Order Flow Advice

[steve46 12]

Sir or Madam

 

Whether you make or lose "a dime" in relation to a software program you are recommending doesn't matter at all..to the folks on this website what matters is whether they can make it work (I am pretty sure they can't) and whether it will take time (a lot of time) and money to find out that in the end, it is crap...

 

Interesting isn't it, that people appear out of nowhere and on their first or second post, decide to graciously tell the rest of us about some magic piece of software or indicator that will turn it all around, and you don't have to do any "work" to reap the benefits...all you have to do is contact them.....or go to some website and download it....

[gcabrera 10]

Steve:

 

I guess you are correct.... I am a total stranger with very few post claiming that going to some webpage your trading could change dramatically. I guess I am a extremelly naive person....

 

Well, let me introduce myself and tell you and others reading this, why I did this:

 

My name is Gerardo Cabrera, I am 50, software designer by accident, mechanical engineer as profession. I live in a small country named El Salvador, Central America, that fits 500 times in the US. My first tongue is Spanish so please excuse my spelling or redaction.

 

I started watching the markets after a scammer got me in love with Options in 2003, just to loose some money. And some many more scammers got in my way to rip some money and make me donate some more to the market.

 

I am a very persistent person and very dedicated to perform well at what I do. So I kept making indicators, some people approached me to program some simple stuff. but nothing worked with indicators.

 

Until I discover the times and sales..... unfortunatelly, under Interactive Brokers data feed, you know what I mean.... super bundled trades. Took a lot of time to discover that.

 

Well, I have a blog.... Trader Gerry where I posted my trades. Some of them I have posted as a blog here too, you can check that.

 

You can see my charts and notice I trade live, if you know about the difference in the DOM color..... I guess you can not show the Dom in grey color if you are trading sim, correct me if I am wrong. And that is tha case of the charts I took from the video of Joel Parker Video, they show grey color in the DOM... I guess they are live trades.

 

Well, the dots and numbers you see in the chart are the big lot trades that are being taken. I asked for that indicator to a programmer at Integrity Traders(Dan), and felt so grateful with the programmer that I decided to tell about it to everyone I know, including in the forums. Just wanted to help Dan sell more indicators since I think he is very talented guy programming and such a nice person.

 

With Joel Parker of price action room, I took a 10 day workshop in November last year, about tape reading and actually learned a lot and have continued learning from my observations of the times and sales, I have to admit it is not easy... I guess I never told it was easy.... and Joel is going to tell you that it is not easy too. Much depends on yourself too. At that time he showed us this bundled times and sales indicator and said it being develeped by Pete, one of his students that happens to be a programmer. It was supposed to be ready by January 2011, but it is going out until this month.

 

Again, I feel so grateful with Joel and Pete, that I decided to tell everyone about it. Naive???? I guess so, at least I should understand that in this business, there are more scammers than honest people. What is worst, I don´t have the indicator in my charts yet....but I saw it working live and made the comparisons with my big lots dot indicator and understood that I was seing big lots being hit as limit orders in my charts, not the actual big lot market order that hit that limit big order.

 

I got interested in tape reading after reading No B.S.Daytrading, which seems to be a very honest and cheap book too. I defended that book in various forums and some people send me messages asking if I could send them the book and video as a violation of the author copyright .... and guess what I said: I can´t. It is only $40, please buy the book.....

 

I can´t say I understand everthing that happens viewing the tape, but It is my expectancy to combine this new presentation of it, with my previous experience to help me start taking off from a point of actually 'keeping my money' to 'making money consistently', as I have always expected from this businnes of trading.

 

Best regards and apologies for taking so much of your time.

 

Gerardo

[joshdance 10]

if you know about the difference in the DOM color..... I guess you can not show the Dom in grey color if you are trading sim, correct me if I am wrong. And that is tha case of the charts I took from the video of Joel Parker Video, they show grey color in the DOM... I guess they are live trades.

 

As an aside, this is just in response to the above if anyone is wondering. In NT you can color the DOM any color you want in sim, to make it look live. Also, you can create a sim account with a number, so even if you show your DOM with the color and account number, it can be completely fake. The only way to prove trades taken is by posting them as they are taken, or in advance.

 

That's just in response to this as clarification, now back to the topic at hand.

[BlowFish 10]

Though the answer is, "this is not possible, especially with a retail platform and tools," I ask, how so?

 

I wrote a 'trade intensity' indicator for NT as a proof of concept, you can find it in the thread of the same name. I think this a better metric anyway but with very minimal tinkering you could use it to reconstitute orders. It only works in real time however if you where prepared to except a granularity of 1 second to reconstitute orders (I use much higher resolution) you could run it on historical data or you could change it to use Gomis NT framework that has a millisecond (or maybe better?) resolution database.

[joshdance 10]

I wrote a 'trade intensity' indicator for NT as a proof of concept, you can find it in the thread of the same name. I think this a better metric anyway but with very minimal tinkering you could use it to reconstitute orders. It only works in real time however if you where prepared to except a granularity of 1 second to reconstitute orders (I use much higher resolution) you could run it on historical data or you could change it to use Gomis NT framework that has a millisecond (or maybe better?) resolution database.

 

Isn't it making a false assumption (I want to say naive here but don't want to sound offensive) to think that all the orders that come in at the same price within a certain time period are from the same order?

 

Put another way, if you were trying to cover your tracks, wouldn't you do something more than just split the order and push it through all at once?

 

But my main point is still this: who cares how the order is split? I'm really agreeing with your first statement, that the "intensity" or "momentum" of the orders is far more important than if it comes from this source, or that source, or whatever.

[BlowFish 10]

Isn't it making a false assumption (I want to say naive here but don't want to sound offensive) to think that all the orders that come in at the same price within a certain time period are from the same order?

 

Put another way, if you were trying to cover your tracks, wouldn't you do something more than just split the order and push it through all at once?

 

But my main point is still this: who cares how the order is split? I'm really agreeing with your first statement, that the "intensity" or "momentum" of the orders is far more important than if it comes from this source, or that source, or whatever.

 

I think you have to make that assumption Josh you only have a couple of variables to play with price,volume,time. You could also look at the order book I guess but not sure what that would add to this particular mix. (Having said that 'intensity' of aggressive sellers vs 'intensity' of aggressive buyers is a pretty interesting metric to look at.)

 

Really there are couple of things going on here traders splitting orders to hide intent (personally dubious about how effective that is as it's all going to hit the tape at some stage) and secondly the changes in reporting by the CME. I think it is pretty safe to reconstitute 100x1 lot orders that go off at the same time (well essentially the same time).

[AlgoFutures 10]

Below are my Top 10+ Core Principles Regarding How Changes in Order Flow Affect Changes in Price:

 

1. Price is always a function of Supply & Demand - Regardless of the market.

 

2. Changes in Supply and/or Demand effect changes in Price. The futures markets are no different from a widget market or the Ice Cream market.

 

3. Changes in Order Flow precede changes in Price.

 

4. Program Trading is the Primary Cause of changes in Supply & Demand.

 

5. Buy Programs Usurp Supply - Thereby increasing price.

 

6. Sell Programs Increase Supply - Thereby decreasing price.

 

7. Increases in Price momentum will fade if they are not backed by substantive Program Trading

 

8. As changes in Order Flow precede changes in Price, it is advisable to always enter each trade via a Stop, this way, Price activity confirms the Order Flow information. Long trades are entered via a Buy Stop one tick above the most recent pivot, and Short trades are entered via a Sell Stop one tick below the most recent pivot. If after a Long Entry Stop is place, price moves down and breaches the most recent low pivot, the Entry Stop is to be removed. If after a Short Entry Stop is placed, price moves upwards and breaches the most recent high pivot, the Entry Stop is to be removed.

 

9. Software can monitor this activity in real-time thereby creating ongoing opportunities to follow and feast off of the Big Money just like a Pilot Fish follows and feasts off of a Shark.

 

10. 'Smart Money' really does exist. For Smart Money to profit from their insight, they must trade. When they trade in an electronic market, their transactions get recorded in real-time. Thus, they leave a footprint that can be, and is, monitored by custom TLA software.

 

11. There are really, really sophisticated trading entities thriving in today's electronic marketplace. They exist and thrive because the microprocessor is at the heart of today's electronic futures markets and it enables them to write algorithms to take advantage of any, and every, discrepancy in the market.

 

12. Stop Losses are the bread and butter of short-term algorithmic trading shops. They 'know' where the stops are and can fire off Program Trades with sufficient force to trigger a bucket of stops. By doing this they create immediate liquidity which allows them to close out their positions.

 

13. You can use software to tell when a market is tired and is likely to turn.

 

14. The Forbes 400 List is wholly inaccurate. In my opinion, If the truth be known, the Forbes 400 List would be littered with the Managing Director's of small trading enterprises that fire off thousands of trades a day using sophisticated software that is plumb smarter than the man on the street's.

 

15. You can increase your percentage of winning trades by incorporating Order Flow monitoring and interpretation into your analysis...primarily by having the real-time information which offers you the ability and skill to never fight the tape.

 

If you are interested in monitoring order flow for the S&P 500, Crude, Dow 30, and STOXX 50 futures markets you can do so for free, in real-time at Algo Futures

 

Hope this helps.

 

Carl

[sdoma 10]

Isn't it making a false assumption (I want to say naive here but don't want to sound offensive) to think that all the orders that come in at the same price within a certain time period are from the same order?

 

This is true, and occurred to me as well. I would think that the usefulness of amalgamating those orders is that it sums them up, rather than having to look at a string of ones and twos a mile long.

[joshdance 10]

This is true, and occurred to me as well. I would think that the usefulness of amalgamating those orders is that it sums them up, rather than having to look at a string of ones and twos a mile long.

 

Yes, but that's what the volume indicator at the bottom of the screen shows--it amalgamates volume. Or if you're interested in buy/sell volume, then that's what the delta indicator shows.

 

It's my understanding that part of the intent of those who do this though is to determine what is a "large order," in other words, to show the actual intent of the initiator of the order--not just to summarize a series of orders which happen to come through at the same time. My contention is that while it may summarize orders, it can in no way show the intention of the person, institution, or computer that placed the order.

 

Before the CME changed its reporting, the intent of a market order was shown, and was not split. Even then the intent could be hidden by splitting the order up in both size and time. Now that even a market order's intent is not shown in what is reported, how much more impossible is it to know whether orders are from a particular entity? It's simply not possible, and what matters more, IMO, is that there are orders, not where or who or "retail" or "institutional" or whatever. I'll add that I don't think it's a bad idea to do what's being done, just that the conclusions that are being drawn from what is shown on the "reconstructed t&s" are not necessarily valid. But if they help the trader, then by all means why not use it?

Edited May 17, 2011 by joshdance

[gcabrera 10]

Learning to use this indicator

 

A big lot 800+ contracts at today open made it go back down. (ts1)

 

Then it broke to the upside with a lot of buyers and resistance or taking profits at the end. (ts2). I placed an elipse at that point just to see how it moved later.

 

Went back down to restest open just to start pushing high again.ts3.

 

I see that my dots and numbers in the chart are just big limit orders that big market orders have filled.

Edited May 17, 2011 by gcabrera

[boru 10]

Please do that .. I am sure people are looking forward to you starting a tape reading thread.

 

I would also look forward to a tape reading thread thanks

[daVinciLite 10]

8. As changes in Order Flow precede changes in Price, it is advisable to always enter each trade via a Stop, this way, Price activity confirms the Order Flow information. Long trades are entered via a Buy Stop one tick above the most recent pivot, and Short trades are entered via a Sell Stop one tick below the most recent pivot.

 

Buy the high and sell the low. WOW, never heard that one before. Where do I sign up for the free money?

 

-dVL

 

"That sounds like over educated and under intelligent"

John Gotti NY Mafia

[joshdance 10]

Buy the high and sell the low. WOW, never heard that one before. Where do I sign up for the free money?

 

-dVL

 

"That sounds like over educated and under intelligent"

John Gotti NY Mafia

 

"High" and "low" in relation to what? You alternative would I suppose be to "buy the low, sell the high" ... sounds great in theory--how do you determine the low and high? The poster is simply advocating entering in the direction the market is moving. Bottom- and top-pickers (some of those who buy the low, sell the high) are often fodder for the freight train of momentum and provide the needed liquidity for those in tune with the actual direction of the market. Hope you didn't "buy the low" a couple of weeks ago on oil every time it dropped.

[joshdance 10]

Hope this helps.

 

Carl

 

Carl, thanks for the post, and nice web site. But advertising here with only a few posts to your name will unfortunately not sit very well with many people, just so you know. Also, I'm not sure I agree with your ideas that program buying and selling are the cause of changes in supply and demand. Perhaps in some markets, but supply/demand principles have, as you know, existed long before computers, so I'm not sure what you're getting at with this.

[ferasjaara 10]

This Darreeb guy is so good at orderflow trading, forexfactory got scared and moved his thread to recycle bin.

 

URL Deleted by Moderator.

 

Forums don't like it when someone takes traders away from forums. they lose money I guess

 

l

[joshdance 10]

This Darreeb guy is so good at orderflow trading, forexfactory got scared and moved his thread to recycle bin.

 

URL Deleted by Moderator.

 

Forums don't like it when someone takes traders away from forums. they lose money I guess

 

l

 

Sure, that's why they moved his thread. Because he was SO good. He was SO good and SO profitable that he had to charge $400, then $1500. He was SO good that he had to charge money to others to reveal his secrets of trading. I suppose this crap will never end on trading forums, pulling in unsuspecting gullible people thinking that the holy grail is just around THIS corner, even though it didn't work the last 25 times. Yet another 3-post poster promoting someone's snake oil.

[daVinciLite 10]

"High" and "low" in relation to what? You alternative would I suppose be to "buy the low, sell the high" ... sounds great in theory--how do you determine the low and high? The poster is simply advocating entering in the direction the market is moving. Bottom- and top-pickers (some of those who buy the low, sell the high) are often fodder for the freight train of momentum and provide the needed liquidity for those in tune with the actual direction of the market. Hope you didn't "buy the low" a couple of weeks ago on oil every time it dropped.

 

 

My criticism is not just for criticism sake. Here is a screen shot of the web site and another from my chart. The advantage this morning was at the overnight low. It coincided with the lows of the 5-5 and 5-16. It was also near yesterdays close. Yesterdays close was also near the close two days ago, making 1325.25 a price a lot of people were looking at – at least a lot of professional traders.

 

No indicator will tell you that.

 

As we approached and breached that price the selling order flow dried up and buyers moved price upward. Once you recognized this, you could have went long with a one or two point stop depending on your skill.

 

Look at the stop and entry for the site. Their stop is much more than two points and the entry is just ridiculous.

 

If someone wants to become a trader, then they have to learn how to trade. There is no easy way around it. Indicators are not going to cut it. I wish they could.

 

Good luck.

-dVL

 

"That sounds like over educated and under intelligent"

John Gotti NY Mafia

[joshdance 10]

No indicator will tell you that. ... If someone wants to become a trader, then they have to learn how to trade. There is no easy way around it. Indicators are not going to cut it. I wish they could.

 

Agree 200% -- I don't use indicators, and think that they generally handicap the trader. I also am myself learning how to be a trader, not a system or indicator follower. I'm with you more than you can possibly imagine daVinci. And I don't like the idea of automated systems, particularly those run by people who hit internet forums with their spam.

 

As we approached and breached that price the selling order flow dried up and buyers moved price upward. Once you recognized this, you could have went long with a one or two point stop depending on your skill.

 

Look at the stop and entry for the site. Their stop is much more than two points and the entry is just ridiculous.

 

For every trade example you post where the "selling dried up" and price reversed as it did in your example, I'll find you another where it did just that, and then just kept on going (see oil today for numerous examples of what seems to be buyer exhaustion, yet price marches on upward). You're finessing your entries, which is all well and good, and would be ideal for me as well. And I agree that the ES trade you posted was a fantastic entry, with very low, quantified risk. But you're looking at a tiny time frame on this. The trade you took from their web site doesn't look quite so "ridiculous" if looked at in the larger context (see attached picture).

 

You are trading off a hunch that price will go the other way. A good hunch, perhaps, but a hunch all the same, with less information that if you had waited for more confirmation. This is a lower probability entry. Your reward for this increased risk of failure is that your monetary risk is more quantified and smaller. The entry given on the web site you mention has a larger monetary risk, but at the point of entry the market had more clearly shown its hand, that it in fact was rejecting yesterday's close and was read to move higher. It's a trade-off either way, there is no perfect way to enter the market. And that was my point, and only that. Not to say that either way was right or wrong.

 

Did you enter long as you were watching this (if you were watching)? In real time these bottom- and top-picks are not quite as easy as in hindsight. I mean, looking at your PnF chart, all I can say is "duh"-- but emotionally, it's a little harder to take the trade, with real money on the line, and for those with the balls to do so, their reward is a small loss if they're wrong.

 

EDIT: I do agree that the stop is a bit large perhaps, a more conservative stop would be below the low of the day, but that's obvious in hindsight. By the way, do you think longer-term position and swing traders really enter a trade with a 2 point stop? I'm not one so I can't speak personally to this, but something tells me the answer is no, due to their longer time frame perspective. The chart you posted shows at least a week's worth of data, where 2 points is noise.

Edited May 18, 2011 by joshdance

[Ants88 10]

Great topic pbylina.

 

I have been using only Order Flow (bid/ask volume, delta), pivots, PoC and Vwap for the past 7 months. See attached pic, (my ES chart).

 

Let's get a conversation going on Skype: AuctionsOrderFlow

 

All invited chat, text - daily. Free always (until Microsoft screws it up :doh:).

[daVinciLite 10]

You are trading off a hunch that price will go the other way.

 

QUOTE]

 

Joshdance,

You make some very valid points and I agree with 95% of it. In no way am I saying it was an easy trade. It was not. Someone could of come in with a 1000 lot and blown me away. What I am saying is that I saw that level from last night and really liked the level because of what happened at yesterdays low. It had strong buying. We also went back into the two-week channel. If buyers wanted to hold the market up, that was a good spot to do it. The big money buys wholesale most of the time.

 

This is something I have seen hundreds of times. It happens over and over. Especially at the previous days close. I have two years worth of screen shots documenting this sort of thing. It is NOT easy, but I have honed my skills and I will keep getting better at it. That trade would of gone over my head a year ago. Not to say I know everything because there is always something to learn.

 

Everyone trades differently. Limiting my losses is key to my style.

 

Ants88,

I like your chart. I will try to chat on skype.

 

dVL

 

"That sounds like over educated and under intelligent"

John Gotti NY Mafia

[joshdance 10]

daVinci,

 

Right on--keep up the good work.

[Ants88 10]

Great topic pbylina.

 

I have been using only Order Flow (bid/ask volume, delta), pivots, PoC and Vwap for the past 7 months. See attached pic, (my ES chart).

 

Let's get a conversation going on Skype: AuctionsOrderFlow

 

All invited chat, text - daily. Free always (until Microsoft screws it up :doh:).

 

 

Does anyone constructively use the Chat room on Traders Lab during the trading day?

[gcabrera 10]

I attach a secuence of charts showing what I did today. For my style of being a contrarian, the bundled times and sales works fine. Even I was able to watch the big buyers continuing the trend.

 

I missed some trades there because I wanted price to make the last push to hit a limit order and that left me out ot the trade.

 

The last trade I did not hesitated and entered at the same price (market) that the big seller of 1000s did. Unfortunately, hesitated very soon :doh: and lost one tick. It actually worked.

 

Take care everybody

[pbylina 10]

Great topic pbylina.

I thank the people who responded.

 

I have been using only Order Flow (bid/ask volume, delta), pivots, PoC and Vwap for the past 7 months. See attached pic, (my ES chart).

 

Nice chart, not very colorful ...but hey, its what gets the job done right?... What software is that?

 

Let's get a conversation going on Skype: AuctionsOrderFlow

How do I find it? Add contact, Skype name:AuctionsOrderFlow =?

[pbylina 10]

As we approached and breached that price the selling order flow dried up and buyers moved price upward.

I love this. I also look for a lot of Buying or a lot of Selling to not be able to push to price higher or lower. You really need to see it live and experience it. Once you recognize it thou, you need to act fast before it shoots off.

 

Once you recognized this, you could have went long with a one or two point stop depending on your skill.

I believe this. I have seen it. Its easier to get that small of a stop when market is slow. Need more practice so I can get it when the market is fast.