Order Flow Trading

Trading Systems Free Forex Trading Systems
374

Hi ben, nice thread!
I am new and will go through each page!
Thanks!

375

You did so well, especially as this is not your first language! -with reference to your first post

377

I’m subscribed!

378

Hello, dappa! Nice to see you here. I am following this thread too. But it looks like it is dead for now. As far as I know Dali has landed a good job as a prop trader. So no time for him to continue here. Anyway - tons of good reading in this thread.
Cheers!

379

I see, so all you have to do is look at the news and try to correlate the news with technical levels?

My problem has been , sometimes I don’t understand what the news actually means.

380

Yes this is exactly what I have been struggling with!

381

Damm dude, it seems like everyone gets it but me.:mad:

383

Hi :slight_smile:

If there’s anyone still around, I need help with understanding the logistics of this statement:

As an orderflow trader, all your looking to do is trade the reactions of these transactions taking place. If price is @ 1.5025 and you know there are buy stops @ 1.5030 and there is a barrier at 1.5050, then [B]you can trade those stops and target the barrier… the reaction of those stops being filled should be enough to cause price to rallie up to the barrier[/B].

That is order flow in its purest form.

So to me it sounds like 1)you’d enter a buy market order at current price 1.5025, then 2) you’d ride the price up to the buy stop orders (new buyers with pending orders or previous sellers getting stopped out?) zone, which would then 3) propel price up to the barrier 1.5050 zone, where you’d 4) close the order and take your profit?

Or do I place a pending buy stop order with all the others at 1.5030? …or a buy market order when it gets there?

Thanks!

384

Hi Sweet hows it going. Looks like any of those would be good options. Trading from one level to another is not a bad idea. Develop an entry criteria, currently I’m exploring H4 engulfs. There’s a good thread or two if you’re interested.

385

Hi & Happy New Year! All’s good…how about you?

So not really the answer I was expecting…lol. Engulfing bars are good and I do use them quite a bit when looking at entries. What threads would they be?

But back to my question I think it’s the terminology that’s got me hung me up. Having used MT4 for so long, I equate limit & stop orders with “pending” orders…so if buy stop orders mean to buy, then how can I trade other buy orders when I want to buy too, …and when I was with FXCM and their non-MT4 platform, they used the term “limit” orders for “take profit”.

You don’t really have to think about the who’s on the “other side” and how (on a bigger scale) all that affects price change. Our retail brokers always let us out of our positions. So now when I read the part where it says, “[B]you can trade those stops and target the barrier[/B]”…I’m having a hard time getting my mind set to understand the opposite side of things?

So then, buy stops are getting filled by seller’s stop losses right?..they’re looking for buyers to get out of their positions which is what my buy stop order will provide. I guess I wouldn’t want to put in a market buy order at 1.5025 because price might not go back up and hit all those other buy orders at 1.5030 to help propel it up further. So it would be better to put in a pending buy stop order at 1.5030…(right?)

386

you’re right, terminology is confusing especially for a weekend. :smiley: but what you say makes sense. If you think it may go up due to some level of buys and you have a target, then you have to decide where to get in. Too soon and it may not happen but if it does then it’s a lower entry = more profit, get in higher and more chance of catching the move but then it’s a higher entry = less profit.

387

I am just wondering that in all of this a 50 million $ option or even a 1.5 billion $ option in a 4 trillion $/day market makes ripples of the kind we are talking about? Would you be so kind as to show why this is so credible to assume? Just crurious.

388

What would be nice then based on this knowledge of stop haunts is where one should ordinarily place his stops given the hunter does not want to become the haunted (else we would be in a haunted house of horrors - if you would pardon a joke). So lets say you help with an outline of that? Cheers

389

I have been on this site since 2012 not been big on the forum, it is amazing the subjects I have found here. Well done! Great topic…

This is all about market microstructure, there are some great books on amazon that you can read on this. This is really getting technical, honestly you will be no better off hunting for stops in the OTC market of Spot FX, however it is possible to have an idea where stops are, the target is normally consolidation points after trends.

This is much more complicated in the FX spot market however in the stock market it is damn easy as the orderflow is from one central exchange, I think the Baby pips school mentions this at the start regarding differences between Stock exchange and the FX market.

If you want to really understand finance and liquidity then delve into this but get the real books at Amazon, they are pricey and if you are a UK based then you will need to buy on the US site …

390

Depends where price is relative to the strike level and how far away the option’s expiration is for that day to judge if that option will affect price action.

Hedging from option writers (banks) create buying order flow under strike levels or selling on strikes below price. As price approaches a large strike level, the incentive to hedge grows as liquidity is limited and price moves in that direction. Large vanilla options tend to pull price in and keep it close until it expires.

Successful stop-hunting is usually done during an illiquid time as it costs less to move price. You’d want to place your own stop away, far enough that it won’t be sought after or behind a wall of limit orders to help protect it. Look for stop hunts that are counter-sentiment moves which you can enter and count on the sentiment of that period’s market to be on your side making a rogue stop-hunt harder to do.

391

In that scenario, market sentiment is UP and most-likely buy-stops are from uninformed bears(TA traders, Supply/Demand, fib extentions, ect). You’d want to place a buy at 1.5030 bc if you buy at 1.5025, the buy stops may not trip. Those buy stops are usually enough to push price and trip up in to the barrier at 1.5050. Barrier options have a set $$$ of opposing limit orders used to spend on defending 1.5050 from being hit (If you’re paying out $50M on a hit of 1.5050, makes sense to spend up to that much to make it not hit). If the barrier is hit, those orders (offers in this case) at 1.5040-1.50409 need to be exited ASAP after a break so there are buy stops placed just on the other side of the barrier. A trip would execute a high volume of buy orders, shooting price up. If exiting right away, wait until the barrier’s buy stops are tripped and exit when price stops rising to get the most out of it.

I posted this on the Order Flow Trading Feed yesterday: USDCAD – Buy stops building at 1.0985/90. DNT barrier at 1.100 still valid. Here’s a graphical representation on why there are buy stops from sellers at the white boxes, purple line is the 1.100 barrier. See how this scenario plays out during today’s Canadian Sales data(mixed, but previous were both downgraded)

392

Thanks EE for confirming that.

I just finished reading the “finding stop clusters on a chart” from a few year back on FF by Carnegie…great source of info there.

Actually I have been referring to that news feed and even placed a successful trade based on it the other day, but whether that was just a fluke or not, time will tell, but it’s interesting to view trading in this light. I still have more reading to do.

That USDCAD chart, before (without knowing about the barrier) I would have thought of there being a whole bunch of sell limit orders there in those white areas, and would have faded them with a limit order of my own…say 1.0985…and then a stop placement of 30 pips @ 1.1015…right about where price reached and took out my stop before reversing …lol.

Thanks again :slight_smile:

393

I remember that thread… that one and an Order Flow Mindset thread (T&E by Larry Harris was a requirement… lol)

I’m sure there were sellers in those white areas selling the “Supply” but like the Pantera song, Yesterday Don’t Mean Sh*t. The orders that came from those highs were what dictates future price discovery.

A good example of a barrier defense; A writer of a Usd/Cad KO option that was to expire on Thursday the 16th at 1.100 would spend the $$ in defending it, and won. The defenders of it lately have lost though. Chart shows very well what buy stops look like when being used to sell in to. Good trading, Sweet Pip!

394

I’ve been googling about barrier options but I’m still unclear about how the expiry dates and price levels are established. Does the trader decide that, or the broker, or the bank? Can you only find out about existing ones by “rumor”?

395

I’m unsure who establishes the time frames and makes their exotic option market. As far as I know its all OTC so you never really know the length or details about them until price is near or a dealer sees a bunch of very large offers ahead of price.

You can spot them on a historic price chart, but market talk of large barrier usually beats the chart. Look for market rejections at large round numbers as those tend to attract the larger barrier levels. Make sure no break has been made yet.
Catching counter-sentiment or counter-trend moves towards a barrier seems to show it’s order structure more prominently… but that’s after observing them for a while.