Order Flow Man

I wouldnt think it is the wrong assumption. I am only talking as per the COT reports. I would say that ES and currencies have a lot of dumb money in them (as per the usual expression). This doesnt mean that there isnt just as many (if not more) commercial and non-commercial speculators to balance their positions, because there is. But there is a huge difference between 10% small trader involvement and 30% small trader involvement and what this means for how the market moves day to day. For example, at the moment the S&P futures (see full COT report) you will see that both the commercials and non-commercials (eg hedge funds) are net short. There needs to be some pretty big small time trader involvement for this to happen. Who is holding the other side of their trade? Well not me, I can assure you of that, I am short. But a lot of small traders are long. In other markets, the commercial and non commercial move almost inversely as their is practically zero non-reportable positions. Example- heavy retail markets: --------------------------------------------------------------| NONREPORTABLE NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS --------------------------|-----------------|-----------------|----------------- LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT -------------------------------------------------------------------------------- ($50 X S&P 500 INDEX) OPEN INTEREST: 3,190,988 COMMITMENTS 440,541 487,310 84,694 2121988 2391851 2647223 2963855 543,765 227,133 CHANGES FROM 02/18/14 (CHANGE IN OPEN INTEREST: 27,216) 15,851 -19,411 3,893 -23,622 57,523 -3,878 42,005 31,094 -14,789 PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS 13.8 15.3 2.7 66.5 75.0 83.0 92.9 17.0 7.1 NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 546) 108 108 54 215 219 347 357 Example Non-retail BUTTER (CASH SETTLED) - CHICAGO MERCANTILE EXCHANGE Code-050642 FUTURES ONLY POSITIONS AS OF 02/25/14 | --------------------------------------------------------------| NONREPORTABLE NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS --------------------------|-----------------|-----------------|----------------- LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT -------------------------------------------------------------------------------- (CONTRACTS OF 20,000 POUNDS) OPEN INTEREST: 6,905 COMMITMENTS 579 4,168 22 4,965 2,286 5,566 6,476 1,339 429 CHANGES FROM 02/18/14 (CHANGE IN OPEN INTEREST: 518) 188 281 -1 342 194 529 474 -11 44 PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS 8.4 60.4 0.3 71.9 33.1 80.6 93.8 19.4 6.2 NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 31) 8 6 3 14 9 22 18 I think the main point I was trying to make is that a plot of CD can show you accumulation/ distribution. But it really depends on the market on how you should interpret it. Simply by definition, if their is divergence in the price and the cumulative delta then their has to be a surplus or lack of limit orders from the previous.

I seem to find myself on this web site again inadvertently after Googling something related. I thought I might mention (my 2c) that if you want to spot accumulation/ ditribution than you can use the CD indicator. In the more retail markets (specifically the currencies) you will see large divergence in the CD and price chart before large reversals. Just plot it out for a couple of weeks and you will see it happening each day. There is a bit more to it than that, but if you think about market dynamics you might be able to put it together. This is not so prevalent in the ES. A bit in the ZN but works slightly differently. You can look at retesting levels but lower values of CD to show less strength and possible reversals. This market is a lot thicker so is more reliable, also has a lot of games by big prop firms being played. Also, if CD moves significantly higher and price doesnt move, you can assume some type of accumulation or distribution. It is easy to see in the currencies and ZN where the big money is (exiting an old position/ taking partial profit/ starting a new position) but not so much in certain other markets like ES. Like I said, ES will pretty much track CD all day as it is a very market order driven instrument. I highly recommend plotting the CD for a variety of markets over the medium term and understand their players, characters and cycles. And dont listen to the standard way of reading the CD for every market. It is different for each market based upon its depth and players. There is more to look at but this is good info!

Hey Alex, Thanks for the post. I met up with the guy about a week ago. He seemed like he had been in the industry for quite some time, but order flow was still fairly new to him. He was previously using an algo price action breakout strategy (new highs and lows of the session) so click trading in general was a change in pace. I gave him the texts below and put him on track with DD broker and non-filtered feed and the JIgsaw DOM. Also recommended he get some form of footprint & profile tools as well. I did not discuss spread trading at any depth with him. Can you advise if KOSPI has any correlation/ lead lag with any other indexes? I will send him an email and put the link of the thread. Good idea. For books (assuming you have read these or something similar, because they are pretty standard): Market Profile/ Liquidity Data Bank Analysis- CBOT handbook (or anything by Jim Dalton) Power Based Trading/ Overlay Curve- Don Jones No BS Day Trading - John Grady There is a lot more to understand, but these are the only books I could find... I think they at least get a person to start thinking about it the right way... Mainly just spruked No BS book to him so that he would understand the cycle of the markets constantly moving in to areas of liquidity. This is the basis of my trading- big money looking for liquidity to enter and exit positions. Obviously you spot in via the nuances on the DOM/ footprint. Eg. More orders hitting at bid and the price moves higher etc. (Very basic example, but you know what I mean- resistance/ divergences etc) Any other books you think would help this guy? OFM

I agree with a couple of these items. NO BS Day Trading is an informative, factual and cheap book on DOM scalping. I can assume he is also referring to the JIgsaw DOM. It is simply a new charting DOM which to be honest is the cheapest and most informative thing on the market. Better than X-Trader for an absolute fraction of the price. Believe me or not. OP at least you tried giving some good advice. Put these together with a couple of years starting at the tick data and you have a shot at making some good money.

Maybe we just have different outlooks on trading. I was always in it for the money- nothing else. I am not here to be anyone’s friend, or their enemy. I am here to earn dollars. But remember I did offer you great free advice when suggesting you need to look at order flow and much can be learned by putting in significant screen time. My advice wasn’t going to make or lose me money this week, and perhaps one day another reader will realise that these words were actually really honest and helpful because I have been where 95% of retail traders have been. I studied fundamental and technical analysis, I wrote algorithms, I paid higher commissions and I used bad brokers. I won money, lost money, lost sleep and even girlfriends because of how much time I gave to both the markets and just earning money in general. Maybe I do have an ego, some people have said that. But over the last ten years I have grown as a person because I was willing to accept that I didn’t know everything and to seek out good advice. I worked unbelievably hard in my career and on the screens and through dedication grew my income many times over. I have seen really dedicated men with no education make a lot of money, and I have seen really smart men lose a lot of money and lose their wife and kids. There is no sure fire formula. All I know is that if you put in a lot of work, have proper risk management, forget your ego and stay hungry to learn than you can earn an almost stable 10-15% a month on a futures account. I just hope that if you really want to be a trader (or just be successful in any part of your life) that you find success, and all the benefits that come from hard work and dedication. All the best as this is my last post. OFM

I have only put up a couple of messages on this forum and already I have run in to some pretty "strong" personalities. I assumed that this was a forum of traders who wanted to talk about trading. I am sure with your 2000 odd posts you would know something note-worthy concerning the intra-day analysis of Kospi futures? If not, then why wouldn't you just have enough tact to ignore the message if you thought it sounded conceited? I think ego is a matter of perspective. A lot of people will just read my post and answer it as they may have been in a similar situation themselves and think the concepts are pretty standard. One of the most crucial thing for success for any activity is to ask questions and learn from people who have done it before. Anyway, can we please focus on trading!

A couple of points. I haven't put these comments up to debate you, I have put it up for all the other readers to be honest and practical and repond to your statements. This is the end of my time on this thread. 1. You said my systems are 'poor' because they are not 'publicly available'? The books on the shelves will not teach you how to trade profitably. Like I said call up your local prop shop and try to get a placement. Trading is something that is developed via mentoring by other traders, coupled with the knowledge from a couple of informative (and detailed) texts. Who do you think all the retail traders lose their money to? Look up a historical order book chart for a retail broker and you will see that the price chart and the retail net position are approximately inversely correlated. This is a pretty good example that professionals use their greater capital and experience to methodically take the money from the small players. It is a game all about money, not about who has read the most publicly available textbooks.. 2. 'Big words' or standard industry language? 3. I dont claim to be a 'genius', but I have put in the screen time, was mentored by profitable traders (some better than others) and am willing to accept that in some trades I am wrong (cut my losses short.) I dont trade a "system," I learn to spot professional activity and jump on board and ride it for what is there. The only measure of success is your P/L. If you are in it for any other reason then you are not a trader. Whether you or myself are right or wrong, the answer will be in our brokers accounts.. Ok, the trading week is about to start. I am going to look at that..

I don't know if you were attempting to be productive or rude. I have scalped, day traded and swing traded a basket of instruments for a long time and he is the one who is requesting I help him. He is the one who contacted me even after I specifically said that I dont trade it (I am assuming because he can see some value in the long term screen time I have put in to this game.) He wants my input on the advantages on reading pure order flow and volume analysis when trading, instead of the analysing it with the common methods of the retail trader. He has mentioned that he has never traded order flow, but his timetable is such that he wants to trade the Asian session and scalp/ day trade. I currently only trade the SPI during the Asian session as I am generally do other related market things (analysis of data for possible swing trades) and I have already mentioned that the SPI would be more preferable due to the lower commissions. A little choppy and thin though, but good for a couple of intra day moves/ reversals. I am more a European/ US session trader anyway as I told him. He has worked in a Derivatives Middle Office and has created algos for a bank, so I actually figured it wouldn't be a complete waste of time because he would already know a bit and could catch on and obviously develop it himself. We all know that no-one is going to be profitable off a mechanical or discretionary system they don't understand. But if you are given the right tools, platforms, feeds, products and a little direction/ mentoring a person cut significantly reduce the amount of time it takes to develop their own system. To be honest the reason most people never become profitable is that they dont acquire these things. Look at the amount of people in the markets that think technical analysis is the answer. Jeez... Also there are very few (if any) extensive order flow training books I can send to this bloke. I could just point him to 3 I can think of, but still they are not on the cutting edge of it all. Basically what I have read be mentioned is: "I would recommended looking for intra day swings due to divergence in the cumulative delta/ volume and price . Also the methods of Steidlmayer seem to hold true as it is a relatively a retail market, and beware the lack of liquidity at this time bla bla..." No-one has touched it in any real depth yet though. Perhaps the following points could be of assistance: - Liquidity/ Time of Day - Correlations/ Lead Lag/ spreading - Market Profile/ TPO/ - DOM/ manipulation/ pulling & stacking orders/ accumulation & distribution of big players around typical setups/ false breakout reversals - Divergences (of anything) - General nuances you can notice via the Jigsaw Dom/ Time and Sales. - Markets similar in depth and action - Market footprint This is just a start. You can mention anything you want. Given the variety of things I could talk about (and analysis methods) of general order flow trading I was trying to just put him on the right track. Like I said, I am going out of my way here just to be helpful to this bloke. All I see it as is an afternoon when I can relax, smoke a stogie and talk about something I am passionate about (ie. speculation.) I am appreciate of the people who took the time out to help me, and want to pass it on. If you think the fact that I have never traded the KOSPI means I could not be of any assistance to this bloke make a good argument and I might just leave him to his own devices. At the end of the day it doesnt change my P/L in my markets one way or the other. OFM :missy:

Hello all, Could someone let me know if the KOSPI has any advantages over say trading the ZN (US treasuries), ES or other popular contracts? (indexes, currencies, financials) Even in the Asian session what are the advantages/ drawbacks over trading the ASX200 index future (SPI)? I have traded intra-day for a long time but never on the KOSPI. I had a person contact me in order to pick my brain about order flow/ volume analysis intra-day and I wanted to make sure I didnt put him in the wrong direction due to the different characteristics of this market. You can be as general or as technical as you want. (Footprint, price action, volume, order flow, DOM, market/ volume profile, TPO, cumulative delta, liquidity data bank analysis) I know all of the theory. Thanks. OFM

I think the moderator put it best when he suggested you are going very dangerously close to advertising a product. If you are a well researched and educated trader then I may have jumped the gun with my harsh tone. I have been in this industry a long time and there is at least 200 false prophets of algorithmic systems to every reasonable programmer (who would generally already be working for a hedge fund/ bank/ or HFT firm already.) I know some of these blokes and the tone of the forum did not come across as this (I may be wrong.) The reason I am so proactive with it is that I feel sorry for the retail traders who troll the forums, learn a little, and then go try to implement it and lose their money. The way you promoted your system seemed like you were trying to get business for your system. It certainly rubbed me up the wrong way. I am not 'getting hurt' by your thread, and I am not 'pretending' anything. I was just giving good solid advice to 'newbies' who would be reading this. As soon as I smoothed out my equity curve while trading I very soon did not care about promoting my "system" or style, I just decided to get on with making money. One thing I still do care about is diligence and morality, and like I said there are a lot of crooks in the speculative world and I am willing to try and call them on it if I suspect it. The markets are constantly evolving and the systems that worked 20 years ago (hell even 5-10 years ago) don't work know. It's no big secret. Even the order flow concepts that became the big thing in Chicago in the 2000's are already starting to lose their edge due to all the bots competing for the same money. Apply to a professional firm and say things like technical or fundamental analysis and they will not call you back. They do not implement any traditional indicators in the real world. Do you really think that the MACD or trendline is going to tell you when a big player is going to drop tens of thousands of contracts on the marketand it is going to explode down? Most profiable methods look solely for where the retails are trading and to take the opposition position to ensure the liquidity is there. I stand by my point though that if your 'algo' is based upon price action alone and you take it over a longer term than 6 weeks than you will definitely face some big drawdowns. You will most likely be blown out of the water and lose it all (I am 99.9% sure of this.) You can continue down your path of publishing results, but I think there is more wisdom you could give to your readers/ followers. You said the theory was too complicated to understand.. Then try me? Like I said I have friends who have done this professionally, so now you have sparked my curiousity. Explain how to build a profitable indicator (generally)?

Not to be too harsh but as a moral person I feel obliged to say to everyone this OilFxPro character has absolutely no idea what he is talking about. I found this thread by some random Google link and have read it all because it is so hilarious- mainly how this character responds to the criticism. OilFxPro it would appear that your system is based upon price action alone which all professional traders would smirk at. I wont expand on this, but take it from an experienced and profitable trader you obciously are (cough cough) a 'keyboard warrior, amateur trader, scammer,' to be blunt. If you are the real deal, put some decent margin money in your account and trade it. The fact that you have been pitching it for ten years proves it doesnt work. There is an old saying- 'An experienced trader without money does not exist.' Other readers, please move on to a different thread if you really want to earn money from trading. The best thing I can recommend is to Google search your nearest proprietary firm, and send them a CV saying trading is your passion and you are willing to endure however long it takes to learn. Then get ready to spend 1-2 years mastering your craft. All the best... ....(except for you OilFxPro.) I hope you trade your own system on a live account and get eaten alive for trying to scam these people.