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Is Orderflow An Outdated Concept?


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Is Orderflow An Outdated Concept?

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  #1 (permalink)
TradeTheTrade
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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

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  #3 (permalink)
 addchild 
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Being skeptical of everything in trading is a good instinct.

IMO the author is 100% right. Things that used to play out in the orderbook over the course of 1-2 seconds now happen in microseconds. There's nothing really there for click traders to lean on any more. Like anything, I'm sure there are exceptions, but they are very few and far between.

.
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  #4 (permalink)
TradeTheTrade
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addchild View Post
Being skeptical of everything in trading is a good instinct.

IMO the author is 100% right. Things that used to play out in the orderbook over the course of 1-2 seconds now happen in microseconds. There's nothing really there for click traders to lean on any more. Like anything, I'm sure there are exceptions, but they are very few and far between.

Thanks for your reply

Care to elaborate?

I understand the markets now move faster than before, but the concepts of order flow should be universal since this is how the markets move. Aggressive buyers and sellers, imbalances..etc

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  #5 (permalink)
 RDK91 
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TradeTheTrade View Post
Thanks for your reply

Care to elaborate?

I understand the markets now move faster than before, but the concepts of order flow should be universal since this is how the markets move. Aggressive buyers and sellers, imbalances..etc

Order flower is much harder to spot these days, large orders are executed in smaller lots with algos, HFT's are way faster than any discretionary trader ever can be and automatically take advantage of any market inefficiency it spots.

Order flow trading from the DOM might still be possible but got much harder the last decade. If you where very successful doing it in the past you might have been able to adapt but if you have to start learning now i think you are in for a very tough ride.

Just my opinion though, i have no experience trading that way.

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  #6 (permalink)
 Grantx 
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Hi, do you mind sharing that link?


TradeTheTrade View Post
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.


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 ninjus 
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Grantx View Post
Hi, do you mind sharing that link?

https://www.reddit.com/r/algotrading/comments/cfwtpe/order_flow_and_algorithmic_trading/


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TradeTheTrade
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Grantx View Post
Hi, do you mind sharing that link?

Someone shared it.

I couldn't because I am a new member so I cant post links

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  #9 (permalink)
TradeTheTrade
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RDK91 View Post
Order flower is much harder to spot these days, large orders are executed in smaller lots with algos, HFT's are way faster than any discretionary trader ever can be and automatically take advantage of any market inefficiency it spots.

Order flow trading from the DOM might still be possible but got much harder the last decade. If you where very successful doing it in the past you might have been able to adapt but if you have to start learning now i think you are in for a very tough ride.

Just my opinion though, i have no experience trading that way.

I understand.

I am really not into DOM very much. After I have done some research I realized it is like playing poker where you have to guess the hand of the other players.

I like the footprint chart and see what has already happened and base my decisions on that. So HFT wouldn't bother me.

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 Hulk 
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TradeTheTrade View Post

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

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.


TradeTheTrade View Post

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.

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.


TradeTheTrade View Post

"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.

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.


TradeTheTrade View Post

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.

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.


TradeTheTrade View Post

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.

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.


TradeTheTrade View Post

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.

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.


TradeTheTrade View Post

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.

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.


TradeTheTrade View Post

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.

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?

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  #11 (permalink)
TradeTheTrade
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Hulk View Post
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?

For someone who wants to learn, where to start then?

I also assume what we are discussing is for scalpers and those looking at the DOM.

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 Hulk 
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TradeTheTrade View Post
For someone who wants to learn, where to start then?

I also assume what we are discussing is for scalpers and those looking at the DOM.

No, This really isnt about scalping or trading by looking at the DOM. That never worked for me and I dont think it is sustainable as a means for regular income. In other words, you cannot consistently do that every day.

Your question is a loaded one but I will first counter that with another, do you really want to day trade? Why?

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TradeTheTrade
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Hulk View Post
No, This really isnt about scalping or trading by looking at the DOM. That never worked for me and I dont think it is sustainable as a means for regular income. In other words, you cannot consistently do that every day.

Your question is a loaded one but I will first counter that with another, do you really want to day trade? Why?

I want to day trade and swing trade, a mix of the 2 of course depending on the trade I see.

Why, so I turn this into a business and trade for a living.

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TradeTheTrade
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Hulk View Post
No, This really isnt about scalping or trading by looking at the DOM. That never worked for me and I dont think it is sustainable as a means for regular income. In other words, you cannot consistently do that every day.

Your question is a loaded one but I will first counter that with another, do you really want to day trade? Why?


I still fail to see why these concepts accumulative volume, absorption..etc dont work, these concepts sound very logical. I dont see how the market can move otherwise. It is all based on supply and demand, buyers meeting sellers..etc

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 Hulk 
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TradeTheTrade View Post
I still fail to see why these concepts accumulative volume, absorption..etc dont work, these concepts sound very logical. I dont see how the market can move otherwise. It is all based on supply and demand, buyers meeting sellers..etc

Based on this post, I feel you didn't quite follow what I said earlier. Let me put it this way, the concept is sound but most beginning traders do not have the tools and the mindset to convert the concept into a consistent revenue stream.


TradeTheTrade View Post
For someone who wants to learn, where to start then?

Most people in your situation, lose whatever money they put into trading and are forced to give up. My guess is > 90% of people starting out, never make it. My guess is only 1% graduate to actually making money in the markets consistently.

I am not saying this to discourage you but to help you plan. The most important part of the plan is to have enough time to learn and enough money to survive the first few years.

The best way to get started is to get a job at a trading shop as an analyst and learn first hand. No one can teach you exactly how to trade, what to trade, which instrument, what time frame, scalping or swing. But if you can somehow manage this, its the most preferred route to becoming a full time trader.

The only other way that I know requires a few skills. These skills are programming and pattern recognition. Get historical data (the most detail you can get), write programs or visualize graphically to analyze data and identify patterns. For each pattern you identify develop a theory, backtest the theory and see if it has any credibility. In my estimation, for every 100 theories you come up with, you will find 5 that will be historically profitable. Maybe 2 out of those are actually executable and not all will consistently retain the edge. If you are well funded, start small and gradually raise your size otherwise, reach out to funds, prop shops and show them what you have done to get a job with them. Trade their capital. This is not a trivial thing to do. It took me years.

If you do plan to use your own funds, my advice to you is to not risk a single dollar in the markets unless you at least have a profitable backtest. Not all profitable backtests will execute the same way as backtests show. There is a learning curve to this and its quite painful.

In other words, if you find these concepts you talk about - accumulative volume, absorption etc logical, then prove it first on a few years of data (for CME, 3 years is good enough). Do not rely on third party tools, build your own.

If some of these terms are new to you, there is a lot of information on the forum about backtesting. This topic has been discussed many times.

Always ask yourself, what is it that you have that is better than your competitors - is it your program? your data? or your risk appetite (yeah, I know, you are saying what does this have to do with winning? but it is one the most important attributes of a successful trader). Try to find a yes for either of these questions before you deploy risk.

Good luck.

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 josh 
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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.


TradeTheTrade View Post
I still fail to see why these concepts accumulative volume, absorption..etc dont work, these concepts sound very logical. I dont see how the market can move otherwise. It is all based on supply and demand, buyers meeting sellers..etc

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.

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 Hulk 
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josh View Post
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 the trader must think differently, and do something differently than what everyone else is doing, to achieve results which are different from everyone else's results.

Very well put.

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  #18 (permalink)
 dextrade 
Skokie
 
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I am sorry but anyone writing things like this works, that doesn't work because of their possible own experience with the markets, does a disservice to anyone aspiring to make consistent profits.
The truth is everything works and nothing works.
Order flow, Volume profiles, support resistance, patterns all are great tools of any tool box of a seasoned trader.
Trading is a very personal journey and different things work for different people. Just because something works/doesnt work for me, it doesn't mean it will work or not for someone else.

The journey of a trader is a pretty simple one. As an example if you are an intraday trader,,,have the right setup with live data so you can see the flow of orders (yes it works obviously). Pay attention to volume distribution, support resistance on multi-time frames, price rotations, correlation of the market youre trading with other instruments ...
After 10s of 1000's of hours of screen time and skill of preserving your capital while you learn, proper risk management you will just finally get "IT". You can then start to increase your size as you succeed.
No shortcuts, no algo programming miracles, holly grail indicators, gurus, chatrooms, simply time and effort.
There are some great educational sources out there that will shorten the learning curve, most are free.

Cheers and Good luck, Trading is the best most easy and difficult job in the World.

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  #19 (permalink)
 LastDino 
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josh View Post
The problem is not that they "don't work" -- it's that you seem to be looking for a turnkey solution

Gold nugget, pretty much hit nail on the head. I wish I had understood this about myself when I started, would have saved me some money.


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

This takes LOT of time, its really not that simple to do it, even after having tools to do it, especially without having your own idea/plan to trade.

In older times martial artiest stressed on the fact that weapon is part of your body, just like your own limbs. In trading that is also true, whatever you are using needs to be "part of you" otherwise you wont be able to always win even with the edge.

I agree with everything Hulk and Josh have explained, you wouldn't get this even after doing ton of courses.

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  #20 (permalink)
 Schnook 
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One other point that hasn't been mentioned yet is that visible orderflow may have vastly differing informational value depending upon the product traded.

The author of that reddit post is a short term interest rates trader. This means that he's most likely trading eurodollar futures, where most of the biggest players are spreaders, arbs, hedgers, and basis traders. One guy might be buying the redpack against the blues. Another guy might be selling the greens versus cash two-year notes while the next guy is just hedging convexity risk in his mortgage book.

The point is that the rates market is vast and deep, and the majority of traded volumes occur in OTC products - cash treasuries, swaps, forwards, term repos, and so forth. Whatever orderflow you might be seeing in, say, EDZ1 is going to be completely dwarfed by the volumes going through in the surrounding contracts, cash treasuries, and other related interest rates products. So I agree that trying to develop strategies based on orderflow concepts in interest rate futures is probably a fool's errand.

HOWEVER

The same market structure does not necessarily apply to other products.

The equity indices, for example, may still contain a lot of arb and spreading flows but also have much higher levels of outright retail participation, where certain small directional biases can still reveal themselves in the order flow.

And what about, say, the sugar market? Or cocoa? How actively are people trading the cash / futures basis in these markets? How much orderflow "noise" is being created by cross-asset spreaders, hedgers, or basis traders? I don't know the answer to this question because I don't actively trade these products. I'm only pointing out that just because one idea or concept may not work in rates, it does not necessarily mean that it won't have some value elsewhere.

The point is you need to know your market. Regardless of what you're trading, there's always a lot more going on than what you're seeing on your DOM and footprint charts. How much and how relevant that might be - and whether or not you can gleen any valuable information from it - will depend on the product you're trading and your knowledge of that product's overall market structure.

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  #21 (permalink)
 Silvester17 
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Schnook View Post
One other point that hasn't been mentioned yet is that visible orderflow may have vastly differing informational value depending upon the product traded.

The author of that reddit post is a short term interest rates trader. This means that he's most likely trading eurodollar futures, where most of the biggest players are spreaders, arbs, hedgers, and basis traders. One guy might be buying the redpack against the blues. Another guy might be selling the greens versus cash two-year notes while the next guy is just hedging convexity risk in his mortgage book.

The point is that in the rates market is vast and deep, and the majority of traded volumes occur in OTC products - cash treasuries, swaps, forwards, term repos, and so forth. Whatever orderflow you might be seeing in, say, EDZ1 is going to be completely dwarfed by the volumes going through in the surrounding contracts, cash treasuries, and other related interest rates products. So I agree that trying to develop strategies based on orderflow concepts in interest rate futures is probably a fool's errand.

HOWEVER

The same market structure does not necessarily apply to other products.

The equity indices, for example, may still contain a lot of arb and spreading flows (cash vs. index, individual basis hedges, cross index spread trades etc) but also have much higher levels of retail participation, where certain small biases can still reveal themselves in the order flow.

And what about, say, the sugar market? Or cocoa? How actively are people trading the cash / futures basis in these markets? How much orderflow "noise" is being created by cross-asset spreaders, hedgers, or basis traders? I don't know the answer to this question because I don't actively trade these products. I'm only pointing out that just because one idea or concept may not work in rates, it does not necessarily mean that it won't have some value elsewhere.

The point is you need to know your market. Regardless of what you're trading, there's always a lot more going on than what you're seeing on your DOM and footprint charts. How much and how relevant that might be - and whether or not you can gleen any valuable information from it - will depend on the product you're trading and your knowledge of that product's overall market structure.


yes, indeed. thank you for this great post!!

mia san mia

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 TopGunNote 
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Silvester17 View Post
mia san mia

So true!

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  #23 (permalink)
 Blash 
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Chicago, IL
 
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dextrade View Post
I am sorry but anyone writing things like this works, that doesn't work because of their possible own experience with the markets, does a disservice to anyone aspiring to make consistent profits.



The truth is everything works and nothing works.


Order flow, Volume profiles, support resistance, patterns all are great tools of any tool box of a seasoned trader.

Trading is a very personal journey and different things work for different people. Just because something works/doesnt work for me, it doesn't mean it will work or not for someone else.



The journey of a trader is a pretty simple one. As an example if you are an intraday trader,,,have the right setup with live data so you can see the flow of orders (yes it works obviously). Pay attention to volume distribution, support resistance on multi-time frames, price rotations, correlation of the market youre trading with other instruments ...


After 10s of 1000's of hours of screen time and skill of preserving your capital while you learn, proper risk management you will just finally get "IT". You can then start to increase your size as you succeed.


No shortcuts, no algo programming miracles, holly grail indicators, gurus, chatrooms, simply time and effort.

There are some great educational sources out there that will shorten the learning curve, most are free.



Cheers and Good luck, Trading is the best most easy and difficult job in the World.



Bro..... you have gotta post more..... lol.... I couldnít agree more...lol....I love it!

Screen time is sooooooo important. And like Peter Davis from Jigsaw says ď you only get one day a dayĒ (Iím paraphrasing, but very close) meaning it takes MANY days and a long time to understand the way Mr Market moves, reacts, behaves, responds or doesnít. And it goes without saying you canít understand all of it.

I use orderflow. But itís only a tiny piece. Some trades it might help .... others it wonít. Of the small amount of time it gets utilized a sizable chunk of that is for after entry. For trade management. I need other traders to enter in my direction to make me a winner (I dislike using the words winner or loser just doing it here. I see things from a, doing business, point of view.)

Everything works and nothing works is SO true. Itís all dependent on the practitioner.

The only thing I can say is universal in trading, that works all the time, all successful traders admit and gets referenced all the time, if you listen...... are virtues. I have a thread devoted to this.

Trading takes Patience it takes determination it takes self-discipline it takes decisiveness it takes commitment it takes tact it takes assertiveness it takes humility it takes courage it takes creativity it takes honesty it takes acceptance it takes contentment it takes detachment it takes devotion it takes endurance it takes diligence it takes flexibility it takes fortitude it takes gratitude it takes perseverance it takes resilience it takes discernment it takes fidelity it takes forgiveness it takes moderation it takes openness it takes perceptiveness it takes steadfastness it takes trustworthiness it takes confidence...... (not complete)

These are ubiquitous, widespread, rampant and inescapable if you want to be a trader (or anything).

Ron


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  #24 (permalink)
 bobwest 
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TradeTheTrade View Post
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.

...

after reading this I became skeptical of everything for some reason

Of course.

Here's why:


dextrade View Post
I am sorry but anyone writing things like this works, that doesn't work because of their possible own experience with the markets, does a disservice to anyone aspiring to make consistent profits.
The truth is everything works and nothing works.
...
Trading is a very personal journey and different things work for different people. Just because something works/doesnt work for me, it doesn't mean it will work or not for someone else.

It is important to always add, in some form, the words "for me" after any statement of what works or does not, even if you are certain in your own mind that it works or doesn't work as a matter of undeniable Truth For All Time, embedded by Natural Law in the structure of the Universe.... because somebody else is going to come along with a different experience that will blow your certainty out of the water. (I have learned this from a long experience of being both right and wrong, and not knowing the difference until after I was proved wrong.)

I don't use order flow. Never figured it out, and it never appealed to me anyway. But that's just me. There have been people in this thread who I know from their posts over the years, and who do use it and use it well. They are telling you the truth, for them. The person who wrote the statement on reddit that bothered you was telling the truth for him. Now, opinions aside, was he making money? I don't know, of course. Are the people who have written pro-orderflow posts here making money? I don't know that either, also of course, but I would bet that they are, some of them anyway (I won't mention names out of respect for the others. )

So, what do you believe? Sadly enough, you have to try stuff out, making and losing money on the way, and you have to find what works for you, and just let all the other things be something that may work for others. The only way to know is to try it out and see if it makes enough sense to you that you want to pursue it further.... and then be willing to spend whatever time you need to see if it is going to work out for you in the long run.

I hope I've been clear about this. If not, here's my bottom line: order flow works well for some of the traders who try it, and it fails for some others. So does every other thing that anyone tries, until they hit on something that works for them.

Simple, if maddening.

I don't know if order flow will be it for you, and for that matter if trading will be for you either. If trading is something that clicks for you, I hope you find some variation that lets you succeed at it, whatever it is.

Good luck, and I mean this -- and you also will need it. Stay connected here, and people will try to help.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
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 dextrade 
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Bob, Ron, and others, great thread..thanks for the kind words and great info without BS.
As I mentioned order flow or anything out there works and doesn't work.
Finding your nitch takes years and when successful will align with your personality and overall approach to life.

I trade Intraday instruments like ES, NQ, CL.
I have a setup i customized (including a color theme of charts) over the years with SierraCharts. I pay attention to monthly, daily, 30 min as a guidance while trading on small time frames using Order flow, price rotations and volume profiles. At the same time I am watching world markets, currencies and Bonds. It all correlates together. Of course i also want to know whats going on with the news, upcoming reports, events etc.
As an example, If I am Long ES, i better have UltraBonds and JapYen dropping at the same time or My longs maybe in trouble. The example works, for now, until it doesnt.

My peace rests not in my setups and winning trades but rather in confidence that when I am wrong I know I will not get myself in trouble, and will easily close my losing positions without any resentment. That comes from deep scars from the past

All of this works for me and only for me, my personality, approach. I can give my setups and instructions to 99 other traders and the possibility is it would not work for them. It has nothing to do with ..if I am a better or worse trader then them. There are few great teachers out there who really know their "stuff" such as FuturesTrader71. Their value is immense and will shorten the learning curve.. and yet.. at the end one must still find their own path.

I do believe that if someone does it just for the money, the next Ferrari, it will be a tough journey. There needs to be a passion for working with the markets that is not connected directly to Money. Money then becomes a bi-product.

Have fun and good luck.

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  #26 (permalink)
 Rrrracer 
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Blash View Post
Trading takes Patience it takes determination it takes self-discipline it takes decisiveness it takes commitment it takes tact it takes assertiveness it takes humility it takes courage it takes creativity it takes honesty it takes acceptance it takes contentment it takes detachment it takes devotion it takes endurance it takes diligence it takes flexibility it takes fortitude it takes gratitude it takes perseverance it takes resilience it takes discernment it takes fidelity it takes forgiveness it takes moderation it takes openness it takes perceptiveness it takes steadfastness it takes trustworthiness it takes confidence...... (not complete)

These are ubiquitous, widespread, rampant and inescapable if you want to be a trader (or anything).

Yep sounds like a recipe for a good life. The trading just falls into its place.

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  #27 (permalink)
cpg3333
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I have used order flow for a few years now. My humble opinion it is not a magic bullet that a lot of folks are looking for. By the way there are no magic bullets or fool proof methods. Every trader has bad days. To me the order flow traders are momentum traders and the footprint numbers can confirm that momentum. Again just my humble opinion.

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  #28 (permalink)
ELche
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I went into the jungle and pirates of OF softwares out there. Spent K's of $$$$, no success . Now went back into the old as dirt crossing MAvg. with standard free indicators like RSI ,MAcd . ,123 tops ,double tops etc. You get the pic. As long as you stick to rules and have a low risk entry, you will make more than you lose.

Good luck and stay safe.

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  #29 (permalink)
 SMCJB 
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@Hulk I think everything you said was spot on.


Hulk View Post
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.

There are chat/IM applications that parse messages into an orderbook style format but it's heavily options focused. You'd also need to be talking connected to good brokers in several good shops otherwise it would be an extremely limited view.

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  #30 (permalink)
 phantomtrader 
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There's no doubt that the patterns on the DOM have changed and are changing rapidly. I've stopped looking for the patterns I used to trade because it simply doesn't work. A lot of it is the context of the market. I prefer to trade the bonds, but right now it's impossible - every time the FED inserts capital, the futures will jump ticks, the numbers are all fake, etc.

That said, there are still benefits to the DOM. I'm using it to confirm my trades - sometimes I use my coded strategy, sometimes support/resistance depending on what the market is doing. So if you're looking for a short, you want to see some drive down with sellers generally above. The number in the upper right (see jpg) is very helpful. It's the easiest way to see the net effect of buying/selling. If big buyers/sellers come in, you'll see that number jump. If you're in the wrong direction, get out. If you're in the right direction, hold on for your target. Of course, there's always the problem of volatility, but in general, I find that watching that number gives you a very nice perspective of what's happening. I analyze my trades at the end of the week in replay. If you get the hang of watching that number, it will give you an edge.

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  #31 (permalink)
 CannonTrading   is a Vendor
 
 
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Asked my fellow broker, Joe Easton, whom I like his market read what he thinks and he shared the following:

Good job doing your homework and asking the right questions. Part of being a good trader is to think rationally and independently. It is correct to search for information and be skeptical of the answers and test to see if they work in your experience. Every trader will have slightly different opinions and experiences and that is what makes a market.
To me orderflow is an outdated concept. Since it is a fact traders can hide order sizes and cancel bid or asks at anytime already pokes holes in the idea that this information could be helpful. I realize there are some successful traders that use orderflow but in my experience I do not find it helpful. I personally believe in technical analysis because you are using information that is a factÖprices traded. You cannot cancel a position already filled and printed on the chart. Using information that has already happened to me is more useful than using information that may or may not happen.

PM with any questions about Cannon Trading (800) 454-9572 (310) 859-9572. Trading commodity futures, forex and options involves substantial risk of loss. The recommendations contained in this post are of opinion only and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performance is not necessarily indicative of future results.
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  #32 (permalink)
nam4bmt
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First of all, orderflow is not a technical concept. It is based on fundamentals. When you look at it that way, your understanding of orderflow careens with a new angle. Yes, orderflow with technical mindset alone is an incomplete tool!


TradeTheTrade View Post
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


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  #33 (permalink)
 photog53 
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For what it's worth...my experience with OrderFlow matches this very closely.


TradeTheTrade View Post
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


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  #34 (permalink)
 TWDsje   is a Vendor
 
 
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To say that the concept is "outdated" is certainly not true. It's still real data that has a significant impact on how an asset moves and should be factored into analysis. DOM trading also places an emphasis on the execution of a strategy, and that will always give you some edge.

But it is not nearly as reliable as we once held it to be. Part of it is just that a lot of moves are off correlation, and the order flow will be dead wrong when that happens. Part of it is that you're looking for such a short term trade that all it takes is a little noise to ruin the trade. Sometimes it will work for you every time, and sometimes it will fail every time. You have to know when the action is good which is something I've had a hard time consistently doing. So it becomes like everything else. Maybe you can find an edge in it, and that edge might not last forever.

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  #35 (permalink)
 traderpards 
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I don't know if anyone's mentioned it yet but look up MBox on YouTube. [yt]https://www.youtube.com/channel/UCLKraR4UVif9dszy4DZLXtw[/yt]

This guy's system uses order flow and if there's a way to use order flow, it seems to me this is one way to make it work.

That guys seems to be onto something. It helps me that he posts live trades. Except he doesn't tell you how many he recorded and doesn't end up showing.

Disclaimer: I have no affiliation with this guy. I haven't even bought his system. What he says appeals to me though.

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  #36 (permalink)
 josh 
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CannonTrading View Post
I personally believe in technical analysis because you are using information that is a factÖprices traded. You cannot cancel a position already filled and printed on the chart. Using information that has already happened to me is more useful than using information that may or may not happen.


The whole notion of "order flow" trading deals with trades. Sure, the order book may be used, but I don't think it's implied that "order flow" trading centers around quotes.

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  #37 (permalink)
SunTrader
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Orderflow, is orderflow. Not FA or TA by itself. That is the whole point.

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  #38 (permalink)
 Meklon 
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Hulk View Post
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?

Great post and insight.

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  #39 (permalink)
 joe s 
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a lot of useful info to consider

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  #40 (permalink)
 Meklon 
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Hulk View Post

The only other way that I know requires a few skills. These skills are programming and pattern recognition. Get historical data (the most detail you can get), write programs or visualize graphically to analyze data and identify patterns. For each pattern you identify develop a theory, backtest the theory and see if it has any credibility. In my estimation, for every 100 theories you come up with, you will find 5 that will be historically profitable. Maybe 2 out of those are actually executable and not all will consistently retain the edge. If you are well funded, start small and gradually raise your size otherwise, reach out to funds, prop shops and show them what you have done to get a job with them. Trade their capital. This is not a trivial thing to do. It took me years.

If you do plan to use your own funds, my advice to you is to not risk a single dollar in the markets unless you at least have a profitable backtest. Not all profitable backtests will execute the same way as backtests show. There is a learning curve to this and its quite painful.

In other words, if you find these concepts you talk about - accumulative volume, absorption etc logical, then prove it first on a few years of data (for CME, 3 years is good enough). Do not rely on third party tools, build your own.

I find these 3 paragraphs from the above are the most undervalued and underpriced by the amount of information contained in them. Speaking from the experience.

I have also been (from very beginning) very skeptical about ability of the traders to earn consistent profit using DOM. Don't get me wrong, this has nothing to do with my opinion being high or low about abilities of others to recognize the patterns on the DOM ladder. It is more to the fact that because of electronic trading, the nature of the markets have changed significantly in the past 10 years, causing live traders to loose whatever edge they may have had.

I come from the IT / programming background and it quickly became very apparent to me that my biggest strength is not in watching the screens whole day long trying to catch the volume bump to lean on, but rather in ability to spot and recognize context patterns, determine (in very detail) what the conditions are for those patterns and then writing my own code to hunt for these conditions in the market to simplify my job as a trader. In other words, I want my bot (algo) to monitor the market, place an order for me along with proper risk management when conditions line up and I can take over and manage that trade from this point forward.

I am not that smart or delusional to think that I can beat the algos and millions of dollars invested in the super fast hardware, but I am smart enough to employ computers to simplify my job and do the 70% of work for me so I can focus on discretionary trading.

Cheers,

Mek.

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  #41 (permalink)
 johny1971 
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The reddit post seems to be from a trader going way beyond the retail level. Isn't the retail level all about getting the dropped fruit as opposed to chopping down and carrying out the trees? I'm content trying to capture movements riding on the big guys backs. Wouldn't this mean the reddit comment need not make a retail trader so skeptical?

Is there any theoretical and profitable truth that riding on the backs of the big guys works?

Just like TA assumes crowd behavior yields patterns, couldn't the same be said for orderflow?

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  #42 (permalink)
 forgiven 
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i would have to agree with the author ! i would love to have the millions spent on this bull shit order flow software and the money lost by the suckers that bought into there concepts . may be one day mike will require these order flow experts to show a couple years worth of the brokerage statements ,so we can see how much money they have made eating there own cooking ... hint ... they can not really trade. they just sell trader stuff

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  #43 (permalink)
 Meklon 
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josh View Post
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.

Great definition. I recommend for every new trader to print this out and save it.

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  #44 (permalink)
 Don673 
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Oh boy! Good old orderflow! What can we do without it (or I believe I should be saying `what can we do with it`.)

I have had the orderflow idea sold to me by the same vendors that have already been mentioned in some of the postings made already on the thread as well as some not mentioned here at all. So I do not wish to mention the name of any vendor- I virtually passed through the lot.

Orderflow is presented as an 'undeclared holy grail' of trading. In my opinion the reason they do not out-rightly declare it a holy grail is (I guess) it is now an accepted saying in the trading community that there isn't one. Having said this all you have to do is take a peek at the way the vendors present it and you will obviously reach a conclusion.

So just like any other gullible member of the retail trading community I fell for it and did their courses and/or paid for their software. The temptation to mention the names of these orderflow software vendors and teachers/courses is great but i choose not to. However suffice it to say that some of the vendors/teachers are better informed in the orderflow concept than others.

The DOM: Some of the vendors advise that you should learn to make trade decisions off the DOM alone initially. One of the softwares I used even had the provision for you to make annotations as well as draw lines on the DOM. I tried it. But no matter how hard I did (in keeping with the dictates of the course) it was not practicable. If you would like to position yourself for the day (as a day trader) using the DOM alone, then that would obviously qualify as a Sisyphean task to say the least. IMO even scalping off the DOM alone would fairly be described as a difficult task depending on your scalping targets.

The Footprint Chart: is sold to would be disciples as the place where proceedings on the DOM are translated into actual and visible transactions between buyers and sellers. I must say true to words, it is. It probably represents the only part of the orderflow phenomenon that is practically useful again IMO; but how useful? In isolation, not very. In a chart with well marked out demand/supply (or support/resistance if you would) areas, yes very useful. And that is how I use orderflow. In summary I only use the footprint chart while I have a regular candlestick chart with supply/demand zones well plotted on the chart. So as you can already imagine, the demand/supply zones already tell you where to start expecting those reversible features you are suppose to see in Delta, Single Print, Trapped traders, Point of control, Imbalances (stacked or not) etc etc.

The Heatmap: of all the components of orderflow perplexes me the most. I tend to think that anyone who uses it to make a trading decision must have made the `leap of faith`before sitting down at his trading desk. I could be wrong and I hope I am; I do not want to draw the ire or indignation of traders who use the heatmap. Suffice it to say those who use this resource must be outstanding.

I summary as a simple level headed trader, do I write off orderflow trading? Obviously not. Will I recommend it as a standalone method of trading? Again obviously not. I just admitted I use the footprint chart which (roughly) about sixty percent of the time helps me make a good decision. Now here is the big question; could I have made those good decisions without the footprint chart? The candid answer would be a thoughtful yes. In using the footprint chart alone would I consider myself an orderflow trader? I believe the answer is a resounding no!
Between the footprint chart and my traditional candlestick chart which is more important to me? Of course my candle stick chart.
Is there some use in orderflow trading for traders. Yes. Do I think orderflow should be used in exclusivity? No.

Here is the heart warming aspect of things. I am beginning to see components of orderflow being developed by programmers and coders; for example, I have seen a footprint chart indicator on the futures.io website. I have also seen gamma indicators in a host of other sites for sale. Perhaps other components of orderflow trading also abound. I believe taking the bits and pieces you need here and there might save you the exorbitant costs charged by orderflow software vendors if you don't need all the components.

In summary I would be hesitant to promote orderflow trading in isolation to any retail trader (most especially a newbie) trading in the present dispensation.

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  #45 (permalink)
Huaba
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@TradeTheTrade:

I feel like you should read another reply from this dude:

"I'm not saying it is not possible, I'm just saying that it is not worth it.

Trading is very simple, there are just three ways of making money: You are faster (HFT, gaming the queue), you are smarter (you have a research edge, better data, man power) or you cheat. Note that it is always about the relative advantage.



So yes, you have computing power...but your competition has more computing power. You may be very smart, but the competition employs ten guys like you.



Do you actually know how much effort it is to build and maintain a database for accurate realtime tick data over multiple instuments? It is usually a 2-3 man effort just for the data. No way you can replicate this on your own.



The only way for retail to make money is to find a market that nobody knows, nobody cares about or the big guys are not allowed to trade due to regulations or size constraints.



If you trade the mature markets you go head to head with the best of the best, which is absolutely not necessary to make a very decent living as a trader. Look for the low hanging fruit, don't battle for the high hanging ones with the top 1% of the competition.



I was a STIR trader for a long time and I employed all those "orderflow" concepts that are now sold by NoBSDaytrading, Jigsaw et al. ...and they work, of course they do. But in my days you used to have dozends of trades a day and it was rather easy to make a living. Today there is no way you could trade like this in the major markets and only those, who are doing it for 20 years already have enough experience to still pull the trigger on the few trades that remain."


I think it pretty much sums up everything.
Trade a market that you understand and have edge over other guys. You have no mentor so you've gotta take what you already have and transfer that to your desired skill set.
If you work in the service industry trade small cap service stocks. All those "orderflow" guys never talk about context which is probably 80% of any trade. But in order to understand context, you need to understand the market you are trading.

Do you know who trades treasuries? Why and how? What are the goal of a spreader and what are his triggers? In which way are treasuries linked to Eurodollars, FED funds, FX Forwards and why?
You have no idea, the only thing you have is the DOM and that "setup" you see...and that's why you have no confidence to hold winners.

If you try to get a hold on trading, there is the niche route which I already described and it will probably take you 5 years to become profitable, asumed that you do this besides your job.
If you have cash to spare and want to cut time, see what Gary Norden can do for you. He's a former market maker and offers paid mentorships. I have no first hand experience, but read his book and his experiences and tips are pretty much in line with how I trade today.

Good Luck

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  #46 (permalink)
Huaba
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Ah yeah, btw if anyone is interested what this guy ment with modelling queue position:

https://market-microstructure.institutlouisbachelier.org/uploads/91_7%20MOALLEMI%202014-12-paris-mm-queue-value.pdf

This is what you orderflow guys are up against and this even is the simple entry level stuff. In other words

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  #47 (permalink)
 Meklon 
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CannonTrading View Post
Asked my fellow broker, Joe Easton, whom I like his market read what he thinks and he shared the following:

Good job doing your homework and asking the right questions. Part of being a good trader is to think rationally and independently. It is correct to search for information and be skeptical of the answers and test to see if they work in your experience. Every trader will have slightly different opinions and experiences and that is what makes a market.
To me orderflow is an outdated concept. Since it is a fact traders can hide order sizes and cancel bid or asks at anytime already pokes holes in the idea that this information could be helpful. I realize there are some successful traders that use orderflow but in my experience I do not find it helpful. I personally believe in technical analysis because you are using information that is a factÖprices traded. You cannot cancel a position already filled and printed on the chart. Using information that has already happened to me is more useful than using information that may or may not happen.

I would like to expend on what you have said here because I don't think your statement above is correct (or partially incorrect):

Main problem with 99% of new (aspiring) traders is that they not only looking for a single "tool" (i.e. OF) to help them uncover the secret agenda of Mr. Market, but also missing on the fundamental understanding of how the market works. Specifically, the auction process of the market itself and what makes it tick (no pun intended). I find this alarming that the vast majority of intra-day traders (especially those who claim to use OF) donít realize that there are TWO types of participant (sellers and buyers) in the market Ė passive and aggressive. The OF concept in general should be divided into two segments: one for analyzing the traded volume (orders that already happened and what the Foot Print is designed to organize, show and highlight) and the second part for analyzing the orders that MAY happen (this is, essentially, the orders you see on the DOM and on the Heat Map, which is nothing more than an enhanced representation of the DOM using graphical interface and history).

Understanding the dynamics between both of these components (passive and aggressive traders) are crucial for proper utilization of the Order Flow.

Still, OF alone in my humble opinion is only one side of the puzzle and cannot be successfully used for trading without being combined with market context, awareness of pollical / financial events that may render any support / resistant or the OF pattern useless. Of course, proper design of the trading strategy (risk, size, rules for entering and exiting the trade, targets) are vital as well.

Hope this helps.

Mek.

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 nikotron1124 
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Have not been able to use as the inventors claim. Maybe it is of some value, but not to my trading.

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 Hulk 
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Meklon View Post
I would like to expend on what you have said here because I don't think your statement above is correct (or partially incorrect):

Main problem with 99% of new (aspiring) traders is that they not only looking for a single "tool" (i.e. OF) to help them uncover the secret agenda of Mr. Market, but also missing on the fundamental understanding of how the market works. Specifically, the auction process of the market itself and what makes it tick (no pun intended). I find this alarming that the vast majority of intra-day traders (especially those who claim to use OF) donít realize that there are TWO types of participant (sellers and buyers) in the market Ė passive and aggressive. The OF concept in general should be divided into two segments: one for analyzing the traded volume (orders that already happened and what the Foot Print is designed to organize, show and highlight) and the second part for analyzing the orders that MAY happen (this is, essentially, the orders you see on the DOM and on the Heat Map, which is nothing more than an enhanced representation of the DOM using graphical interface and history).

Understanding the dynamics between both of these components (passive and aggressive traders) are crucial for proper utilization of the Order Flow.

Still, OF alone in my humble opinion is only one side of the puzzle and cannot be successfully used for trading without being combined with market context, awareness of pollical / financial events that may render any support / resistant or the OF pattern useless. Of course, proper design of the trading strategy (risk, size, rules for entering and exiting the trade, targets) are vital as well.

Hope this helps.

Mek.

Good point. At first, no one knows anything. We (me included) came into this looking for a magical indicator. Coming from the programming background, I dreamt of writing a piece of code that would run on a co-located server and just cha-ching all day (visualize donald duck with $ symbols in his eyes). Then after a while, it dawns on you that for every buy there is a sell and then you spend the next few months scratching your head trying to figure out what people mean when they say they see buying or selling in the flow.

Aggressive vs passive orders is one of the most important concepts to understand. It is not always possible or easy to determine the aggressor. If a product spans multiple exchanges (like WTI, Brent etc. that trade on both Nymex and ICE), you will need to have your own calculations in place rather than rely on what the exchange disseminates. Understanding implied orders becomes really important if you truly want to determine the aggressor in this case.

For anyone interested, see the CME documentation: https://www.cmegroup.com/confluence/display/EPICSANDBOX/MDP+3.0+-+Trade+Summary+Order+Level+Detail


Quoting 
Trades with a Defined Aggressor
  • An aggressor is defined as any customer order that triggers a trade immediately upon entering the book.

Trade without a Defined Aggressor
  • There are two scenarios where a trade may not have a defined aggressor (tag 5797-AggressorSide=0).
  • When an aggressing customer order trades against implied orders, at least one Summary Level will not have a defined aggressor.
    • The Summary Level with an undefined aggressor type represents the customer orders that created the executed implied orders. Order Details are only sent for the customer orders. Any unreported quantity represents the participating implied orders. Side (buy and/or sell) are not defined.
  • Market Open or Re-Open after a Velocity Logic Event


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  #50 (permalink)
 Futuresnoob 
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To the Original poster I feel for you. You asked what you believed was a simple question and instead you opened up the trading version of Pandora's Box.


I've used order flow in my trading for about 2 year. I own both Jigsaw and Bookmap. I even own the first NoBSdaytrading course. Here are some things I've learned. I cannot trade orderflow and I definitely can't do it from a standalone DOM. The numbers moved to fast to remember what they did at which price. I use Bookmap like a hunter uses a scope. You don't lay out in a field all day with your eye glued to a scope. I use it to try and refine my entry on an area that I was interested in trading. I found that if I stare at Bookmap all day I will make up trades.

I will share with you what saved me. Understanding risk management and position sizing. Risk management has a few heads to it but I believe the most important is understanding that no single trade deserves enough of your account to kill you.(search my name and you will find my crack spread gone wrong). The very close second is not taking trades outside of your trading plan. If the volatility is too great and I cannot pare down my size enough to keep my loss per trade below my limit of about 1% of my account then I don't trade. Oh and journaling. Especially in the beginning. To me if you don't at the minimum track your trades to see what happened before and during the trade how will you know if you are following the setup you tested and what adjustments to make at the end of a sample set.

Remember there are a lot of ways to trade. Some work, most don't. Some curve traders here don't even use charts in the traditional sense. But that's a different rabbit hole. This thing called trading you've decided to do is a lot of hard work. It's a lot harder when don't have someone that is doing it successfully who is willing to hold your hand.

Jason

P.S. @Hulk what part of Texas are you from?

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  #51 (permalink)
 Oriole 
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traderpards View Post
I don't know if anyone's mentioned it yet but look up MBox on YouTube. [yt]https://www.youtube.com/channel/UCLKraR4UVif9dszy4DZLXtw[/yt]

This guy's system uses order flow and if there's a way to use order flow, it seems to me this is one way to make it work.

That guys seems to be onto something. It helps me that he posts live trades. Except he doesn't tell you how many he recorded and doesn't end up showing.

Disclaimer: I have no affiliation with this guy. I haven't even bought his system. What he says appeals to me though.

Iím pretty new and Iíve looked at a bunch of ready to trade systems/indicators and have zeroed in on Mike. I really like what he does and have considered purchasing his tools. The trades are indeed live, uncertain if account is live but he makes money. Iím reading the book ďTrades About to HappenĒ about the Wychkoff trading concept.

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  #52 (permalink)
 JonnyBoy 
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traderpards View Post
I don't know if anyone's mentioned it yet but look up MBox on YouTube. [yt]https://www.youtube.com/channel/UCLKraR4UVif9dszy4DZLXtw[/yt]

This guy's system uses order flow and if there's a way to use order flow, it seems to me this is one way to make it work.

That guys seems to be onto something. It helps me that he posts live trades. Except he doesn't tell you how many he recorded and doesn't end up showing.

Disclaimer: I have no affiliation with this guy. I haven't even bought his system. What he says appeals to me though.

Of course Mike will cherry pick his videos and charts to show what he wants you to see. I did notice that on his videos he doesn't provide any kind of trading disclaimer. I thought this was a pre-requisite of being a vendor with @NinjaTrader, who I thought did periodic audits of their vendors to ensure they comply to stuff like this.

Be cautious here, especially with a vendor that refuses a free trial of their product.

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 Oriole 
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JonnyBoy View Post
Of course Mike will cherry pick his videos and charts to show what he wants you to see. I did notice that on his videos he doesn't provide any kind of trading disclaimer. I thought this was a pre-requisite of being a vendor with @NinjaTrader, who I thought did periodic audits of their vendors to ensure they comply to stuff like this.

Be cautious here, especially with a vendor that refuses a free trial of their product.

Agree, I've intereacted with Mike lots of times via email. Always responsive and seems like a stand up guy. Things can always change, yes indeed.

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Huaba
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Seems like OP has already thrown in the towel after so much negative feedback. Might save him a couple of bucks in the end.

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  #55 (permalink)
 RDK91 
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ELche View Post
I went into the jungle and pirates of OF softwares out there. Spent K's of $$$$, no success . Now went back into the old as dirt crossing MAvg. with standard free indicators like RSI ,MAcd . ,123 tops ,double tops etc. You get the pic. As long as you stick to rules and have a low risk entry, you will make more than you lose.

Good luck and stay safe.

Go ahead and try adding the market internals + VIX and VWAP to your charts, they give very clear indication on what can happen in the markets (stock indexes).

Funny how many ES traders have never even heard of the market internals.

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 JonnyBoy 
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JonnyBoy View Post
Of course Mike will cherry pick his videos and charts to show what he wants you to see. I did notice that on his videos he doesn't provide any kind of trading disclaimer. I thought this was a pre-requisite of being a vendor with @NinjaTrader, who I thought did periodic audits of their vendors to ensure they comply to stuff like this.

Be cautious here, especially with a vendor that refuses a free trial of their product.

@bobwest - do you know why the @NinjaTrader tag from my post above was removed? It is relevant to the conversation regarding this vendor not having any disclaimer on their videos. NinjaTrader do complete regular audits on their vendors to ensure they are in compliance to their guidelines. I am curious why my post got edited and the tag removed. Glitch? Am I just not seeing it? Or was it removed upon request? It appears in this quote post, but not in the original.

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  #57 (permalink)
 bobwest 
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JonnyBoy View Post
@bobwest - do you know why the @NinjaTrader tag from my post above was removed? It is relevant to the conversation regarding this vendor not having any disclaimer on their videos. NinjaTrader do complete regular audits on their vendors to ensure they are in compliance to their guidelines. I am curious why my post got edited and the tag removed. Glitch? Am I just not seeing it? Or was it removed upon request? It appears in this quote post, but not in the original.

No idea. I've refereed it to @Big Mike. Appears to me to be a glitch of some kind, as there's just a blank space there.

Bob.

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 JonnyBoy 
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bobwest View Post
No idea. I've refereed it to @Big Mike. Appears to me to be a glitch of some kind, as there's just a blank space there.

Bob.

Yeah, no big deal. Just curious, especially when it appears when the post is quoted.

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 bobwest 
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I just realized how weird this is. After reading your last post, I went back to the original and quoted it, and look at this -- the "@" tag is there in the quote that I made just a minute ago, but is still missing from the original:


JonnyBoy View Post
Of course Mike will cherry pick his videos and charts to show what he wants you to see. I did notice that on his videos he doesn't provide any kind of trading disclaimer. I thought this was a pre-requisite of being a vendor with @NinjaTrader, who I thought did periodic audits of their vendors to ensure they comply to stuff like this.

Be cautious here, especially with a vendor that refuses a free trial of their product.

My guess is that there's some database issue. To be determined....

Bob.

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  #60 (permalink)
SunTrader
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IMO the only testing to put any faith in is forward testing.

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 Big Mike 
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bobwest View Post
I just realized how weird this is. After reading your last post, I went back to the original and quoted it, and look at this -- the "@" tag is there in the quote that I made just a minute ago, but is still missing from the original:



My guess is that there's some database issue. To be determined....

Bob.

Just a temporary caching issue. Tomorrow I'll delete the post cache, I'm already done for today. It happened because of all the changes I've been making.

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 Big Mike 
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I did it from my phone. Any further issues, please use changelog thread.
Big Mike View Post
Just a temporary caching issue. Tomorrow I'll delete the post cache, I'm already done for today. It happened because of all the changes I've been making.

Sent using the futures.io mobile app

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  #63 (permalink)
 YogaTrading 
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Futuresnoob View Post
To the Original poster I feel for you. You asked what you believed was a simple question and instead you opened up the trading version of Pandora's Box.


I've used order flow in my trading for about 2 year. I own both Jigsaw and Bookmap. I even own the first NoBSdaytrading course. Here are some things I've learned. I cannot trade orderflow and I definitely can't do it from a standalone DOM. The numbers moved to fast to remember what they did at which price. I use Bookmap like a hunter uses a scope. You don't lay out in a field all day with your eye glued to a scope. I use it to try and refine my entry on an area that I was interested in trading. I found that if I stare at Bookmap all day I will make up trades.

I will share with you what saved me. Understanding risk management and position sizing. Risk management has a few heads to it but I believe the most important is understanding that no single trade deserves enough of your account to kill you.(search my name and you will find my crack spread gone wrong). The very close second is not taking trades outside of your trading plan. If the volatility is too great and I cannot pare down my size enough to keep my loss per trade below my limit of about 1% of my account then I don't trade. Oh and journaling. Especially in the beginning. To me if you don't at the minimum track your trades to see what happened before and during the trade how will you know if you are following the setup you tested and what adjustments to make at the end of a sample set.

Remember there are a lot of ways to trade. Some work, most don't. Some curve traders here don't even use charts in the traditional sense. But that's a different rabbit hole. This thing called trading you've decided to do is a lot of hard work. It's a lot harder when don't have someone that is doing it successfully who is willing to hold your hand.

Jason

P.S. @Hulk what part of Texas are you from?


Thanks for the good words of encouragement !! Cheers.....

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  #64 (permalink)
 DavidBodhi 
Milwaukee, WI, USA
 
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I appreciate what some of the very experienced have said about order flow being useless at the retail level due to the paucity of actual data we have access to, however, the Jigsaw DOM has been very, very helpful to me.

I use 5-min charts and, when I see what looks like a setup on the chart, I hone in on the DOM and look for as ideal a jump-in point as I can manage. I also can't register the actual numbers because they move too fast, but I can see the little surges and try to use them to catch trades that don't come back against me at all, or very little.

Retail order flow has helped me. In fact, I am recently seeing the first consistent (though modest) rise in my equity curve, ever, though there are additional reasons for that.

Just my $.02

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 YogaTrading 
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DavidBodhi View Post
I appreciate what some of the very experienced have said about order flow being useless at the retail level due to the paucity of actual data we have access to, however, the Jigsaw DOM has been very, very helpful to me.

I use 5-min charts and, when I see what looks like a setup on the chart, I hone in on the DOM and look for as ideal a jump-in point as I can manage. I also can't register the actual numbers because they move too fast, but I can see the little surges and try to use them to catch trades that don't come back against me at all, or very little.

Retail order flow has helped me. In fact, I am recently seeing the first consistent (though modest) rise in my equity curve, ever, though there are additional reasons for that.

Just my $.02

An old horse trader once told me that the key to life is to find something that fits your style and you benefit from!!!!

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 datahogg 
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Just my opinion, but I think order flow is most effective for scalping and day trading.
I use the JS Dom and the Sierra foot print chart.

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 nikotron1124 
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Orderflow is a nice subject, but not really useful in actual trading.

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 Meklon 
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nikotron1124 View Post
Orderflow is a nice subject, but not really useful in actual trading.

Really??? That's quite a statement. You forgot to add "For myself".

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 bobc 
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nikotron1124 View Post
Orderflow is a nice subject, but not really useful in actual trading.

Well Niko, you have my attention.
How do you trade?

regard
bobc

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 nikotron1124 
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My trading is based on options where I can set my targets and my stops by using the right strikes based on my bullish, or bearish projection. For price discovery I have been using for a long time Rob Smith's approach, the "strat" You can follow him on Twitter @Rob in the black.

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  #71 (permalink)
 bobc 
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nikotron1124 View Post
My trading is based on options where I can set my targets and my stops by using the right strikes based on my bullish, or bearish projection. For price discovery I have been using for a long time Rob Smith's approach, the "strat" You can follow him on Twitter @Rob in the black.

Hi Niko
Thank you for your prompt response.I will have a look at Rob Smith.
Another question. How do you project a bullish/ bearish position for Gold in say Dec.?
regards
bobc

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SunTrader
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That settles that.

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 OpalDragon 
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I 100% agree with everything has said here.

IN MY OPINION / Viewpoint garnered from all my experience
Orderflow does not work -- unless you already have a good place to execute your trades from. A REALLY REALLY GOOD Place and a really really good reason to do so.

It CAN be used to fine-tune an entry in a good place to enter. << A real high probability -- real reason place to enter

2> AND SECOND AND MOST IMPORTANT >>>>
THE MOST IMPORTANT AND MOST INSANE THING THAT I FOUND OUT FROM STUDYING ALL THE ORDER FLOW THINGS IS THAT:

Real Order Flow Traders ARE NOT ORDER FLOW TRADERS AT ALL >>> they are MOMENTUM TRADERS!

LET ME REPEAT that incase some one didn't read that correctly >>>

They are MOMENTUM TRADERS.

I purchased the AXIA FUTURES video course that shows one of their traders going from s small contracts on the FGBL in London all the way up to 300 contract POSITION!

And all his talk about order flow this..... order flow that... bid blah blah bhah ask this ask that.... When I truly truly focused on him and started to watch what he was doing >>>
He was actually really just trading momentum and momentum only!

He talks about bids.... and he talks about asks... etc... but he really really not doing much with that... he is looking at breakdowns or breakouts and looking for a stream of contracts to keep coming in to the stream that created that trade...

That is what he is looking for....

So if you focus on some important areas....

then see if there is some kind of breakdown [ for shorts for example ] and you start hitting that area

and more and more contracts keep coming in supporting the break down -- you should be all good and see it the breakdown happen in real time -- with more and more orders come in -- until a real splash happens and the move is done..... and you exit..

then you just keep doing that... increasing your size after some time... until you get to 300 contracts per instrument.


Again -- he is momentum trader.

The videos I am talking about are available in the Jigsaw Trading Member section and they were called Trader Joe from 2 to 300.

You don't "have" to buy them -- you can see a ton of Axia Futures videos online/youtube.

And they are constantly talking bid this... bid that... It's bullshit -- they are momentum traders. 100%

They are just excellent at finding momentum and killing a trade if momentum does not come in. If momentum does not come in - They will kill the trade basically immediately...
Then if momentum does come in... they add lots and add lots and add... Depending on how big the account is. If just starting out -- add only one more...

If you have a bigger account you add a ton more... on ever little push.

I think they seem to add more one THE PUSHES than pullbacks -- I could be wrong there. I have to go watch the videos again -- but it looks like they add on the pushes of price -- not the pullbacks.

Which sounds counter intuitive -- but they go with the flow -- not try to do anything crazy.

That is my 2cents.....Hopefully this will save you a ton of bullshit. It took me forever to figure that out because of all their other jargon and bullshit of "pulling bids here... pulling asks there.... "
The whole pulling bids and asks I think is pretty much bullshit .... what matters is the orders traded and the momentum...

When I REALLY REALLY looked at what he was doing -- he was hardly using the pulled bids and offers. That was basically useless.

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SunTrader
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Yet another I can't you can't anecdotal post.

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 datahogg 
Knoxville Tennessee USA
 
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OpalDragon View Post
I 100% agree with everything has said here.

IN MY OPINION / Viewpoint garnered from all my experience
Orderflow does not work -- unless you already have a good place to execute your trades from. A REALLY REALLY GOOD Place and a really really good reason to do so.

It CAN be used to fine-tune an entry in a good place to enter. << A real high probability -- real reason place to enter

2> AND SECOND AND MOST IMPORTANT >>>>
THE MOST IMPORTANT AND MOST INSANE THING THAT I FOUND OUT FROM STUDYING ALL THE ORDER FLOW THINGS IS THAT:

Real Order Flow Traders ARE NOT ORDER FLOW TRADERS AT ALL >>> they are MOMENTUM TRADERS!

LET ME REPEAT that incase some one didn't read that correctly >>>

They are MOMENTUM TRADERS.

I purchased the AXIA FUTURES video course that shows one of their traders going from s small contracts on the FGBL in London all the way up to 300 contract POSITION!



And all his talk about order flow this..... order flow that... bid blah blah bhah ask this ask that.... When I truly truly focused on him and started to watch what he was doing >>>
He was actually really just trading momentum and momentum only!

He talks about bids.... and he talks about asks... etc... but he really really not doing much with that... he is looking at breakdowns or breakouts and looking for a stream of contracts to keep coming in to the stream that created that trade...

That is what he is looking for....

So if you focus on some important areas....

then see if there is some kind of breakdown [ for shorts for example ] and you start hitting that area

and more and more contracts keep coming in supporting the break down -- you should be all good and see it the breakdown happen in real time -- with more and more orders come in -- until a real splash happens and the move is done..... and you exit..

then you just keep doing that... increasing your size after some time... until you get to 300 contracts per instrument.


Again -- he is momentum trader.

The videos I am talking about are available in the Jigsaw Trading Member section and they were called Trader Joe from 2 to 300.

You don't "have" to buy them -- you can see a ton of Axia Futures videos online/youtube.

And they are constantly talking bid this... bid that... It's bullshit -- they are momentum traders. 100%

They are just excellent at finding momentum and killing a trade if momentum does not come in. If momentum does not come in - They will kill the trade basically immediately...
Then if momentum does come in... they add lots and add lots and add... Depending on how big the account is. If just starting out -- add only one more...

If you have a bigger account you add a ton more... on ever little push.

I think they seem to add more one THE PUSHES than pullbacks -- I could be wrong there. I have to go watch the videos again -- but it looks like they add on the pushes of price -- not the pullbacks.

Which sounds counter intuitive -- but they go with the flow -- not try to do anything crazy.

That is my 2cents.....Hopefully this will save you a ton of bullshit. It took me forever to figure that out because of all their other jargon and bullshit of "pulling bids here... pulling asks there.... "
The whole pulling bids and asks I think is pretty much bullshit .... what matters is the orders traded and the momentum...

When I REALLY REALLY looked at what he was doing -- he was hardly using the pulled bids and offers. That was basically useless.

Yes , you are correct.. It works well with a good DOM (JS) or footprint (Sierra) easily making $1000 per day .

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  #76 (permalink)
 OpalDragon 
Des Moines, Iowa
 
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datahogg View Post
Yes , you are correct.. It works well with a good DOM (JS) or footprint (Sierra) easily making $1000 per day .

Well that is good if it works for you.... but those real traders don't say "make $1000 per day" because in reality if your position sizing should be increasing weekly as your account grows.
So some days you are trading 2 or 3 then next few weeks 3 to 5 then some other time later 5 to 8 etc.. etc..


I guess you were being sarcastic or something...

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  #77 (permalink)
 OpalDragon 
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SunTrader View Post
Yet another I can't you can't anecdotal post.


No -- I didn't say that -- I CLEARLY SAID >>> that SOME OF THOSE TRADERS AT AXIA FUTURES are making money with the DOM.

THEY 100% ARE >>> AND I CLEARLY went into detail of how they do it.

If you can think like them or you like their method then PERFECT... go do that and focus on momentum - not on bids etc... and other bullshit.....

That is what I meant from my post.

I didn't really like it -- but if you use it correctly -- it should work.... That is what I meant. Cheers.

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 spideysteve 
Fort McMurray, AB Canada
 
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Thatís interesting @OpalDragon. I was going to buy the trader joe videos .. thanks for that

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  #79 (permalink)
 OpalDragon 
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spideysteve View Post
Thatís interesting @OpalDragon. I was going to buy the trader joe videos .. thanks for that


Well Spidey -- they are still .... "worth it..." IF .. AND ONLY IF... you sort of know that he is really really focusing on Momentum and finding it thru the X-TRADER DOM.

If you want to see that -- then they are worth it. Depends on you...

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 Big Mike 
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[mod]

Everyone, please keep it civil. No yelling, no angry posts. If you can't get your point across without them, then better to not post.

We are a community full of respect and helpful traders, don't lose sight of that. It's far more difficult to teach than to judge, but the time is usually worth it -- plus, karma.

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  #81 (permalink)
 matthew28 
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OpalDragon View Post
I purchased the AXIA FUTURES video course that shows one of their traders going from s small contracts on the FGBL in London all the way up to 300 contract POSITION!

And all his talk about order flow this..... order flow that... bid blah blah bhah ask this ask that.... When I truly truly focused on him and started to watch what he was doing >>>
He was actually really just trading momentum and momentum only!

He talks about bids.... and he talks about asks... etc... but he really really not doing much with that... he is looking at breakdowns or breakouts and looking for a stream of contracts to keep coming in to the stream that created that trade...

"looking for a stream of contracts to keep coming".... so that would be a flow of orders. To me that sounds a lot like, wait for it order flow
I haven't bought an Axia course but I have watched a number of their YouTube videos and they constantly talk about Bid or Offers holding or refreshing and their videos show a screen full of DOMs. All a DOM shows is the flow of orders traded and the order book ie the two raw components of order flow. How could they not be using order flow if that's what they look at, they haven't just got them up on their screens to look 'Pro' or 'cool' in videos.

Even only watching a few of the free videos I know they are news traders, they trade events, and most of their trades seem to be breakout, momentum trades ie they buy because the market is strong or sell because it is weak. Even trading large size they are not trying to buy the low of the day or sell the high of the day like the general retail trader trying to turn the market round with their one lot. They are taking the path of least resistance and making money (a great deal of it by all accounts).

I find the fact that you don't recognise any of that as order flow surprising and wonder what you believe order flow actually is. And also wonder why you bought their course in the first place as what you are describing sounds very similar to the snippets one sees in their free videos (though presumably much more comprehensively explained). I assume you would have done some investigation of them beforehand by at least watching those free videos before signing up for the course, yet the contents of the course seems to have been not at all what you were expecting and obviously a disappointment to you. I also wonder how much time and effort you have actually put in yourself to learn from what they teach and really work hard at applying it and improving yourself, before you wrote it off as rubbish.

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  #82 (permalink)
 ninjus 
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matthew28 View Post
"looking for a stream of contracts to keep coming".... so that we will be a flow of orders. To me that sounds a lot like, wait for it order flow
I haven't bought an Axia course but I have watched a number of their YouTube videos and they constantly talk about Bid or Offers holding or refreshing and there videos show a screen full of DOMs. All a DOM shows is the flow of orders traded and the orderbook ie the two raw components of orderflow. How could they not be using orderflow if that's what they look at, they haven't just got them up on their screens to look 'Pro' or 'cool' in videos.

Even only watching a few of the free videos I know they are news traders, they trade events, and most of their trades seem to be breakout, momentum trades ie they buy because the market is strong or sell because it is weak. Even trading large size they are not trying to buy the low of the day or sell the high of the day like the general retail trader trying to turn the market round with their one lot. They are taking the path of least resistance and making money (a great deal of it by all accounts).

I find the fact that you don't recognise any of that as orderflow surprising and wonder what you think orderflow actually is. And also wonder why you bought their course in the first place as what you are describing sounds very much similar to the snippets one sees in their free videos (though presumably much more comprehensively explained). I assume you would have done some investigation of them beforehand by at least watching those free videos before signing up for the course, yet the contents of the course seems to have been not at all what you were expecting and obviously a disappointment to you. I also wonder how much time and effort you have actually put in yourself to learn from what they teach and really work hard at applying it and improving yourself, before righting it off as rubbish.

And lets not forget to ask how price can have momentum (mass x velocity).
How do we get the mass of price?

volume / sec is our velocity I suppose.

But mass?

By momentum then we might mean the ratio of market to limit orders.

Sounds like order flow to me.


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  #83 (permalink)
 Schnook 
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Many people in this thread seem to be trying to reduce this discussion down to a binary yes or no, all or none type of answer. Unfortunately it's not quite that simple.

As several recent participants (including, I believe @OpalDragon) have tried to point out, orderflow is often used not as a primary tool but as a supplemental tool.

A breakout or momentum trader, for example, may use orderflow to provide confirmation for entries and exits. Indeed this is quite common among price action traders as well. They may identify a level on a price chart where they expect to see a reaction, and then study the volume, delta, and the movement of bids and offers to help them decide whether and how to trade the level.

I've done quite a bit of work with cumulative delta, and one of the most important early lessons I learned was that context is absolutely critical. All of my early attempts at developing a systematic (algorithmic) strategy based on delta, footprints, or order flow alone failed because I found that certain setups only work in trending markets, others only work in consolidations, etc. I'm sure that countless others have had similar experiences. Many probably convinced themselves that orderflow just does not and cannot work, while others dug a little deeper and realized that, in certain markets, under certain conditions, orderflow can become a very valuable tool.

Using orderflow as your only tool will probably lead to failure. Using it as a supplemental tool may dramatically improve your performance, or even turn a losing strategy into a winner by filtering out false or weak setups.

A master carpenter does not build a high-end cabinet using only a mitre saw. the same concept may apply here with orderflow. You don't have to embrace it, but I wouldn't be so quick to dismiss it either.

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  #84 (permalink)
 bobwest 
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ninjus View Post
And lets not forget to ask how price can have momentum (mass x velocity).
How do we get the mass of price?

volume / sec is our velocity I suppose.

But mass?

By momentum then we might mean the ratio of market to limit orders.

Sounds like order flow to me.



Everyone who mentions momentum in trading means how fast is price changing.

If we were physicists we would call it velocity. But we're not physicists, so it's "momentum."

The terminology gets me sometimes too, but that's trading life.

(No actual point to this post, except I just got an impulse to make it when I saw the physics formula. Carry on. )

Bob.

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  #85 (permalink)
 Meklon 
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matthew28 View Post
"looking for a stream of contracts to keep coming".... so that we will be a flow of orders. To me that sounds a lot like, wait for it order flow
I haven't bought an Axia course but I have watched a number of their YouTube videos and they constantly talk about Bid or Offers holding or refreshing and there videos show a screen full of DOMs. All a DOM shows is the flow of orders traded and the orderbook ie the two raw components of orderflow. How could they not be using orderflow if that's what they look at, they haven't just got them up on their screens to look 'Pro' or 'cool' in videos.

Even only watching a few of the free videos I know they are news traders, they trade events, and most of their trades seem to be breakout, momentum trades ie they buy because the market is strong or sell because it is weak. Even trading large size they are not trying to buy the low of the day or sell the high of the day like the general retail trader trying to turn the market round with their one lot. They are taking the path of least resistance and making money (a great deal of it by all accounts).

I find the fact that you don't recognise any of that as orderflow surprising and wonder what you think orderflow actually is. And also wonder why you bought their course in the first place as what you are describing sounds very much similar to the snippets one sees in their free videos (though presumably much more comprehensively explained). I assume you would have done some investigation of them beforehand by at least watching those free videos before signing up for the course, yet the contents of the course seems to have been not at all what you were expecting and obviously a disappointment to you. I also wonder how much time and effort you have actually put in yourself to learn from what they teach and really work hard at applying it and improving yourself, before righting it off as rubbish.

Thank you Matthew for a well balanced commentary. You have hit the nail on the head pretty much for every point I was planning to respond with. Many people dismissing one or another concept, method or a strategy just because it does not match their personality or because they have not placed a sufficient effort into learning and understanding it. It's is mind boggling. I can understand that a very narrowed approach can lead to this type of conclusions but this is exactly what separates traders into those who will make it in this business because they "understand" the context of the market and those who simply looking for another Red / Green Buy / Sell indicator.

The truth of the matter is that Order Flow is just another tool and if you are a professional, you need many tools in in your tool box. I have posted before on this thread that OF consists of TWO main components: Traded volume and An order Book (Passive / Aggressive market participants). DOM is simply an analogy of a B&W Photography that combines BOTH these channels of information and just like with B&W photography one truly needs to be a master to depict and reflect the depth and complexity of what he sees through the lens of his camera. Yes, the new trillion pixel color digital cameras are very nice and expensive, but if one lacks the knowledge and talent to use it properly it is nothing more than shiny toy. While even the primitive B&W camera in hands of professional photographer will yield phenomenal results.

Yes, we are all "momentum" traders. Doesn't matter if we use Order Flow or not. I have not yet met a consistently profitable trader that only does reversals. On a long run it NEVER works. We all strive to find the trend and ride it simply because it dramatically increases our chances of a successful trade. And if one knows how to identify these signals of momentum using the DOM (aka Order Flow) he will have much better chance of success than the one simply relying on the indicator and wating for a green light to flash.

People have a tendency to make things complicated while they trade rather than simply understanding the mechanics of the market. I know a very successful person who thaught himself OF by simply looking at the action for almost 2 years, replaying the tape, Foot Print and DOM after each session and now this guy makes millions by trading only ONE (!) market - CL. No expensive software or Guru's that charge thousands of dollars.

Yes, it can be done. Putting the time and effort into it - whole another story.

Cheers,

Mek.

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  #86 (permalink)
 OpalDragon 
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Schnook View Post
Many people in this thread seem to be trying to reduce this discussion down to a binary yes or no, all or none type of answer. Unfortunately it's not quite that simple.

As several recent participants (including, I believe @OpalDragon) have tried to point out, orderflow is often used not as a primary tool but as a supplemental tool.

A breakout or momentum trader, for example, may use orderflow to provide confirmation for entries and exits. Indeed this is quite common among price action traders as well. They may identify a level on a price chart where they expect to see a reaction, and then study the volume, delta, and the movement of bids and offers to help them decide whether and how to trade the level.

I've done quite a bit of work with cumulative delta, and one of the most important early lessons I learned was that context is absolutely critical. All of my early attempts at developing a systematic (algorithmic) strategy based on delta, footprints, or order flow alone failed because I found that certain setups only work in trending markets, others only work in consolidations, etc. I'm sure that countless others have had similar experiences. Many probably convinced themselves that orderflow just does not and cannot work, while others dug a little deeper and realized that, in certain markets, under certain conditions, orderflow can become a very valuable tool.

Using orderflow as your only tool will probably lead to failure. Using it as a supplemental tool may dramatically improve your performance, or even turn a losing strategy into a winner by filtering out false or weak setups.

A master carpenter does not build a high-end cabinet using only a mitre saw. the same concept may apply here with orderflow. You don't have to embrace it, but I wouldn't be so quick to dismiss it either.


That's actually what I meant.... and better explained... Thanks Schnook - and great MjŲlnir on the profile pic.

There is value derived from the videos of the 2 to 300 trader that I was talking about .... but it is not 100% like they are talking about.

It is more how I am talking about. You have to put it in the context of Sustained Order Flow Velocity.... I never really liked the term momentum either -- because price doesn't have a mass so to speak.

Unless -- maybe -- we give it a theoretical mass value to it so that we can then start applying classical mathematical formulas to it and see if they provide any value.

Nothing says I can't give a "tick" a let's say 1 Gram theoretical value.....

There is nothing that says that is really illegal. So we can give it 1 Gram of completely of theoretical mass and then start running formulas on it.
But the problem with that is that you have to assume that classical physics apply to price and ticks movement.

It would be kind of interesting to test if it would apply in some way. >Shrug<

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  #87 (permalink)
 nikotron1124 
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bobc View Post
Hi Niko
Thank you for your prompt response.I will have a look at Rob Smith.
Another question. How do you project a bullish/ bearish position for Gold in say Dec.?
regards
bobc

Currently I am trading the Grains and the Crude Oil, but I will take a look at Gold. You have
to study the Monthly, Weekly, Daily, and Hourly candle formations according to Rob Smith's
approach. Basically, you have similar color candles (red, or green) across these time frames,
is called TFC for Time Frame Continuity and the candles better be in agreement either for
bullish, or bearish projection. Looking at XAUUSD (Gold/US Dollar) seems that Gold is approaching
a top. Hope it helps. Maybe, by looking up Rob Smith's videos on youtube, could help you
get the concept. He has a video called "The greatest story ever sold" that gives a good picture
of his method. Have fun.......

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  #88 (permalink)
 kingfish8877 
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nikotron1124 View Post
My trading is based on options where I can set my targets and my stops by using the right strikes based on my bullish, or bearish projection. For price discovery I have been using for a long time Rob Smith's approach, the "strat" You can follow him on Twitter @Rob in the black.

thanks for introducing me to rob smith, took a look his videos, was very impressed initially, then realized that it could be a different story to actually trade his theory.

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 YogaTrading 
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kingfish8877 View Post
thanks for introducing me to rob smith, took a look at his videos, was very impressed initially, then realized that it could be a different story to actually trade his theory.

Don't know if you are aware that one of the members here on Fut. io wrote an indicator to help with Robs Smith theory of Time Confluence,
I do not trade his system, but I will tell Time Confluence is a very interesting gauge of what is happening in a very precise moment...when all 4 time periods agree. There is a level of confidence that comes into play.

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  #90 (permalink)
 nikotron1124 
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kingfish8877 View Post
thanks for introducing me to rob smith, took a look his videos, was very impressed initially, then realized that it could be a different story to actually trade his theory.

Yes, you are absolutely right. It is very challenging to trade his method, BUT with the right time frames and some exposure to this method on a steady basis you will discover that once you have (what he calls) a "RevStrat" you practically have an almost 100% trade setup with very well defined exit points, just in case something really major shook up the market. Of course, you can trade what he teaches in his course, but this "RevStrat" setup is (almost over 98%) a success. Getting the time frames from the 15 minute up to monthly line up is a sure banking success.
The challenge is to stay away from any indicator (at least at the beginning) so as to not bias in any way your trade selection. Now, if you know about options and their almost infinite way of setting a trade using them, makes you decision to enter a trade much, much easier and less agonizing. Wishing the very best in your trading. Remember, one has to walk before one can run.

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  #91 (permalink)
 TWDsje   is a Vendor
 
 
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YogaTrading View Post
Don't know if you are aware that one of the members here on Fut. io wrote an indicator to help with Robs Smith theory of Time Confluence,
I do not trade his system, but I will tell Time Confluence is a very interesting gauge of what is happening in a very precise moment...when all 4 time periods agree. There is a level of confidence that comes into play.

So I've spent a lot of time on the time confluence thing, and wrote some of the indicators for it. Over the past 3 weeks or so I maybe had 3 losing days with it? But once again like everything it's not a silver bullet. When you get a reversal and all the domino's start falling down it goes a long ways towards telling you how far things can go. But ultimately it relies on trend and if you don't get that trend it can just slice you up. You need strong runners for it to work out. My back testing and results suggest that you need a lot more than that. In the end it always comes down to generating more edge than your competition. Timeframe continuity is kind of too obvious. So it ends up being something that you should absolutely know and incorporate, but that will probably just get you to break even on its own.

And it's the same thing with order flow. The one advantage order flow might have is that it's a lot harder to generate an algorithm, find historical data, and run a backtest on everything that an order flow trader looks at. There may be less order flow traders than there are other methods right now, but there's still enough. You still have to find something unique that gives you enough of an edge on everyone else to generate excess returns.

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  #92 (permalink)
 phantomtrader 
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TWDsje View Post
So I've spent a lot of time on the time confluence thing, and wrote some of the indicators for it. Over the past 3 weeks or so I maybe had 3 losing days with it? But once again like everything it's not a silver bullet. When you get a reversal and all the domino's start falling down it goes a long ways towards telling you how far things can go. But ultimately it relies on trend and if you don't get that trend it can just slice you up. You need strong runners for it to work out. My back testing and results suggest that you need a lot more than that. In the end it always comes down to generating more edge than your competition. Timeframe continuity is kind of too obvious. So it ends up being something that you should absolutely know and incorporate, but that will probably just get you to break even on its own.

And it's the same thing with order flow. The one advantage order flow might have is that it's a lot harder to generate an algorithm, find historical data, and run a backtest on everything that an order flow trader looks at. There may be less order flow traders than there are other methods right now, but there's still enough. You still have to find something unique that gives you enough of an edge on everyone else to generate excess returns.

Good analysis. There's also an increasing element of randomness in all the markets which is why, at best, most are just breaking even. Trend and steady buying/selling which you can see on the DOM is probably the most important thing right now. The days of just looking for typical DOM setups are over. It was nice while it lasted though!

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  #93 (permalink)
 joe s 
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I have been looking at order flow more now and watching videos to see
if I want to use it more in my trading

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  #94 (permalink)
 RickW00716 
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Has anyone used Jigsaws Auction Vista to assist in orderflow trading?

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  #95 (permalink)
 spideysteve 
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RickW00716 View Post
Has anyone used Jigsaws Auction Vista to assist in orderflow trading?

Iíve used it. To me it hasnít been very helpful. Just my own opinion of course

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 hadamkov 
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RickW00716 View Post
Has anyone used Jigsaws Auction Vista to assist in orderflow trading?

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.

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TradeTheTrade View Post
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

I would agree with a lot of it.

Absorption - This is a valid concept but it's contextual. For example, market pulls back, it takes 200 contracts to push down through each level and then 2500 sell into a level and it can't move down. It will not work all the time - but it's an R:R trade - stop is small and potential is new highs. Won't work in a directionless market or a fast news driven one
Another case of absorption - market pops up out of a 2 hr range 5-6 ticks and suddenly all buying is absorbed - classic headfake in a slow sloppy market.

But what do people do? They create a 1 rule trading system to "always fade absorption" regardless of market state or context. All absorption means is that buying or selling is no longer having impact at the moment. Wait for some people to puke to get in if you need additional confirmation.

A lof of the professional use of order flow is momentum bas