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thc

Recurring Order Flow Phases

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I trade the ES intraday. As my method matures I am spending most of my research time trying to properly visualize order flow. After all, the developing structure is easy to see in the form of a price fractal, volume profile, and perhaps a channel or two. But visualizing order flow cycles is more subjective.

 

One topic I think would be of broad interest relates to the nature of the recurring order flow phase shifts (I call them liquidity phase shifts) that I see each day in the ES. I'll give a few examples to kick things off:

 

RTH 0 to 15 minutes - Overnight order initiative and response

 

RTH 15 to 30 minutes - First institutional initiative and response

 

Some people might trade this as a 15 minute OR breakout

 

RTH 30 to 60 minutes - Second II and response

 

AKA the 30 minute OR breakout

 

RTH 60 to 90 minutes - Third II and response

 

AKA IB extension

 

RTH 90 to 120 minutes - Fourth II and response

 

I believe this is driven by the close of RTH in London and the Dax.

 

 

I have a few more but first I would like to see if anyone has perspective to share on which market constituency is dominating the initiative in each of the phases above. As I mentioned, I believe the 4th II ( or call it what you wish) is driven by Europe initiative.

 

Does anyone disagree or have other perspectives on the topic?

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Do you have a way to account for scheduled news release times? There can be different mixtures of amounts and times of news releases, and their importance. How are you going to verify these cycle periods? If you can verify the cycle periods with data, then why not just use the data?

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I would call them "windows" rather than "periods". But typically within each window you will see initiative and response. These are just my observations after staring at the order flow for many months.

 

As another example, I think the 2:30 PM to 3:00 PM ET time window is dominated by the bond market close and related rebalancing in equities. So I shorted the day's high to the tick after the close of the bond market produced non extreme initiative followed by evidence of exhaustion. I held for the VWAP but as 3:45 PM ET approached I took my gains as I knew the last 15 minutes is a totally different type of initiative related to last call. Unfortunately the initiative that emerged was to my favor but I'm still comfortable with the decision given the recurring pattern and an acceptable gain.

 

My point being that if you understand the nature of the initiative then you can supplement the structure and order flow analysis with additional observations. In this case I observed bonds selling off into the bond close and given the time window in which that occurred I understood the initiative in equities.

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I assume he probably IS "just using the data"...thats what I am doing

 

The first time period IS in fact the time to process the overnight and MOC orders that originate primarily from retail (when retail folks are in the market)....there is also a component of MOC orders from longer time frame speculators and system traders, so it is not entirely homogeneous...As a result the 15 time frame is probably subject to revision

 

The second time frame is in my opinion the time frame in which most institutions come in to "shear the sheep" and that corresponds to the release of some (though not all) economic reports. Generally speaking you have "informed" participants pre-positioned for the report releases by this time...and the rest of the crowd is just reacting.... thats the way its always been.

 

Depending on the significance of a report, or pending news (earnings, or political news) the balance of the day can be summed up as programmed execution, and speculators calling the shots until such time as the longer time frame crowd sees either A.) an opportunity to buy below value (at wholesale prices) or B.) an opportunity to sell above value (at retail prices)...and of course you have the rest of the informed participants either tagging along or initiating trades if they see price at the border of either scenario...

 

Those of us using time-based pivots and supply demand analysis spend our time, watching the larger players move the market to places where we can lean on or front run specific numbers. Since most of us know what the numbers are, it has become a game of "tug of war" as each side tries to move the market while managing risk...

 

Its been a fun year...

 

Steve

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Those of us using time-based pivots and supply demand analysis spend our time, watching the larger players move the market to places where we can lean on or front run specific numbers. Since most of us know what the numbers are, it has become a game of "tug of war" as each side tries to move the market while managing risk...

 

I assume that your reference to "time based pivots" is a reference to the concept I am exploring here. Can you elaborate?

 

Also just to keep the topic warm, once again on Friday the Bond Close brought an initiative/response sequence that produced another key structural inflection point right at 3 PM ET.

 

I am more puzzled by the patterns observed at the 30-60 minute and 60-90 minute mark. Perhaps there is no clean explanation for these windows, as you indicate.

 

In the case of the 30-60 minute window, I have read that many traders will not take a position until the 35 minute mark, regardless of the news schedule. If true then I assume this is because they want to see what I call the First Initiative between the 15 to 30 minute mark before deciding to step in. Does this sound familiar?

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I talk about time-based pivots in my thread "An Institutional Look at the S&P Futures".

Basically, TBP form the profit goals that many if not most institutional traders use on a yearly basis. It has to do in part, with how bonus money is calculated.

 

Coincidentally we had a test of one of the most important time-based pivots on Friday. That being the yearly open at 1263.50

 

I have attached a chart so that you can see the test and strong counter reaction (a 10 point move for those ready to enter long)....

 

Time based pivots are one of the cornerstones of my method.

 

Good luck

Steve

5aa710800be32_FridaysScreen.thumb.PNG.9b524d0fd6d8693d79b482391f1e4312.PNG

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Steve, Is your worksheet pivots something you programmed? Or are they part of some software? What trading platform do you use for charting? I am evaluating all this now and I'm about 6 months into the study of Market Profile.

 

Do you have any experience with market profile trading rooms with a moderator?

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Steve, Is your worksheet pivots something you programmed? Or are they part of some software? What trading platform do you use for charting? I am evaluating all this now and I'm about 6 months into the study of Market Profile.

 

Do you have any experience with market profile trading rooms with a moderator?

 

 

I try to be "low tech" whenever possible. I prefer the hands on approach. My worksheet is something that I do manually every night on a sheet of paper. Works for me.

I use Esignal (the newest version)

and I don't use market profile other than the basic "value area high and low" (its not necessary in my system).

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Sorry I missed one element of your question

 

I have some experience with "rooms" that use Market Profile. Frankly I might still be using Market Profile or Volume Profile, but for one lucky day when I ran into an old gentleman (now deceased) willing to show me a entirely different method of trading...I think a person can make money with market profile if they are willing to handle the drawdowns....One of the benefits of my method is that I can manage risk in more effiecient manner...and I am able to find favorable entry more often. simple as that...

 

Good luck

Steve

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