order flow

what is order flow :?: can you help me understand how it appears and how traders use it :?::?:

cheers

im reading this ....looks interesting .http://hubpages.com/hub/OrderFlow

The article is OK, but extremely basic.

In terms of free resources along those lines, try the James16 Chart Thread on Forex Factory. There's a lot to wade through, but if you like the article you've linked to you should find a lot to interest you in that thread.

Trader Dante's thread on here uses similar ideas, and even my (mostly lulz-based) thread in the noob section is based on the same principles.

One important thing - if you like this DO NOT (that is DO NOT. DO NOT DO NOT DO NOT!!!) just go and trade any old pin bar with divergence, because YOU WILL lose.

The key to this kind of trading is to be very patient and wait for the best set ups.

One other hint. If you like the idea of trading order flow, keep a close eye on what happens around round numbers. It might be something you can incorporate in your method.

price777999 said:

what is order flow :?:

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Also, check out Darkstar's posts over on FF. He seems to know what he's talking about.

J16's stuff I would personally label Price Action rather than Order Flow, but I think all these terms tend to over-lap and have differant meanings to differant people.

I suppose the term 'order flow' in its most general sense can refer to any aspect of market movement or mechanics?

price777999 said:

can you help me understand how it appears...

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For this I reccomend the book :

http://www.amazon.co.uk/Trading-Exchanges-Microstructure-Practitioners-Association/dp/0195144708

It's very informative and you can get it much cheaper than quoted in that advert.

so is order flow just price action or what ?

Vorbis said:

Also, check out Darkstar's posts over on FF. He seems to know what he's talking about.

J16's stuff I would personally label Price Action rather than Order Flow, but I think all these terms tend to over-lap and have differant meanings to differant people.

I suppose the term 'order flow' in its most general sense can refer to any aspect of market movement or mechanics?

Click to expand...

Dark Star's posts can be very interesting indeed, good tip.

price777999 said:

so is order flow just price action or what ?

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Don't worry too much about labelling it. Price action is just a picture of order flow.

You're asking two hugely different questions.

1) How do I trade off order flow?

and

2) How do I identify order flow from a chart?

I'm not convinced you can do 2) much of the time... which means 1) doesn't come in to it.

(By the way, with 1) - it's a huge art but at the same time it's also common sense, really. If you know it's a price insensitive hedger causing a move then you need to react very differently [fade it] to it being George Soros [run with it])

arabianights said:

You're asking two hugely different questions.

1) How do I trade off order flow?

and

2) How do I identify order flow from a chart?

I'm not convinced you can do 2) much of the time... which means 1) doesn't come in to it.

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I agree with this 100%, in fact I think it's absolutely key to making any use of price action. My trading gets better and better the more I stand aside and wait patiently for the times I think I can identify it.

EDIT:

Maybe "identify it" is not really the best way of putting it, perhaps I should say it is more a case of waiting for an improved probability of order flow in the desired direction, if that makes sense.

arabianights said:

You're asking two hugely different questions.

1) How do I trade off order flow?

and

2) How do I identify order flow from a chart?

I'm not convinced you can do 2) much of the time... which means 1) doesn't come in to it.

(By the way, with 1) - it's a huge art but at the same time it's also common sense, really. If you know it's a price insensitive hedger causing a move then you need to react very differently [fade it] to it being George Soros [run with it])

Click to expand...

could you not give a dumbed down example of 1) and or 2) ''price insensitive hedger'' doesn't mean anything to me ?

Cheers

price777999 said:

could you not give a dumbed down example of 1) and or 2) ''price insensitive hedger'' doesn't mean anything to me ?

Cheers

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In reverse order

2) "Price insensitive hedger" - well "hedger" means a market participant who is using the market to reduce their risk, rather than speculate (for example he's selling eurusd ndfs cause he has to receive euros in the future against his dollar costs - if euros strengthen then that would be all well and good, but if they weaken then he may find his handsome looking profit is now a gaping goatse sized hole)

"price insensitive" just means he'll do it at any price... he just needs to have a price, he doesn't really care what it is... in other words he's just doing what the market will take. In reality of course everyone is price sensitive to a certain degree but you can differentiate like that

1) Well, if you know a price incensitive hedger is what's causing the price movement, it's a temporary imbalance in supply and demand, and therefore, subject to a number of assumptions that we'll wave away and go ceteris paribus the imbalance will right itself shortly once he's done his order. So after he's pushed the market far enough (and if it's a small order he probably hasn't moved it noticeably, but that's another concern) you want to fade it and await the previous equilibrium being reached, then exit

How do you know its a price insensitive hedger causing the price movement ?

Cheers for the info Arabianights, much appreciated !