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I hope the charts and comments below are somewhat helpful. I rely mostly on what I have learned from Al Brooks. I especially like the encyclopedia of chart patterns.
But I have two other charts I like to use in addition to the candle chart. They are shown below.
I have NT8, love it. It comes with footprints and other order flow tools. I also own Jigsaw. Never could figure it out. I studied for several weeks the Footprint course from Axia from 2017. Interesting, but IMO not worth the money unless you have more money than you need and don't mind forking out 2 or 3 thousand bucks. Jigsaw has Footprint now but it not work with NT8 as far as I last heard. I think the Axia course for Jigsaw might have been cheaper. BUt you need to buy Jigsaw. I'm glad Ninja provides this stuff for free.
Hope I don't piss any body off; just tossing out my opinion. Thanks.
Absolutely agree with you, it's mostly a marketing nonsense.
Nothing that is available to retail traders in terms of order flow visualisation has any kind of predictive powers.
If someone want to hide their large orders, they can split it into a mixture of thousands smaller limit and market orders, spread all over large ranges, buying highs, buying lows, buying in the middle, sometimes selling to disguise and doing so not only using front month contract... Generally good luck in spotting this with all those heatmaps, consolidated tapes and footprints
You've divined what the correct answer is. There's nothing "generic" that will be predictive,
and my approach to prediction involves extreme analytics techniques for trade durations from 1 minute perhaps out to 5 minutes only.
I'm also something of an expert on Order Flow (and that means Market Depth Analysis) as well as T&S Trade Flow analysis. None of it is easy, and interpretation is highly dependent upon the
basic personality of each futures market.
For short-term trading, believe it or not, Market Maker size can be measured, and "pushes" the
market away from it. It makes sense, if you think about it. Market Maker drives the markets,
and not primarily the Retail players. Retail players simply "chase" the market, by BUYing when
an up price trend is perceived; and SELLing when a down price move is seen; hoping the market
will move far enough for the chase trade to be profitable.
But Market Maker really moves the market. Consider the market is moving UP; and so MM will
need to INSERT volume at a higher BID price, while at the same time REMOVING volume on the
ASK side. If at the moment of that BID Insertion event; you compare volume with the inside ASK side
you will find that the BID is reliably higher than the ASK; on an uptrend.
What's happening here is that since MM is heading higher, ANY retail sellers SHE will buy from, and
then what was bought is then up-valued as MM muscles the market's BID higher. So having larger BID
insertions as the price rises, maximizes the capture of any Retail Sellers whose inventory they
simply scoop up; and push to a higher price, with no risk at all.
The difficult thing is to actually Measure this "pressure" and I'd suggest maybe you find a good
developer who could implement a theory like this; preferably, I'd recommend, using NinjaTrader 8 and using a "raw" unaggregated Market Depth feed, such as Rithmic. One
easy way to get that is through a LeeLoo partnership and NT8.
In the end, there are no generic methods; and the type of analysis I'd suggest is highly tuned
for a specific market, such as the very dangerous NQ or MNQ contract. But if you can master
prediction, and are nimble enough; "there's Gold in them thar Hills" LOL
But Order Flow, which I call Market Depth Analysis, is where the predictive information lives.
Problem is, digging it out is like looking for gold nuggets in your back yard.
I spent a lot of time trying to master order flow. In my opinion it only works with thicker correlated markets like treasuries.. There were a couple setups that worked 50% of the time, and if you could limit your losses it was profitable. One of those strategies was breakouts, you could hit them with more precision with order flow in the treasuries. However, I eventually learned that the best way to trade treasuries (for me, at least) was via spreading, and it can be done pretty effectively even without order flow.
Thanks for your post. Orderflow is a way to view the market. There will always be iceberg orders to flip you out, and range spikes that can happen anytime. There is a large number of floor traders that have survived the transition to the screen. A lot did not. Orderflow is one tool you can use to trade. It has pros and cons, just like everything else. With that said, you need to find your own way to trade and tools that suit your brain. That's the journey every trader has to make. That's not the easy part at all. Many successful traders who have come off the floor use traditional technical analysis, volume or market profile, or combinations of both. You're best placed to find and follow credible traders and see if their way appeals to your thinking. There is no right or wrong. If I were starting again, I would seek out investigating different styles from CREDIBLE traders - there are not many compared to ones that are not. Try Linda Raschke, Anthony Crudellli, Axia Futures, Jim Dalton, and many others. Loads of material on the net and on YouTube. All different styles. Have a look, see what appeals, and then reach out to them. All of them can offer educational material or resources. There are paid courses, but also a lot that exists as free material as well. Good luck!!
Because markets are competitive it is extremely difficult to build a consistent edge based purely on technical data. Our ability to predict future price movements based on past market behavior is extremely limited if it is possible at all. That's just the nature of the game as everyone is trying to find inefficiencies there.
Now there are certainly some advantages to order flow in this respect. It is less common. There's far more people watching price than there are watching order flow. It is difficult to backtest order flow especially when we're talking about depth of market. So there's probably going to be more inefficiencies to find with order flow than there are purely with price. There was a time when order flow was new, and retail traders built many famous successful systems with it. Today these tools are far more common, and it appears that much of that edge has been mined away by robots.
Despite this I still find order flow to be an essential tool. Order flow gives you a much better idea of what actually happened. That might not tell you the future, but it at least gives you a better picture of current conditions. Price alone is so ineffective compared to order flow at describing the current market state that I really don't see how people trade without it. To really be profitable though you'll need a further informational advantage.
Trading: nq, es, Hype cool runner Ipo's months out short into lockup expirations. UVXY, TSLA options
Posts: 24 since Feb 2016
Thanks Given: 3
Thanks Received: 60
I find some of the volume/order flow tools useful. I scalp nq and es and I use the volume profiles right side orientation on heat or delta in conjunction with the market depth map. I also use the nt8 dom with an additional column to the right with volume. That gives you the levels with a buy sell proportion bar in real time just to the right of the dom price levels. I'm primarily a very quick price action trader and I do find those all helpful. Like any thing one has to get used to using them and seeing certain set ups. NQ is so fast I find there are fewer games with flashing size to push price around etc., especially when action is quick. Over time you sort of see the next thing or level where orders should tend to come in. Those tools both help you to learn then confirm when that's happening.
When they studied chess grand masters they learned that they saw the board, the pieces and the strategies differently over time. I find that to be true with traders as well. I might find value in the tools another may not. I may not of found value in them last year and may not next year. One has go with what one see's, works for them at the time. Those tools, while not a panacea or holy grail by any means, help me see the market at the moment. Traders see differently and what they see changes over time. Any strat, understanding, opinion is one perspective snapshot in time, including this.
Observe, adapt, grow, change, evolve or perish. Biological law of species (traders) survival.
If x occurs, do x1. If y occurs do y1. Imagine different scenarios, take the one that confirms. Imagine the high probability scenario first, you may not have time to imagine the second. It helps to know the high probability scenario unfolding. There is always something leading, correlating, find those.
I'm just curious if you have compared your V.P. w/heat, delta, market depth map tools against Bookmap? Of course, those stock tools on NT8 are "freeish" compared to Rithmic Bookmap.
You inspired me to do some sim testing using a 10/10 tick on a 5 sec. NQ chart. I was a little surprised not getting stopped out very often. Of course that was on a sim. I do like the short duration trades.
I tried multiple times trading the MES with tight stops, but to no avail. Used a 233 tick chart. This went better on the NQ. My challenge would be to not fall prey to my tendency of looking for a trade under every rock.
I'm not so long in the industry, ~22years, but in my view it is how you define order flow. Also the market you trade, your time frame, and available risk capitol are major factors in my opinion. I trade Futures, focus on 2 products NQ and ES and trade intraday.
Sure "orderflow" is a buzz word as was "supply and demand" and therefore lots of vendors jump on those buzz words to sell their wares. IMHO that is pretty much the whole NT business model. I always ask myself, if the tool is so great and makes so much money, why are they selling it and not just trading it? However, in my opinion there are some good tools out there which can be used to help. fore example I use the Jigsaw DOM (not sure if i can say that or not? sorry if not Mike) Market Profile, volume profile, VWAP, cumulative delta and relative volume these are the only things on my charts. In my opinion those are order flow but to many they may not be. Nothing basic has changed with the markets in the 35 years. The market state changes all the time, this year for example just look at the VIX! But the markets only go up or down period. Each trade you have a 50/50% probability on the very next trade. I strive to manage risk and trade probabilities to give myself as many trades in the dataset as possible which will allow my edge to manifest it's self and achieve consistent profitability.
again these are just my thoughts and opinion.
good luck and trading.
