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Is anything better than order flow?


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Is anything better than order flow?

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  #1 (permalink)
Trader709
Perth Australia
 
 
Posts: 2 since Jan 2022
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Hi All,
Does anyone know any better way than orderflow technical analysis in financial markets ?
Thank you kindly,
Traderr

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  #2 (permalink)
El Duderino
Newark, NJ
 
 
Posts: 2 since Aug 2022
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Understanding market dynamics using order flow is probably the most difficult thing to master in trading, but as the philosopher Spinoza put it: "All things excellent are as difficult as they are rare."

To shift to a more contemporary metaphor, from the film "The Big Lebowski": order flow is the rug that ties the room together.

In my opinion, anyone (like me, until recently) trading intraday without taking order flow into account is flying blind.

So, short answer: no.

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  #3 (permalink)
RickM
Brisbane
 
 
Posts: 11 since Dec 2018
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Trader709 View Post
Hi All,
Does anyone know any better way than orderflow technical analysis in financial markets ?
Thank you kindly,
Traderr

Hi Trader709

I think the main point is there are two ways to trade the markets. Predict where price is going or React when price moves somewhere.
After 20 years in this game, I think the best way forward is to react after price has moved so orderflow is the better option.

As an example, if the Nasdaq index spikes up with large volume higher than 500 units in a 5 second block, you have a 90% chance it will move a few more points higher before collapsing because the Asks have been removed from the order book and the imbalance can't be substained unless volume keeps increasing.

My point is price at any point on the chart does not offer the trader the odds of moving up or down 50% of times. On ocassions, there is a 90% chance it can't move one way - therefore orderflow strategy's in my opinion do offer the best chance of profitability.

Cheers

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  #4 (permalink)
lightsun47
Toronto, Canada
 
 
Posts: 292 since May 2018
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El Duderino View Post
In my opinion, anyone (like me, until recently) trading intraday without taking order flow into account is flying blind.

I agree 50%.

I myself use order flow, but for most of the times, the values I see are used just to 'push' the prices either between EMAs (which I use and works perfectly) OR between actual support/resistance areas. Remember I used the word: For the most part.

Then comes the times when the actual breakouts do happen, but again, almost always, we can only know once the price actually moved ahead based on the numbers (to confirm it is not just moving between small areas and rather it made large moves).

E.g. Yesterday. 2022-08-26: Feds announced increased hikes in coming weeks/months. The markets tanked the whole day. There is almost no way to know just from the order flow at time of news event that the actual intention will be to move all the way down 150+ points. You will have to look at the support areas to determine whether the prices will break this area to go next or not, not just based on positive and negative Delta numbers.

Therefore, order flow works yes of course, but it is not something which is 100% guaranteed/required. What is required though is the actual knowledge and experience as to how and when the anticipated breakouts/moves will be expected to happen.

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  #5 (permalink)
 Nasdaq1517 
Honolulu Hawaii
 
Platform: Ninja
Trading: ZN
 
Posts: 69 since Oct 2021
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Where does a beginner go to learn order flow?


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  #6 (permalink)
RickM
Brisbane
 
 
Posts: 11 since Dec 2018
Thanks: 3 given, 19 received

Don't go looking at youtube videos, most just talk about levels without explaining the interaction between passive limit orders and aggressive market orders.

I can't help you where to look but a good starting point is just to watch the DOM next to a 1 minute chart for weeks and weeks. Its the imbalance of orders verus the imbalance of volume is what order flow is all about.

Good luck

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  #7 (permalink)
 Nasdaq1517 
Honolulu Hawaii
 
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RickM View Post
Don't go looking at youtube videos, most just talk about levels without explaining the interaction between passive limit orders and aggressive market orders.



I can't help you where to look but a good starting point is just to watch the DOM next to a 1 minute chart for weeks and weeks. Its the imbalance of orders verus the imbalance of volume is what order flow is all about.



Good luck



Much appreciated I will just start studying !


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  #8 (permalink)
 giftedmd 
Memphis, Tennessee
 
Experience: Master
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Trader709 View Post
Hi All,
Does anyone know any better way than orderflow technical analysis in financial markets ?
Thank you kindly,
Traderr

I do not use order flow at all in my strategy and I am profitable. Only price action and volume (in much more nuanced and complex way than most see it). Order flow would not really add anything to my strategy with the type of entries and exits I use. Is it "better" to use order flow? I guess that depends on the trader and the way they personally view the markets.

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  #9 (permalink)
 mwf2220 
Abu Dhabi United Arab Emirates
 
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Nasdaq1517 View Post
Where does a beginner go to learn order flow?

I found the articles here - https://www.jumpstarttrading.com/order-flow-trading/ - to be quite helpful, and the webinar that Gomi did on his indicator was also very useful to me. He focused quite a bit on the different elements of his footprint charts, but the concepts that underpin them should help you better understand the processes -

I'd also recommend checking out these threads on FIO:





Hope that helps.




Unfortunately, I'm no expert, so I was hoping that @RickM might explain the bolded part of his comment below. I feel like I have a relatively good understanding of the interaction between market and limit orders and how they move, stop, and/or reverse price, but I've been thinking lately about the relationship between delta and volume, too. For example, let's assume you are trading a 10R chart on the MES/ES. If you have a +100 delta on 500 volume compared to a +100 delta on 5000 volume at a similar time of day, I feel like the second bar shows much more conviction than the first bar, which might have just been slicing through a pocket of illiquidity as the market searches out more orders.

When I read your comment, I wondered if you were talking about something similar, but, even if not, I'd be interested to here more about what you meant.

Thanks!



rickM
Don't go looking at youtube videos, most just talk about levels without explaining the interaction between passive limit orders and aggressive market orders.

I can't help you where to look but a good starting point is just to watch the DOM next to a 1 minute chart for weeks and weeks. Its the imbalance of orders verus the imbalance of volume is what order flow is all about.


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  #10 (permalink)
HiLatencyTRDR HLT
Tallahassee
 
 
Posts: 355 since Dec 2018
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Foot print charts have been around for 20 years! None of it can be understood by a human retail trader clicking a mouse on a regular feed. You must be a good portion of that order flow to understand the order floor. Hence citadel is 40% or more at times with gtc place holders trading by cancel!!

The only way for computers to understand is to actually be a large portion of the orders all the time hence a liquidity provider!!!!

Ft 71 owns an ib. A brokerage and makes money off of commissions. This same person was upset that s5 trading allowed low margins for retail traders. To the point that he was basically told to leave from what I heard. All a guess?

However, once he started his own brokerage edge clear he absolutely allowed his retail clients to trade with low margins because he makes money off of more trades and more lots.

He also probably gets kick backs from jigsaw but I'm not sure but there are all kinds of monetary incentives for owners of retail ibs.

I'm not saying ft71 is any better or worse than other brokerage owners but he should be careful what he says about what works or doesn't since he has an obligation to make sure his clients understand the true risks.

There is no way to understand order flow other than up is up and down is down imo.
A tick higher is up and a tick lower is down etc. Whatever your measure 1 min 5 min 15 this is the best you can do because everything else is latent or not real and I have not even talked about iceberg orders which are an enormous part of order flow.

The better I get at trading the more I realize that all of the fancy expensive sales stuff doesn't do much but keep you from trading well.

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