 markets with an intra-day bias looking at changes in order flow. Maybe when I was younger, I could have but I am old now and my brain just isnt that capable.


Actually, I can relate to this. On one of my long term momentum strategies, I am constantly being filled by an MM on the block and whenever this happens, I know its going to go against me for a bit. Its OK, they get to make a few ticks but I have statistics on my side .

I use some notion of "order flow" as one pillar in my trading strategy. Yet, I agree 100% with the sentiment expressed here so far, mostly by @ Hulk -- markets are exponentially more complex today than they were 20 or even 10 years ago. In fact, I'd say that they're more than just complex -- they are sophisticated. The participants are sophisticated. Yet, "order flow tools" are thrown around and have been the hot retail thing for some time now.



The problem is not that they "don't work" -- it's that you seem to be looking for a turnkey solution, dare I say, "indicator," that will tell you when the market is going to change directions, so that you can catch the bottom and top. I'm sure you're not consciously thinking this, but your question certainly indicates a line of thought that lines up with a need to find "the answer." "Does this work?" is not even the right question, because it seems to want a "yes/no", binary answer. Does it work? Of course it does. Trendlines "work" -- fib retracements "work" -- higher highs and lower lows "works."

The question is, do you have the skill set to find an opportunity, recognize it as actionable, and then take risk based on it?

If it were as simple as putting up a footprint/order flow chart and seeing volume and fading it, well, everyone would do it, and yes, then it wouldn't work. Markets are too complex and sophisticated for anyone to consistently extract profits without doing something that is different from what most people are doing. I don't think that the method has to be complicated, despite the complexity of the market. I don't think you have to be a math whiz, or anything like that at all. But you must have some advantage to compete with others. The trader must think different and do something different than what everyone else is doing, to achieve results which are different from everyone else's results.

What causes bars like this to sometimes appear out of "nowhere"?
CL 08-20 (15 Second) 2020_06_18 (9_29_51 AM)bigbar

ORDER FLOW ANALYSIS, my experience.

At first I thought this was an old dead thread, but there will always be an interest in Order Flow Analysis, or what I call "Inventory Analysis" as a predictor of when Markets may end a trend, or pivot turn the trend, or hold support or resistance levels; all of which can be understood and well predicted when "Order Flow Analysis" is properly done.

The biggest issue is that "real Order Flow Analysis" is computationally, and memory-intensive. It is also "fractal" in the loose sense that Inventories are moving Net Long and Short dynamically, are are dependent upon the time width of the Analysis interval chosen.

First of all, I used to sell software which implemented this stuff; but I no longer sell it. I don't mind, however, describing the rough algorithmic basis for calculation of "useful Order Flow Analysis" in case some of you are smart enough, and skilled enough to implement it.

Yes, "Order Flow Analysis" is useful; and what does it tell you? It tells you whether Market Maker (considered on aggregate) is net Long or Short against the Retail population (both small and large retail institutional traders, who are NOT Market Makers) and that is an interesting piece of information. BUT... it is by no means that useful in predicting a pause, reversal or continuation of a Trend.

The real money is in a further refinement called "Inventory Risk Analysis" which, in a nutshell, is telling you whether the Inventory is Long or Short, sure, that's informative; but much more important is "whether Market Maker is in the money, or is losing money on the current Inventory, on the current Timeframe" since everything in trading is "timeframe dependent".

Consider that "major swings of the market" represent Accumulation and Distribution periods, during which Market Maker (MM for short) is doing "Accumulation" against the Retail players, and perhaps doing that with a steady down-trend; or whether in a "Distribution phase" usually associated with an up-trend in Pricing. Anyway, if it were the case, that major trend changes occurred over, say, 2 hour cycles, then you'd want to Evaluate your Inventory over roughly a 2 hour period in order to appreciate MM's Inventory situation, assuming that you wanted to trade also on roughly that timeframe.

COST BASIS. For MM's Inventory, which is determined over a calculation of "all trades" which occur over the interval of interest, we need to first establish an estimate of COST BASIS. If MM is "Long", meaning that more Retail Selling is occurring than Retail Buying so that MM is holding Inventory which she wants to Sell off at a Higher price, then we want to know the Cost Basis price for the "Net Long Inventory". That is done by starting with "the Lowest Price Retail Sale Trade (MM is a Buyer)" and searching for a "matching Retail Buy Trade (MM is the Seller)" which is at least 1 Tick higher. Inventory which was Bought by MM; let's say 1 Contract, to Sally the (Retail) Seller; can be matched with 1 Contract Sold by MM, say to Billy the (Retail) Buyer; at a minimum of 1 Tick or more profit.

The preceding operation "neutralizes the single contract which Sally sold to MM and which Billy bought from MM at least 1 Tick higher". So that single contract "disappears" from Total Inventory. It is a special case, most likely of "a spread trade" in which Market Maker (MM) is able to profit on the Bid/Ask spread, where there is no Retail opportunity for profit.

So, proceeding from the Lowest price MM-Buy trade, we search upwards for MM-Sell trade(s) which "neutralize" that volume. We eliminate the entire MM-Buy trade, and we deduct from the MM-Sell trades, the Contract volumes which are "matching". If an MM-Sell trade volume goes to zero, of course, that means that MM-Sell trade effectively disappears and has been "neutralized" or "removed from this Inventory evaluation" due to matching volumes.

TRYING TO STAY out of the weeds here; let's just say we do this until we have processed and eliminated MM-Buy trades (the ones generated from Retail Sell transactions) by finding matching MM-Sell volume at a higher price. BUT THEN WE FIND THAT we have a bunch of MM-Buy trades WHICH DO NOT YET HAVE matching MM-Sell trades. So, we have a bunch of "pure MM-Buy transactions" which have yet to find any matching MM-Sells at a higher Price. THIS IS MM'S NET "LONG" INVENTORY and the Volume Weighted Average of this collection of MM-Buy trades can be taken as the COST BASIS for MM's LONG position (against the Retail Market) and so then.....

...THEN WE KNOW THE COST BASIS PRICE which MM must achieve in order to Profit on this collection of LONG inventory. If the Current Market Price is below which COST BASIS, then I say that MM is "In Long Risk" or, in plain terms, "is losing money" on her LONG inventory, at this moment, over the timeframe of evaluation.

TO AVOID YOUR UNDERSTANDABLE REACTION "tldr;" (Too Long, Didn't Read) LOL ... This means that when MM is "in Long Risk" then she will be reluctant to deviate "too far below" her Cost Basis, which is a very Dynamic calculation.

Obviously, the inverse operation would be used in order to evaluate a situation in which MM had an excess "Short" Inventory, and when that Cost Basis is calculated, then any Current Market Price above that price level, would result in "Short Risk" resulting in a reluctance to raise the Price much further, as "Short Risk" (just like Long Risk) means that MM is actually "losing money" at that moment in time, on aggregate.

TO END THIS DISCUSSION, this process of extending Order Flow Analysis into yielding a Risk Evaluation; is the only way I know to predict when a Market Price will be "reluctant" to proceed further into Risk; and often signals a Market Reversal.

DISCLAIMER AND APPRECIATING THE SCALE OF MM'S ACTIVITIES. We can measure a particular market over time, by experience, and appreciate just how much Risk MM wishes to, or is willing to, take; before deciding to "reverse a trend direction" or proceed in the same direction. Knowing the Total Net Inventory in contracts, say, and its Cost Basis, we can then literally estimate (pseudo-calculate) Market Maker's total Risk in actual Units of Currency. In a Market such as ES, we might see Risk levels in the hundreds of thousands or even low millions of USD. These levels of Risk are, however, just "business as usual" for the Market Makers in such a highly liquid market.

MARKET MAKERS HAVE DEEP POCKETS. Markets are Dynamic and they show "sawtooth" behaviors on multiple "fractal-like" timeframes, precisely because MM's strategy is to use Retail Trade Volume in order to "take a Long position against Retail Players, and temporarily dip into Long Risk" and then reverse, so that she can then swing the other way and "take a Short position against Retail Players, and temporarily dip into Short Risk" as part of the game.

In my view, this is the best and only way to truly use "Order Flow Analysis" or what I call "Inventory and Risk Analysis" to predict when a Trend may come to an end, and show some pullback, or reversal, perhaps at some of the Support and Resistance levels. These, of course, are what I call "volume inflection points" so we can expect them to be violated. But WHETHER A SUPPORT LEVEL BREAKS is almost totally controlled by the RISK ENVIRONMENT which exists at that moment in time, over a significant Inventory Timeframe.

SO THAT IS MY WAY OF THINKING ABOUT, AND CALCULATING Order Flow, which means "Inventory and Risk Analysis" and is my "Commitment of Traders" (COT) evaluation method in real time. Comments welcome; but you can appreciate how complex and how dynamic "real" (in my view) Order Flow Analysis needs to deal with the Time and Sales tape; in order to be of significant value in trading.

[EDIT] An equally useful pairing with Inventory Analysis is Depth of Market (aka "Book") Analysis to determine Market Price direction. DOM Analysis and Inventory Analysis taken together can provide a day trader with useful information, so maybe we can discuss somewhere else how the DOM introduces concepts useful in prediction.

hyperscalper

How are you categorizing what is a market maker's order or what isn't? Do you mean to saw limit orders vs market orders? How do you match if someone say enters with two orders and exits eighth one? How do you match orders up at that point? Otherwise it would basically just be cumulative delta right?

By my definition a Market Maker is the entity which Buys the BID price, to which a Retail player Sells;
and Sells the ASK price, from which a Retail player Buys. The MM never "pays retail" but is the Market
Maker, while all other players (large or small) are Market Takers and are subject to the Bid/Ask price
penalty, that's all...

So a trade on the Time and Sales "tape" at the BID is a Market Maker "accumulation" from a Retail Seller,
while a trade at the ASK is a Market Maker "distribution" to a Retail Buyer.

Those are my criteria for categorizing events.

Regardless of whether a Retail player uses a Market Order or uses a Limit Order; to be "Retail" s/he is
suffering the Bid/Ask penalty. On some "unusual exchanges" so-called "retail" players are allowed
to place Bids and Offers on the Market Depth Book. For our purposes, that converts these guys
into "mini Market Makers" (in a very limited way),
but they are not the large entities to whom the term Market Maker largely applies.

Generally when a Retail player uses a Limit Order, that is converted to a Market order at the
moment of execution. S/he does not "make the bid-ask" but is forced to "pay the bid-ask" penalty.

[EDIT] Any trader or Market Maker who has genuine access to place orders on "the
Order Book" will also be in competition with other Market Makers who "jockey for position"
on the Order Book on the Price-specific FIFO queue. If a Market Maker "pulls" his Bid or
Offer which is placed on the Primary Book on which the Matching Engine operates,
then that MM is penalized, and loses her place on the Book in the FIFO queue as the
first one entitled to execution at that price level, against Retail players. This is what
makes the Depth of Market or "the Book" interesting as a possible predictor, but that's
another topic entirely. Unless I'm wrong, please let me know.

[EDIT] The term "Order Flow" is misleading; what I really mean is "Trade Flow" since
only Executions (Time & Sales) count toward the Inventory Analysis which I use.
Order Flow, in the
sense of Bids or Offers on the Order Book which DO NOT execute, have a different
role in giving us insight into where Market Maker intends to forcibly move the market
price. Hope that helps?...

hyperscalper

Ok that makes sense and answers one part of my question. The second part had to deal with how do you match orders up. If you are just adding and subtracting all the orders that hit then you basically get cumulative delta. But it sounds lidke you're looking for the lot size to match up exactly? So if mm bought 10 at one level and sold two 5's at another level since the size didn't match up you'd still say there's 10 net long and 10 net short?

Regardless of whether a Retail player uses a Market Order or uses a Limit Order; to be "Retail" s/he is
suffering the Bid/Ask penalty. On some "unusual exchanges" so-called "retail" players are allowed
to place Bids and Offers on the Market Depth Book. For our purposes, that converts these guys
into "mini Market Makers" (in a very limited way), but they are not the large entities to whom the term Market Maker largely applies.

Generally when a Retail player uses a Limit Order, that is converted to a Market order at the
moment of execution. S/he does not "make the bid-ask" but is forced to "pay the bid-ask" penalty.

I came into this conversation late, maybe I am missing something; apologies if I am.

But what "unusual exchanges" are you referring to? Bc what you've described is precisely what a retail trader can do on the CME...place resting orders on the order book (referred to as limit orders) and not pay the spread. Now, some products have weird rules for order matching (e.g., pro rata, lead mm) but I believe stock index futures are pure unadulterated FIFO matching...someone correct me if I'm wrong. But that's beside the point anyway.

The point is, retail traders can place resting orders on the books at, for example, the CME and I would not call the CME an "unusual exchange." And limit orders are definitely not converted to market orders, even when the limit order is placed by a retail trader on the CME. This is precisely the reason futures trading is ideal for order flow daytrading.

I think your statements are correct only as applied to forex trading, not futures.

Hey, it's been a while since I've looked at Futures Order Execution and Placement, so I'll take your word for it. It's great that "ordinary traders" are able to be "makers" rather than "takers" and genuinely Bid or Offer on the Book with the same status as the dominant Market Makers. So they can make the Spread perhaps on at least one side of their round trip.

But I'd say that would have a negligible effect on the overall thrust of the Analysis, where Market Maker dominates and (almost) everyone else is a Retail player. Still, I take your point...

Why do you say that the ability to place Orders resting on the Book is what makes futures trading "ideal for order flow daytrading". How does that significantly improve the attractiveness or effectiveness of Order Flow based analysis, and... wait for it... what IS "Order Flow Daytrading" anyway? I ask this as a serious question.

hyperscalper

Why do you say that the ability to place Orders resting on the Book is what makes futures trading "ideal for order flow daytrading". How does that significantly improve the attractiveness or effectiveness of Order Flow based analysis, and... wait for it... what IS "Order Flow Daytrading" anyway? I ask this as a serious question.

On a seriouse note...if you want REAL advice - here it is:

1. Introduce yourself to Market Profile (you don't need to become an expert)
2. Introduce yourself to Order Flow (you DO need to become an expert)
3. Learn to understand what moves market (hint - this is NOT news)
4. Understand market context and apply your understanding to recognize repeatable setups in the Order Flow (based on the context).
5. CONTROL your losses.

It WILL take time and you WILL need a mentor. But this is the ONLY way to become consistently profitable trader.

So, what do I mean by order flow trading? I mean watching passive and aggressive orders to see which side is gaining the upper hand within a given frame of context (context can be anything). There are infinite ways to measure order flow to try to suss out whether one side is outpacing the other. Futures products are traded on a centralized exchange and full "order flow" data (i.e., the passive and aggressive orders) is completely exposed to retail traders. I'm not saying big players don't have a data edge; I'm sure they do. But the retail trader is not knee-capped; he (or she) has access to full order flow data for a relatively cheap price.

For me, I want the data to "tell me" where the market is headed. And what I've called Inventory Analysis, which I tried to describe, is one piece of the puzzle; but it's more "situational awareness" than precisely telling me when/where a turn will happen; and what the dominant trend continues to be, even if Price isn't moving.

My only good candidate for continuous positive real time "Trend following" has got to be Analysis of the Market Depth in real time, or "the Book" as it's called. Here the Analysis is even more complex than I described for Inventory Analysis, since the DOM (Depth of Market) is an unbelievably dynamic critter.

I've done this a long time, and so I do have a feel for how it should be done. Without getting into too much detail, the DOM properly evaluated, will tell you where the Market is headed in the short term. That involves getting to grips with the concept of "spoofing" and understanding somewhat, that Market Maker on aggregate is in competition for favorable positioning on the FIFO execution queue. There is a disincentive for MM to pull a quote, given that she loses her place in the matching queue for that Price level. By being able to find a measurable correlate for this "reluctance" or "eagerness" to maintain a Quote, we can discern a "bias" which predicts short term market direction.

This is the kind of real time indicator I need, so DOM Bias combined with Inventory Analysis is my way of determining where the short term Market is moving. I allow the Market Makers to TELL ME where they're most eager to interact with the Retail players, and therefore, where they will be moving Price.

Most people, and I thought you did for a moment there, believe that Prices move because Retail players, Buyers or Sellers take control and cause it to move. I don't subscribe to that view; and believe that Market Maker moves prices, often on a predetermined plan; and of course uses Retail enthusiasm or liquidity to achieve her goals as Market Maker (on aggregate) always (by definition) trades against the entire Retail Market simultaneously.


hyperscalper

ORDER FLOW ANALYSIS, my experience.

[EDIT] An equally useful pairing with Inventory Analysis is Depth of Market (aka "Book") Analysis to determine Market Price direction. DOM Analysis and Inventory Analysis taken together can provide a day trader with useful information, so maybe we can discuss somewhere else how the DOM introduces concepts useful in prediction.

hyperscalper

Very clear. Great post. Thank you hyperscalper!

Now that we know, based on repetition of how far an MM would take her SHORT RISK or LONG RISK before reversing, how do we then use DOM Analysis to determine Market Price direction? Or, to always stay ahead of the MM, do we just exit at the established COST BASIS?

^That essay split into two line poems you wrote gave me a headache.

Anyways, I have been reading and following your comments here. What exactly are you trying to offer?

Any legit, concrete help or just loosely keep saying 'my code can do X,Y,Z', 'I am not sharing / selling secrets' and 'you guys should just stay away from being in reverse trends'.

Sent using the futures.io mobile app

Orderflow is the heart of my trading strategy. I know some people dismiss it. It requires focus and learning. Once you learn how to read a chart correctly you can't unlearn it. However I understand that some traders find it confusing.

OK, I'll try to explain this without going into code. So you are retaining a record of ALL trades which cross the Time and Sales, and you are of course able to categorize them from some original sequential trade list, into 2 lists, the MM-Buy list (Retail sales to the BID) and the MM-Sell list.

All of these items are, of couse, timestamped but in calculating Buy/Sell volume pairings, the time order is not important since you can clearly Buy, then Sell; or Sell, then Buy and so Inventory Evaluation is not done in time sequence. However, it is ALWAYS done with a particular Timeframe subset of the action, for example, all Trades for the past hour.

Once you have these 2 lists for the past Hour, all within the same time range, you'll need to make a determination whether there is more MM-Buy activity than Sell activity; and decide to call the Inventory "Net Long" or whether the opposite is true, so you call the Inventory "Net Short". Having made this determination, then...

...if "Net Long", then Sort both lists lowest to highest price; and if "Net Short", then Sort the lists highest to lowest price.

Then we have to do "matching" of any MM-Buy volume, and eliminate it, by finding MM-Sell volume at a higher Price. From the MM-Sell entries, most of the time, we'll be able to find enough Volume to match each MM-Buy volume entry, with 1 or more MM-Sell entries at the higher Price levels. The current MM-Buy entry then has its volume set to zero (meaning it is eliminated from open Inventory) and the MM-Sell entries which gave up all or portions of their volumes are also reduced in volume, or set to zero volume by giving up all of their Matching volume in compensating for the MM-Buy entry.

Thus, for "Long" inventory, we work from Lowest to Highest Price, matching EVERY MM-Buy volume unit, with corresponding MM-Sell volume at the next higher price. So, simplistically, an MM-Buy of 1 unit is compensated for by an MM-Sell entry of 2 units. The MM-Buy entry is eliminated from active Inventory (profit is taken) and the MM-Sell entry has 1 unit subtracted from its volume entry.

We work on every MM-Buy, matching MM-Sell volume until we have no more MM-Buy entries, or we run out of matching MM-Sell entries, of course. WHAT REMAINS are "pure" MM-Buy transactions which DO NOT YET HAVE matching MM-Sell volume at a higher price. This is PURE LONG INVENTORY, which has been bought from Retail Sellers, but which remains to be sold off at a higher price.

The Volume Weighted Average price of this "pure" MM-Buy inventory is the Cost Basis or "Price Break Even" for Open Inventory. (The inventory which disappeared during the matching process is Closed Inventory or profit-taking, and so it must be taken out of the remaining Open Inventory).

So the Current Market price, as compared with the Cost Basis for LONG Inventory positions, determines whether MM is making a profit or a loss on her current Open Inventory of "pure" Long Inventory items after this process of evaluation has taken place, over the specified timeframe we said 1 hour.

Obviously, you can evaluate this for ANY timeframe, and you'll find different results; or you can do them for a number of representative timeframes, at the same time, in order to have a "multi timeframe Inventory Status" which shows the Open Interest (Open Inventory), its Price Break Even (Cost Basis) and then calculates an estimate of what I call "Risk" which is Current Price versus Cost Basis. That, multiplied by Net Open Inventory volume, can give you a $$$ measure of just how much "Risk" is being experienced by Market Maker, on this timeframe, at this current time.

Tedious, yes. But this is roughly the way in which Inventory can be analyzed to yield useful results, over specific Timeframes, based on actual Trades over the Time and Sales.

Let's say MM has 10,000 contracts Long and would love to sell them off. Will MM then raise the Price in order to stimulate Retail Buyers, to whom she can sell these contracts??? Not necessarily. She has a Long position, sure, and it seems like a lot of contracts !!! But Market Maker operates at scale.

WHAT REALLY MATTERS is when those 10,000 net Long contracts' Cost Basis is 10 Ticks above the Current Market Price, so she is "losing money on paper" temporarily. Now, we know this is all "part of the game" and that these "Risks" are not really risky, provided that Market Maker can simply raise Price and get out of "Risk" and into "Profit" quite easily.

But RISK (losses on paper) are not a situation which MM prefers, so there is a strong motivation to reduce that RISK level or control it.

This is a DYNAMIC situation, as you can appreciate. There are several ways MM may be able to shift Cost Basis and control Risk, in addition to modifying the Inventory mix. This is why any simplistic Analysis is inadequate.

Hope this gives some idea of the calculations which could be done to evaluate Inventory and "Risk" meaningfully, so that we could use this "situational awareness" and factor it into our trade decisions. So, if we are at a "Support" level (is that a real concept?) then if we are strongly into "Long Risk" we predict that the Support may appear
to break, but it is far more likely to hold.

I'm sure you can work out the Short Inventory evaluation methodology, since it is just the opposite of Long inventory.

[EDIT] Imagine if you find that MM is in $100,000 Risk (small, unrealistic, but for example) so, dang, but consider that in your matching process (every Buy/Sell volume match generates revenue) and maybe that Revenue is $150,000 that has gone into her ample pocket !! So
this "dynamic" situation can be seen to be even slightly more dynamic, since Revenue has compensated for Risk losses on paper, at least at this point in time. She's making high Revenues, so maybe the Risks are not immediately a big deal... LOL Revenue could be characterized as $$ per minute of the entire Timeframe Interval, for example. $150k/60= rev. per minute? Rate of getting Rich for aggregated MM in this situation ! lol of course these are estimates...

[EDIT] So, I ask "Why are support and resistance price levels so important?" one reason is that they generate a trading battle, and generate... wait for it... MORE REVENUE to MM. She loves to linger there for a while ! LOL

[EDIT] At this time, it looks like ES is trading at around $25,000 per minute Revenue, but I didn't see how to post the image.

hyperscalper

If an answer gets to be very complicated, it is usually wrong. The simple answer is usually the correct one.

DOM ANALYSIS requires some fast processing
Case in point, ES and some discussion of NQ futures

Just to give you a rough idea of how difficult Depth of Market Analysis can be,
from an implementation standpoint, on the ES contract, I'm seeing as high as
500 callback events PER SECOND coming in as Market Depth changes, in a
C# Indicator callback routine. So you got a couple of milliseconds on some of
the peak data rates to do something, anything to capture the data.

This is with an ATAS platform, and Rithmic feed and Order Routing; sitting on
a dedicated server in a data center. Just to give you an idea of the challenges
you would face. Basically, it's not achievable by traders, and I'd advise not
to even try; unless, of course, you are one of "those driven traders" who gets
his/her kicks out of trying to "tame the Beast". Just sayin'...

The Dynamic nature of the DOM should be apparent from just looking at it,
but in NQ in particular, the Spoofing activity reaches its peak to completely
confuse traders. I'd post a picture if I knew how... It's an eye-opener...

Entire sides of the DOM consist of "mega spoofing", the minimum values of which
are SINGLE CONTRACTS on the DOM. But, visually, you'd probably think there
was balanced size on both sides... don't be naive; of course you're not naive...

For me, the real prize as I've said before is to master NQ's "take no prisoners"
approach to Price movement. Quite insane, but certain fundamental aspects
of it are actually predictable. I just observed the "distant or far DOM bias" remain
elevated for 10 minutes prior to a 160 TICK Rally in NQ. So, as I said, and I
can't offer you software; but the concept involved maybe; if you can "tame the
DOM Beast" then there would be riches to be had... There's Gold in them thar Hills,
but to get it out may be near impossible, so don't take such a task lightly; and
in fact, don't even try it. Just sayin'... once again.

hyperscalper

I found your posts very interesting. I do a lot of research on the side. There's a lot of opportunity for a good developer to come up with a new platform that captures much of what you are talking about. I'm not nuts about Ninja but I use it along with Jigsaw, doing my own analytical work in Excel. Bookmap has some advantages but in the end, I preferred my own setups.

I found your posts very interesting. I do a lot of research on the side. There's a lot of opportunity for a good developer to come up with a new platform that captures much of what you are talking about. I'm not nuts about Ninja but I use it along with Jigsaw, doing my own analytical work in Excel. Bookmap has some advantages but in the end, I preferred my own setups.

I don't trade the NQ but I've watched the order flow. I've never come to any other conclusion except that it's a complete fraud - spoofing, pulling/placing order, crap all over the DOM. Market profile not much better. I did find that Ninza's Volume Delta was helpful to identify impulse trades (actually you gave me a good idea to study - the 1 hour long or short using volume delta). Tried to do it in sim but in the end always gave it back.

Interesting stuff. Thanks for posting.

I've been doing quite a bit of programming work, and I'm coming to a similar place. I think to really do what I'd like I will need to plug into the Rithmic API directly. A lot of what has been discussed in this thread would benefit from MBO data.

Not sure what MBO means, but I think it means identifying the individual Market Makers which form the composite Size at each Market Depth Price level.

In my experience, YOU DO NOT NEED that level of DOM feed Analysis, in order to get Predictive information from the Depth of Market. At least, I've never had it; and haven't found it necessary.

I'm not denying that "more information could be better" but my guess is that such information would not improve prediction more than roughly 10% so it's a lot of work to do; with a low probability of significant utility.

Heck, with just a simple 10 wide DOM there's a huge amount of predictability; no need to get a super expensive feed, and try to extract even more information. I really doubt it would be fruitful... even if you could figure out how to interpret it.

[EDIT] I am using the Rithmic DOM which allows for 40 wide tiers on each side of the Market. But that's because I am also interested in "distant radar" which potentially exists in that data, having already mined just about all I can from the "near DOM" tiers. But I'm not going to be delving into the MBO information, even if it were available.

hyperscalper

Ok that makes sense and answers one part of my question. The second part had to deal with how do you match orders up. If you are just adding and subtracting all the orders that hit then you basically get cumulative delta. But it sounds like you're looking for the lot size to match up exactly? So if mm bought 10 at one level and sold two 5's at another level since the size didn't match up you'd still say there's 10 net long and 10 net short?

I've been doing quite a bit of programming work, and I'm coming to a similar place. I think to really do what I'd like I will need to plug into the Rithmic API directly. A lot of what has been discussed in this thread would benefit from MBO data.

Yes, you are correct when you suggest that the Depth of Market is a "dumpster fire with intent to deceive" or something like that. Spoofing is one of the Major techniques used, which prevents anyone from "eyeballing the DOM" and getting any useful information out of it.

So when you Analyze Quote Sizes on a specific Price; the very first thing you want to do is to defeat most of the Spoofing. Here's a Hint: If MM really wants to transact with the Retail population of traders; then MM will not "pull" quotes, but will maintain them in order to gain the "FIFO matching engine advantage". So, watching the MINIMUM sizes advertised (perhaps for only a few milliseconds) versus the AVERAGE or MAXIMUM values; is the key to getting a Proxy for the concept which estimates MM's "eagerness" to transact with the Retail Market.

By using these "size minima" you can then begin to look at the DISTRIBUTION of Quoted Size near the Market. You'll find that the Distribution of Volume Weighted Price, expressed in a snapshot as "delta ticks (tiers) from the inside market" will be CLOSER to the Market on the SIDE WHERE YOU WILL PREDICT THAT PRICE IS MOVING.

iN SIMPLISTIC TERMS: "When they really want to 'pull the inside market' to their Quote, then they will hold the Quote stable; and will Distribute their Quoted Sizes nearer to the Market". ...or something like that...

This stuff really works, but "the Devil is in the excruciating Details", as always.

hyperscalper

If I told you, I might be asked to kill you... Just kidding.

So, the basics apply here. MM-Buy transactions are (by my definition) Trades which take place at the BID;
and MM-Sell transactions at the ASK/OFFER Price.

Any time MM can Buy from a Retail Seller at the BID price, and then Sell that same quantity higher up
in price (even if it's only 1 minimum Tick) then that is MM profit, and that Size is eliminated from the "open inventory".

So, to answer your question, when being evaluated for LONG Inventory,
if MM Buys 10 and then ANY MM Sell at A HIGHER PRICE, like your 2 Trades of 5 each occurs,
then that Inventory is neutralized, profit is taken and it is no longer MM Open Inventory.

Let's say MM buys 10, and there's a higher price trade with size 15; then the 10 contracts are
eliminated (neutralized) and that higher Priced Trade (for purposes of the analysis scan)
is set to 5 remaining, since 10 was used to match the MM-Buy.

For a LONG Inventory scan; using the term "Long" loosely, but meaning MM has more BUY
transactions in Inventory than Sell transactions, remembering that we SORT/ORDER the Buy
list and the Sell lists. So these lists would be sorted in ASCENDING order; and then you might
think we could start with the LOWEST BUY Transaction, and then "borrow volume" from any
just higher SELL transactions (eliminating that BUY from Inventory, as closed profit)
proceeding up the BUY Orders, and eliminating them, when their Size can be "borrowed"
from higher Priced Sell Orders.

You might think that would be the way to do the Matching. HOWEVER, I prefer to start with
the HIGHEST BUY transaction and proceed downwards in Price, finding any higher priced SELL
transaction whose volume can be "borrowed or matched" with the BUY transaction, in order
to eliminate it from inventory. BUT WHY?

In this way, I will attempt to eliminate HIGHEST priced BUY orders (remember, we are evaluating
here for a "LONG" MM Net Position) and then LOWER priced BUY orders may remain
unmatched. THIS ALLOWS ME TO UNDER-ESTIMATE MM'S COST BASIS.

I WANT TO UNDER-ESTIMATE MM'S COST BASIS because if Market Price is below that
under-estimation; it is MORE LIKELY that MM is "in risk" or "losing money" on the
Net Open Inventory estimate. So I am more confident when I say "MM is in Long Risk"
and is less likely to want to lower the price further. If I had a higher estimate of
MM's Cost Basis, then I'd be less confident that MM was "in Risk" than if I use an
algorithm which under-estimates (estimates a lower price) for MM's Cost Basis. Savvy?

hyperscalper

"delta ticks (tiers) from the inside market" - not sure what this is - is it the difference in ticks in the spread?

You can get MBO data with Bookmap. I looked at it, didn't spend a lot of time on it so not sure what the true value is. Might be interesting to start a thread where traders who are using MBO can contribute.

I think I could write it in bookmap. I'm just not really in a spot to invest in a new platform, and there's some execution based edges that I don't think I can get over there. If there's a way to get around that I'd be interested in helping write it in Bookmap. Maybe though I'm just enamoured with the idea of writing something that touches the API directly? We're talking about some things that are fairly calculation and memory intense. It would probably be better to have such analysis in a different application from the application you are using to execute from. The Ninjatrader 8 - Jigsaw combination is perfect for it. Too bad ninjatrader doesn't have MBO data.

Can't you get it from Rithmic and funnel it through Ninja 8? I thought there were options for different datafeeds.

Unfortunately, I learned "the hard way" that Ninja does not have a setup for a Rithmic Data Feed. You must take the entire Rithmic Order Routing and Data Feed package, and that invalidates your usage of their CQG broker.

Of course, nothing stops you from coding your own C# to the Rithmic API and feeding that data into your Indicator(s) but it would not be "natural" through the Ninja Framework for datafeed only.

Yes, they market their Kinetick feed as a "feed only" option. But that's a "business decision" and they have no such feed only arrangement with Rithmic.

By using the Rithmic API, no doubt you could get "deeper" into things like MBO (whatever that is...) but unfortunately that could not be integrated as an "officially supported" NinjaTrader Connection adapter; as they simply do not support such a thing; and you'd have to Beg, Borrow, Bribe or Steal the code which could be used to write a proper Connection "snap in" to NinjaTrader 8... <speculation>

hyperscalper

Do not want to pollute the thread but for the sake of explanation of MBO, you can find it here:

Historical market depth and MBO data: Assess your latency, data and execution quality I decided to start a thread to provide some samples of historical market depth and MBO data to consolidate a solution for different questions on execution quality, data integrity and latency. My main goal is to encourage more latency transparency and …

Time for a new platform!

I think I understood that part. Why even bothering to calculate which side is winning? Just always calculate it both ways and show two lines.

What I'm getting at though is that the system doesn't account for losses. So say we're getting a strong down move with lots of traders getting stopped out over and over. Like the trend down move in treasuries today. You get trapped volume up above you that never gets canceled out. It gets stuck because the volume came out as stops instead of limit orders. So your cost basis estimate ends up being higher than it should.

The easy solution as per your earlier explanations is to just adjust the timeframe you're looking at. View on a 30 minute basis or a 5 minute basis. Then that old volume gets rolled off. But if you factor stop orders in as well then you can safely eliminate some of those trapped traders from the calculation and get a more accurate reading without having to reset.

All due respect, Sir; but that is very wrong, although it may be comforting for you to think that simplicity is the answer.

hyperscalper

I am a bit confused. Inventory (Time and Sales) Analysis is concerned ONLY with Transactions; not with outstanding unfilled orders.
So it is "Trade Flow". Whereas analysis of Market Depth, as these are Unfilled Market Maker "orders", would be more precisely called "Order Flow". Just sayin'... So a "stop order" is not an executed transaction which would appear on Time and Sales; and so I don't know why you say "if you factor stop orders in as well". That makes no sense to me.
hyperscalper

Neither you or I thoroughly understand the problem.

I was blown away by how predictable the market is; especially since I've been talking about how difficult
it is to deal with "The Beast" which is the Depth of Market. So we're using Rithmic's feed into NinjaTrader.
Had to go with Rithmic's routing also, as I explained elsewhere; but that's good because of the speed of
execution, even though higher margins.

no post lately

I may have been responsible for revitalizing the issues around Order Flow, and
in my work, I've certainly done a lot of it. But let me just re-clarify what I
understand Order Flow to mean.

WHAT IS "ORDER FLOW"?

Most people, including me, for a while; define Order Flow as "Trade Flow"
or Analysis of the Time and Sales for Buying versus Selling; and thus
calculating some concept reflecting an "imbalance" of the Market Makers'
"net buying or selling" behavior.

So, if the Time and Sales shows only Selling, which would mean that the
transactions occurred at or very near the BID price; then Market Makers
would be accumulating "long" or an excess of Buying, and be motivated
to move the Market Price upwards, to sell off what was purchased from
Retail Sellers, then to Retail Buyers at a Higher Price.

This can be useful, but I've described it more as a "situational awareness"
that "Yes, Market Makers on aggregate have absorbed a lot of Selling,
so they may be motivated to Support the Price, and lift the Price as
a result". It cannot tell you the instant that a down trend, becomes an
up trend, with any precision at all.

All of that is a very natural and logical way of approaching Time and Sales,
and many people consider that to be Order Flow Analysis. In a sense,
Orders on the Book are "Flowing" to Retail players as transactions take
place.

BUT THERE IS A SECOND AND MORE USEFUL MEANING, WHICH IS
ANALYSIS OF THE LEVEL 2 OR "THE ORDER BOOK" which exhibits Market
Maker Orders (and some Retail players limit orders) which exist at
varying Price distances from the Inside Market; BUT WHICH HAVE
NOT generated any Time and Sales transactions; they are merely
Orders.

The "Flow" of these Orders, or the "discoverable patterns" which do
exist in the various "Tiers" on the Order Book are an order of magnitude
MORE DIFFICULT to evaluate, in order to generate Trading Signals
which predict which way the Market may move in the near future.

WHAT ARE THE FACTORS THAT LIMIT "DEPTH OF MARKET ANALYSIS"?

Firstly, many cheaper brokerages offer only a limited number of Tiers
on the Level 2, and anyway, ordinary traders don't know what to
do with a fluctuating Depth of Market (aka "The Order Book"). If
you are given only 10 possible Tiers either side of the Market, then
you will be limited in perhaps what information you could extract
from that presentation.

Secondly, normal traders do not have the ability to apply algorithmic
real time analysis to the Depth of Market (the DOM) and, even if
they did, that analysis might not be useful in their trading, so
perhaps they are 1) unwilling to pay extra for Market Depth, and
2) the data volume or "bandwidth" to the local trading platform
is generally kept at a minimum for most traders, thus not
requiring much infrastructure to deliver.

Thirdly, Premium costs may be incurred for a Full Market Depth
which is "not aggregated" and which might offer 50 Tiers of
information on each side of the Market, and the data rates
of such feeds (such as Rithmic's Depth of Market or other
"premium" providers) may be prohibitive for retail platforms.
For example, the Rithmic Market Depth (not aggregated)
could generate up to 1000 or more UPDATES PER SECOND.

The potential to use this information is questionable; and the
retail demand is generally low; so why would it even be
interesting at all; given the high cost, and the inability to
UNDERSTAND the meaning of any patterns which exist in
the Depth of Market.

BUT HERE'S THE TRUTH. ANALYSIS OF THE MARKET DEPTH
is one of the strongest "edges" that a highly technical
trader can have. Notwithstanding those people who say
they can trade successfully with nothing but Level 1
pricing; and who claim that Level 2 never gave them an edge.

THE PROBLEM IS PROCESSING THE INFORMATION, and then
being able to predict where a market will move based on that
information, which is a highly specialized and relatively expensive
proposition.

You cannot just "eyeball" such information and expect to
extract anything useful. It is a highly technical algorithmic
problem to determine Market Trend from analysis of the
DOM (the Depth of Market) and you are likely to need a
"premium" non-aggregate feed (such as Rithmic's feed, and
probably some others) in order to do that.

SO I HOPE THIS CLARIFIES the differences between Time and
Sales Analysis, versus Depth of Market or "The Book" as
a source of Signals for trading. Both are perhaps confusingly
lumped into the category of Order Flow Analysis.

hyperscalper

that's what I believed years ago: that DOM could offer some type of advantage. Now I think reading DOM is very confusing, basically all the tricks that used to work years ago are now useless because everyone knows them, also there are robots that can read the full LAdder (by the way I used 300+ levels, not 50), in matter of micro seconds, and take decisions faster than you.
I think most of the people lose money because they are so focused on the ladder. They think they understand the market because the see a big order and they scream "that is spoofing" or when it gets hit they say "market is strong because..." etc... the result is that they always have a justification for what is happening.
These people take peanuts out of the market, when they make 200 USD per contract, smart traders make 1000USD with lower risk.

That's only my opinion, but check around in the website and you will see that 99% of the losing traders are huge fan of the DOM.

Hello guys, I am an aspiring trader and just recently learned about order flow and all these concepts. I was thinking about getting into NoBsDaytrading and learning about DOM scalping then I came across a reddit comment from someone who claims to be a STIR trader and claims that orderflow is the modern day technical analysis.

I will copy paste the comment here:

"I'd put it this way:

The way orderflow is used by retail is completely different than it is used by professionals.

All those concepts like delta, footprints, absorbtion are part of a snake oil sales armada just like the technical analysis hype fuelled the retail software industry 10-20 years ago.

"Orderflow" was more or less taught in prop shops (especially bond and STIR desks) and it worked because markets were much more isolated back then.

When you were able to spot a refreshing bid you could really identify what was going on since it most likely was one guy or one firm executing. Now it's old prop traders who ran out of edge who teach the concepts to the public.

Today all markets are correlated, so a refreshing bid could mean an algo that trades a weighted portfolio of 12 different assets, which is pricing your bid off of 11 other markets. He's refreshing at 20 now until one of his markets ticks down, then he's refreshing at 19.

There is so much cross flow between markets that it is nearly impossible to identify a trading opportunity aka. a price to lean on. Also, the big volume has moved from the lit market back to OTC since they are sick of getting robbed.

No as far as the professional users of flow goes, they are just screening the markets for stale orders to lean on, they have access to OTC venues to get an indication which direction the paper is trading and they monitor changes in correlations.

They also look into microstructure but opposed to the flimsy stuff Jigsaw, ATAS or Bookmap provides, they are modeling the FIFO queue in order to find out weither an order should stay for the 0+ trade or cancel/replaced.

Do they use delta or bids vs offers hit? Yes, some do, but it is just a miniscule part of the trading. More important, they monitor the trading of hundreds or thousands of instruments to get an idea which asset is out of whack. As others already mentioned, the data and creditlines necessary to trade on that level is so expensive that it is just not worth exploring for retail.

If you do not have a specific edge to exploit with your "orderflow" concepts, just don't bother programming an algo around it. Most of it is BS to be honest.


Good Luck"



I would like to hear your opinions about what he said. I dont want to waste my time if what NoBsDaytrading used to work and now doesn't anymore.
I know I sound like a newbie because I am. I am trying to learn about the nature of the markets and how they work but after reading this I became skeptical of everything for some reason

Thanks

Hi, what you present is certainly interesting. I always thought of "Orderflow" as a discretionary tool. There's no magical solution to profit in trading, you have to develop your own edge and be consistent at it. Whether it's moving averages, raw price action, delta, foot print, fundamental analysis etc... no one knows with certainty what the market will do next. Find something that makes sense to you that will help you "rationalise" the market, give you the confidence to pull the trigger on a trade, and remain consistent in the long run. Good luck!

Sent using the futures.io mobile app

OK, I'd like to make some comments that could help. But I am biased toward an extreme degree
of specialization; and also to custom coding of high performance algorithms; and toward the
higher cost data feeds which may contain the hidden signals to give you Real Signals for
Market direction.

My work is solely focussed on Futures day trading, or Scalping; using NinjaTrader 8 with
fully custom algorithmic indicators (nothing off the shelf is really good enough) and also the
use of a dedicated server, situated fairly near to the Chicago area, which also presupposes
that you either can system-manage, or you know somebody who can...

Given these constraints, and the nearly impossible goal of predicting with high probability
which direction the market will move in the near future.... given all of this, the only way
I can help is by giving general advice on the setup which is needed to achieve
consistent success. CONSISTENT success is the goal; so that, on a daily basis, you
are profitable; and your Account Equity is not wildly gyrating from day to day, and you
are not overly leveraging your buying power, thus putting your survival at risk...

I am a Technical Trader, relying upon Real Time Technical Analysis. I don't do Swing Trades,
and I might be involved in many hundreds of individual trades, which form part of a
"Meta Trade" involving many Micro contract positions, all working together to allow me
to be successful by controlling a couple of KEY FACTORS.

1) RISK CONTROL involves using multiple Low Risk positions, as a Group, so that both
Cost Basis (your Trade Break Even price) and Risk Levels can be "modulated" as the
trading action proceeds.

1a) ...essential to Risk Control is that you NOT be overly-leveraged; so you can add
to your position size, or reduce your position size; without fully Stopping Out during
Price Adversity, nor having to be All In with a position size that puts you at high
risk. This may involve working with the Micro contracts (which are 1/10th the size
of the Mini contracts) instead of the Mini contracts. By "spreading out" your Entry
Price levels, your Cost Basis is the Volume Weighted Average Position Price; and
also your Risk Level is your current number of outstanding positions which form a
Macro Position.

2) LIFO Accounting for Partial Profits as the Macro Position proceeds. Most brokerages
use a FIFO accounting method; but this is not desirable in helping you to know how
much your Profit Taking is contributing to your Open Losses. A FIFO technique helps
you to say "OK, My Macro position is losing $100; but I've taken $75 already in partial
profits, so I'm really losing only $25 as I continue to 'work' the Trade".

3) You'll want to anticipate tolerating Price Adversity which may be in the range of
50 market ticks or so; in the normal course of your trading. You may reduce a
portion of your position, but you must be ready to increase your aggregate position
size whenever possible; and that will be directed by your Trend Direction analysis.

The above observations are off-topic and don't address the usage of Time and Sales
Analysis, nor Depth of Market Analysis; I realize that. I've already said that although
Time and Sales (what I call "Inventory" Analysis) is valuable; it doesn't help you
Pin-Point precisely when Trending is favorable to you.

So we are left with what I regard as the best way to Identify "true trending" through usage
of the Depth of Market, and developing a "bias" Indicator which will tell you when trend
is favorable to your position (so that you can add to your position) and when you
should possibly reduce your position size, or take individual Partial Profits to contribute
to your "in pocket" cash, which offsets your open losses as the aggregate position
proceeds.

You'll need a platform which is programmable, such as NinjaTrader 8 which uses compiled
very high performance C# code to develop Indicators. Also, you'll need access to a
Market Depth feed, which is likely to be Rithmic at NinjaTrader brokerage. If you have
a substantial account size, then you can tolerate the fact that your margin requirements
could be very much worse, than with the normal data feeds; but you'll need that Market
Depth from Rithmic to do analysis.

Using the LeeLoo proprietary trading service, you will have access to Rithmic Data, and you
may be able to qualify for paying performance accounts in that way.

IN ANY TRADING, you simply cannot "flip a coin" and determine which direction to trade,
either "long" or "short" as they say; and have any hope at all of surviving. ANALYTICS
which are predictive of Market direction MUST BE the starting point for everything further
down the chain, where Execution is the least important.

Consider that Market Makers are NOT driven by "Retail Buying and Selling pressure" but are,
instead, the prime drivers of all Market direction; where Retail players are simply followers.
You'll constantly be told things like "Buyers are in control of the market today, which is
why the price is rising." as though the Retail participants control Market direction. At least
in Futures markets, this is Absolutely NOT True. It is what I'd call a "Convenient Fiction".

Can you tell that I'm not going to give you a specific solution here, but simply to get you
thinking about where the Holy Grail may exist? lol

IF there is a Holy Grail for shorter term trading; or scalping day trading.... then that Holy
Grail is to be found in the analysis of The Order Book, or Depth of Market, abbreviated
as the DOM. Analysis of the DOM will tell you where the market is moving on a short
term basis.

WHY? ...and here I'm just giving you some food for thought. Let's agree to stipulate one
assumption, for the purposes of argument. "Market Makers know where they want to move
the market; meaning that they have a Plan on any given day; and they use their own Bids
and Offers distributed on a constantly changing DOM, in order to maximiz(s)e their Profits,
as they use Retail Players to achieve their objectives."

When Market Maker wants to lift the Market Price, she simply removes her Offers, and also
then begins pushing her Bids, to simply "over-power, overwhelm" the Retail players'
buying and selling tendencies. When Prices rise, Retail players become Buyers; and when
the Price falls, Retail players become Sellers. Retail players are "followers" and Market
Maker is the Prime motive force for Price movement.

1) Time and Sales analysis. Here we see a Limited Value in looking at Buying and Selling
transactions. We can understand why all Markets move in a "sawtooth" fashion. It is because
Retail players BUY (from Market Maker) as the Price rises, and Retail players SELL (to Market
Maker) as the Price falls. Thus, some "Inventory Analysis" which involves tallying shorter term
"Net Market Maker estimated position against the Retail action" can help you to identify
the tops and the bottoms of the sawtooth movements. At the top, Retail players have been
(for the most part) Buying; so Market Maker has been selling to them; and thus Market Maker
becomes relatively "short"; and at the bottom, Market Maker has been buying from Selling Retail
players, and so has been shifted relatively "long" in Inventory.

SO TIME AND SALES ANALYSIS has a value in helping to provide what I would call a
"situational awareness" which may help us to measure a process responsible for the tops
and bottoms of the "sawtooth" micro movements in a Market.

....I'd better continue in another segment...

hyperscalper

that's very interesting, I can see that you have some very deep knowledge of the market. Can I ask if trading is trade full time? if so do you trade your own capital or for a prop firm? just curious... I am just wondering if this level of details is achievable for a retail trader who is not trading full time.