Orderflow Trading

[DayTraderProfesional]

Hi,

Seems that in this forum there are traders who love orderflow. I will use this thread to share how i understand it and it's open for who wants to do the same.

I will use volumeladder charts and volume profile and all focused on the e-mini sp. Hope we can start nice discussions.

Cheers

 

ADVISE

 

All that is explained in this thread is not intended to be A buy or sell recomendation. All is for educational purposes, and has this only objective. Any one reading this thread and using the ideas exposed here is doing it at his own risk.

Edited September 20, 2016 by DayTraderProfesional

[⭐ AndyS]

Best of luck and hope to get a good group going.

[lululee]

Hi,

Seems that in this forum there are traders who love orderflow. I will use this thread to share how i understand it and it's open for who wants to do the same.

I will use volumeladder charts and volume profile and all focused on the e-mini sp. Hope we can start nice discussions.

Cheers

 

Hi it will be good idea if we all use same tools, that will help tremendously in understanding and execution. I love the way you teach/discuss and love to be part of this thread. Please let us know what is the common platform you suggest that we can all use. Thanks in advance

[DayTraderProfesional]

Hi lululee,

I will use ninjatrader. For the tools, we can start using footprint charts with some basic features, like footprint bars and delta.

We will try to keep it simple for learn about it. Basically is discussing about buy and sell activity and this can be do it with any platform that has footprint bars.

I think that if someone will use some special feature to show an example, trade or anything else, will explain it for the benefit of participants on the thread. This will give the chance that more traders can jump on it. But it's open for any tool that you want to use.

Let's will see how it goes ;) .

[⭐ nadjib]

I know that is a very good idea what you really propose to understand here

[⭐ laser1000it]

With all Orderflow stuff the loss of the account and/or margin call is 100%. The winner is only the market and the software house. :) Edited July 29, 2016 by laser1000it

[rodamas]

Hi lululee,

I will use ninjatrader. For the tools, we can start using footprint charts with some basic features, like footprint bars and delta.

We will try to keep it simple for learn about it. Basically is discussing about buy and sell activity and this can be do it with any platform that has footprint bars.

I think that if someone will use some special feature to show an example, trade or anything else, will explain it for the benefit of participants on the thread. This will give the chance that more traders can jump on it. But it's open for any tool that you want to use.

Let's will see how it goes ;) .

 

Dear DTP,

 

This is a good initiative and thank you. One of the challenge I find is using order flow is to learn on how to see a pre-determined level is reacting dynamically. The tool can be anything that fits like you mentioned as it is a means to an end (many in II thanks to the good folks here :-bd ) .

[DayTraderProfesional]

With all Orderflow stuff the loss of the account and/or margin call is 100%. The winner is only the market and the software house. :)

 

Hi laser1000it,

It's true. Orderflow is not the holy grial. Without mastering your mind and emotions any method you use will have this result, account loss.

Trading orderflow succesfully is a long way road. But we need to start at any point and discover by onseself if this can be or not useful.

Cheers

[DayTraderProfesional]

Let's starts with what i think it's a main component to trade orderflow successfully, be focused. Looking orderflow at any point can't be helpful.

Like @rodamas said, having pre-determined levels can help us, to be focused. With this topic can exists a lot of opinions, and any will be valid. A level is a level, and always will be your level, maybe wachted by you alone (rare :) ), or not. I know people trying to get the perfect level, and ok, why not. But the most important is that, this, is giving to the trader a focused point.

I'm using work zones, or levels to trade at them. I will explain the philosophy behind them and why i use them. This will help any one reading my analysis to understand why this zone is important to me for to be focus on it. I encourage everyone to do the same, have your own levels. Don't think about wich levels will be more efective or not, because it's a main component, but not the only. The next step will be to see what is happening there to know what i can do or not.

Edited July 29, 2016 by DayTraderProfesional

[DayTraderProfesional]

In my case, a level it's not a specific price, it's an area around this price. For example, if i have 2152.25 like a level this means, i will wacht the action around this zone.

In the next image you can see my work zones:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/6a866ce0-23ed-4b3a-859f-9c3bf925d867/2016-07-29_0839.png

 

Most of this levels are directional zones, easy to see in the chart. If we are trading in a range i will use microlevels, information of the last day (value area, high, low, and lvn or balances extrems (UH,UL) zones) to help me to understand the direction inside of this zone, but focused on the extrems of this range zone, like an important are to watch.

Edited July 29, 2016 by DayTraderProfesional

[DayTraderProfesional]

Let see an example of today:

 

Look how the market is working in the 2166.50 and 2159 zone. Looking at the daily bar we can see clearly that the market is balancing this zones, working up and down inside of it. We are trading inside of a previous range, and the same action is giving me zones to work, UH or UL.

At the extrem of the daily Bar we have 2 absorptions, buyers losing money, and few tics below a rejection.

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/f97b553e-48b8-4b13-a27e-41d066c06a46/2016-07-29_0859.png

 

This above situation gives us the chance to fade extrems. Bar 08:37 give a sell signal. This sell signal is based on delta, nothing more. if you see bar 07:17 the delta is positive. Bar 08:00 delta is negative and in the next we have an increase of the delta, showing sellers speeding up. You have the chance in the Bar 08:59 to take a short, expecting a trade till 60 area, where you have a less worked zone inside the balanced action:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/32a4e1e2-34a1-4d08-871b-be8af98d7548/2016-07-29_0905.png

[DayTraderProfesional]

This is the trade explain it above:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/cd2f8d98-b3c5-4f40-b145-16fef5aee828/2016-07-29_0908.png

[DayTraderProfesional]

I want to explain somenthing interesting in the action this morning. I was showing previously a sell signal based on delta, but we have another sell signal that if we trade this one, the trade was a loser trade.

 

This is why it's important to understand the action, more than follow signals. Look at bar 06:26 negative delta. Bar 06:47 Positive and in the next one, 07:01 we have less buyers. This can be a reversal signal, previous move down, buyers becoming less in the movement. But, where is happenning the action? We know that the action is balanced. Every orderflow trader, knows that the low extrem of a balanced action, is knowed like UL and the advantatge is for buyers and not sellers. This can prevent you to take this short trade, because the actions was telling you that isn't a good place to think in shorts:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/34658b68-0ecf-4bb4-aa81-12731bd68fe7/2016-07-29_0918.png

Edited July 29, 2016 by DayTraderProfesional

[DayTraderProfesional]

The previous explanation shows an important aspect about levels. You can have your levels, much, you need to have them, but don't forget to follow the natural levels that the market is giving you.

In the case explain it above, balanced actions has like a natural levels to fade the zone , the extrems, called UH/UL

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/c0a9cb89-52c1-43b2-ac02-e8dcb0d8dc7b/2016-07-29_0942.png

Edited July 29, 2016 by DayTraderProfesional

[thedriver]

Very very good thank a lot!!

[tradermic]

finally here is someone who has understood it!

 

very good, @daytrader...

[marcus70s07]

Thanks for doing this DTP, I really enjoy the way you describe/analize order flow action.

And for sure this will be a very helpful and most visited post in this forum !!!

[jff1713006937]

Very nice, DTP... Keep going bro.

I also see that you are very proficient in using market profile and its terms. So based on MP , do you have any or have developed a system that could generate calls at UL (value area low - val) or UH (value area high - vah) ?

 

I think we could write a strategy using previous days vwap. poc and vah/val to trade intra day.

 

Break out of these levels we could look into order flow and then trade accordingly.

 

Your thoughts on this would be helpful.

 

Thanks & Cheers!!!!

Jff

[rodamas]

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/34658b68-0ecf-4bb4-aa81-12731bd68fe7/2016-07-29_0918.png

 

Dear DTP,

 

Can you explain what the numbers on the top and bottom of each bar as well as those on the histogram at the bottom mean on your footprint chart, just to be sure so we can follow your explanation better.

 

Thanks again.

[DayTraderProfesional]

Dear DTP,

 

Can you explain what the numbers on the top and bottom of each bar as well as those on the histogram at the bottom mean on your footprint chart, just to be sure so we can follow your explanation better.

 

Thanks again.

 

Here you go ;)

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/496acc6f-f2cc-4fb2-8a94-474af2071b6d/2016-07-30_0950.png

[DayTraderProfesional]

Very nice, DTP... Keep going bro.

I also see that you are very proficient in using market profile and its terms. So based on MP , do you have any or have developed a system that could generate calls at UL (value area low - val) or UH (value area high - vah) ?

 

I think we could write a strategy using previous days vwap. poc and vah/val to trade intra day.

 

Break out of these levels we could look into order flow and then trade accordingly.

 

Your thoughts on this would be helpful.

 

Thanks & Cheers!!!!

Jff

 

Hi Jff

 

Like i said when i was speaking about levels, a level will be that. I'm not a coder, and think in terms of a coder to describe how a UF or UL is, it's difficult for me. Visually are really easy to spot, but write an strategy for that will be a hard task to me and i don't know if we can have some edge doing that. Doesn't matter if you trade a balance's break, or a HVN, LOD, UF, UL.... this levels are only yours, the market don't take care about them but you can take care about them and like you said trade them accordingly in what you see on the orderflow action.

 

 

A general Note for Orderflow Traders:

 

Naked Charts is the best you can use to trade, because you need to be really involved in what you are seeing. Markers are very helpful to do fast calculations that help you to understand somenthing. imbalances are an example of that. But orderflow is very complicated to code in a terms of a successfully markers signals. Volume is alive and for a retail, rigid algos is not the way. When we speak more about realtime actions you will see that will be better to know the structure and trade accordingly of what you see, using your mind like the best flexible indicator/algo that someone can have ;)

[DayTraderProfesional]

Let's we talk in more deep about Balanced actions:

 

First of all, to trade successfully you don't need to trade every were, and have dozens of patterns. Having only one pattern and becoming a master of it, you can trade successfully. This is why i want to spend a little more time speaking about balanced actions, because most traders think that they are tiresome and has no interest in trading them. Some others has fear to trade at the highs or lows because seems that you are trading against the move. If someone is able to masterize how to trade them, can be a very profitable way to trade.

 

The first piece of the puzzle is your mind and expectations. To trade Balanced actions you need to accept that fading this zones are the right way to trade objectively. Your mind will fight with this logic, because on a balanced zone your are more focused on the brake of it, than in what the market is doing. This is why most traders take long trades at the highs or short trades at the lows, pure personal expectations. Wrong mind, wrong results.

 

Somentimes is tricky to know real intentions of the market, but in many cases the market is clear speaking. Value is a real concecpt in the moderns markets and don't has nothing to be with our own expectations, hopes or what you feel. Be objective and logical about what the market is showing you, and is probably that you will have different results. It's not easy, because you will need to show courage, but it will be better than trade personal expectations.

Edited July 30, 2016 by DayTraderProfesional

[DayTraderProfesional]

In a balanced action what we need to do first is define the highs and lows, for to know clear where we can work with the UH/UF. It's easy to understand that if there exist a unfair situation to one participant of the market at those zones, we need to be on the fair side ;).

 

This can seems a very simple task but not really, because the market is changing constantly. Vpoc for the day is changing and this means value, also. Someone need to be very adaptative looking at it. Like i said, somentimes will be more easy, somentimes more harder.

 

Let's look to an example about what is a microbalanced action using the volumeladder chart:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/8a41771f-f2f4-4a4b-b7f6-62c3422bfa39/2016-07-30_1154.png

 

With the image we can see that to define a Highs we need to see a decreasing activity on the ask side, 3515 vs 895. To define a Lows we need to se a decreasing activity on the bid side, 1265 vs 502. This is important and you need to know, how many contracts are available on demand and supply. Yes, i'm speaking about the level 2 data. If you know that the average is more and less 500 contracts, you can see clearly the highs and lows. In the image showed the market was trading 20 minuts at this area, and look the lows, no more than 502 contracts traded. if the average was that quantity we know clearly the no interest to trade at this price in 20 minuts.

 

Knowing the highs and lows we will know very precisely were we can trade fairly or not. It's probably that we begin to understand if i'm a buyer in this lows where need to be my stop, and things like that, but maybe i'm going to fast ;)

 

Let's talk more about it, balanced actions

Edited July 30, 2016 by DayTraderProfesional

[DayTraderProfesional]

The Highs and Lows is an important aspect speaking about risk terms:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/fd3ce8d5-b0ff-414c-8961-947d9ada4946/2016-07-30_1219.png

 

Why Below the low is a best Risk zone? Think about sell activity. If we detect a zone where sellers don't want to trade, if you are long your stop will be a sell order. The best place to put a sell stop order is where sellers don't have interest to trade. In the opposite situation, highs we can use the same scenario.

[DayTraderProfesional]

Let's we think now in terms of reward:

 

http://content.screencast.com/users/daytraderprofesional/folders/Jing/media/115e58f8-7a8e-48f4-bff1-199b33daf163/2016-07-30_1233.png