Order Flow Data

Anyone utilizing order flow data? This can be different from bid/ask volume

I came across some recent academic finance articles, believe it or not, that showed very high probability (>80%) price moves following imbalance in order flow.

I've called around, this data is not usually available to everyone. CQG has it for some futures markets, but its only real time.

If they keep it locked up outta sight, its probably worth looking into..

I use it - but not really in any way that other people don't use it. So no big secrets.

In terms of order flow, there's only 2 things you can look at. The bids/offers and the trades (or is that 3?).

Do you have links to the articles - I'd be very interested in having a peek and having more discussion afterwards.

No nonononon - there is one other thing = the order flow!!! Literally, the orders coming in, to buy and sell.

I haven't actually double-checked that 80% number since the summer, when i came across OFD the first time while drunk at the beach in North Carolina..

CiteSeerX — New perspective on FX markets: Order-flow analysis
https://www9.georgetown.edu/faculty/evansm1/New Micro/SagerTaylorOrderFlow.pdf

The first is a collection of articles, the second is more recent and basically says Order Flow is bunk, worse than random. If that's true, reversing it may be better than random, eh?

Natureboy - the orders coming in - to buy & sell - that's the Time & Sales AKA the Tape.

Welcome to the world of Tape Reading.

One of the issues with the FX market though is that there is no tape, there is no centralised exchange through which all orders flow and therefore analysing order flow for Forex is very tricky.

ok.. Tape Reading is also known as just reading price action, too

Googling all this, i came across orderbookfx - subscription service. What they have looks basically like the TradeStation Matrix. Time and Sales is the Market Depth. I am uniformed on both of these approaches to trading - i'm all Technical Analysis

So Order Flow is just that - submitted orders. They do not necessarily have to be filled orders, which would put them into Time&Sales, i think..

still learning, thanks

natureboy said:

ok.. Tape Reading is also known as just reading price action, too

Googling all this, i came across orderbookfx - subscription service. What they have looks basically like the TradeStation Matrix. Time and Sales is the Market Depth. I am uniformed on both of these approaches to trading - i'm all Technical Analysis

So Order Flow is just that - submitted orders. They do not necessarily have to be filled orders, which would put them into Time&Sales, i think..

still learning, thanks

Click to expand...

Tape reading in terms of reading Time & Sales is quite different from reading price action from a chart.

Time & Sales is not market Depth.

Market Depth/L2/DOM is an order book. These are limit orders on the buy and sell side at various price levels that MIGHT represent actual intention to trade but also MIGHT be fake.

Time & Sales is a list of trades executed. Someone submits a buy market order and that is filled against a limit sell order. A market sell order is filled against a limit buy order.

So - Market Depth/L2/DOM can be thought of as 'intent' to trade but it might be fake.
Time & Sales is 'actual' trades.

Using the two, you see the intent & actual. Actual trading is always a bit different to the intent. Orders get pulled, orders get added but rarely is it a case of intent=actual.

One of the methods of using order flow data is in using the actual trade data alongside the DOM/L2. Some people ignore that alltogether though and just use the tape.

In terms of how to combine this with price action - price action from a chart will give you a rough idea of where a trade might be worth taking. This is also referred to as 'context'. Tape reading shows you if the market is reacting at that level. An example of that might be that you expect a reversal up, you see a lot of sell orders on the tape but you no longer see price moving down. In this case, it is often because a player is absorbing that selling by buying what is sold. If you see this, then it acts as a confirming factor for your PA/TA based set up.

This is a good path you are on but you need to sit down with a Time & Sales and a DOM and watch it for a while. A good way to do this is with a free copy of Ninja and a free Zenfire data feed looking at a futures market.

btw - my opinion is that order flow analysis, order book analysis is icing on the cake.

Still - you do actually need the cake.

Thanks pal
I mentioned up there, this is available for FX now - using EBS interbank data

I'm with you on the icing - if the cakes not a lie, that is

who moved my cake?

DionysusToast said:

btw - my opinion is that order flow analysis, order book analysis is icing on the cake.

Still - you do actually need the cake.

Click to expand...

Hello,

I'd like to ask if the term 'order flow analysis' is the same as the 'footprint' charts offered by the Market Delta software?

Thanks,

Pi3141 said:

Hello,

I'd like to ask if the term 'order flow analysis' is the same as the 'footprint' charts offered by the Market Delta software?

Thanks,

Click to expand...

It's all based on the same concepts.

Order flow at the lowest level is Time & Sales/DOM.

I like to think about Cumulative Delta/Footprint charts as a way of seeing order flow data at a higher level or even a "higher timeframe" tape.