xplorer 

Hi Vamous, and welcome. Before I attempt to reply, OF=Order Flow? Or do you mean something else by OF?

Hi,

Thank you for this very fast answer, i love this Community.
And yes i mean Orderflow.

OF = Orderflow

Vamous 

And yes i mean Orderflow. OF = Orderflow

Ok, now that's been clarified, onto your post:

Quoting 

How do you discipline yourself to not enter on every OF signal too fast? Wait for an OF signal at the VAL Wait for an OF signal below the VAL (outside value)

Quoting 

How do I decide beforehand how strong/clear an OF signal needs to be before it counts as a valid entry trigger?

First off, this is the first time I have heard of order flow signals, so I'm not sure what, in the context of order flow, would constitute a signal, as such.

Order flow is an umbrella term, which can mean different things to different people. Do you work on something based on your reading of the DOM (Depth of Market)? Is it something you see on the Time and Sales (a.k.a. the Tape)? Is it based on volume profile? Or just the speed at which orders are hitting the bid vs the offer?

If you could share an example of what a OF signal you use to tell you when to enter a trade, that might help clarifying things further.


Your rule of thumb of max 3 attempts per trade idea/zone sounds reasonable to me. Assuming you're day trading, obviously you don't want to blow all of your maximum daily risk on what could be one of several opportunities during the daily session.

In any case, it sounds like the main issue you highlighted is one of discipline. I don't know how long you have been trading but usually discipline comes with experience and, for your specific case, by 'experience' I mean repeated exposure to the results of jumping too quickly onto a trade.

The immediate drawbacks of entering too quickly are

1. a larger-than-anticipated downside risk to your trade, which in turn means ->
2. a degraded risk-reward (unless you have a reasonable expectation that you can increase your exit target to make up for fhe increased risk)
3. a worsened mental state because of the added mental pressure of having entered too soon and your trade may be going against you for longer
4. the risk of losing more money per trade

Number 4 on the list is redundant, but I wanted to leave it there because at the end it is the most significant to the bottom line: whatever your edge may be, entering too quickly may turn out to erode it in the long run.

The secondary drawbacks for me are psychological: in case you were right, even if just in a handful of occasions, your brain is going to start telling you that it is okay to enter early. Or that you can move your stop by 10 extra ticks just this once.

In other words, the risks associated with the negative psychological aspects are considerable and can damage your trading habits, and it can take a long time to correct those bad habits.

Again, this tends to get resolved once you have spent enough time "battling the markets",

All of the above assumes, however, that behind your trades there is a solid analysis that proves you have a well-defined edge, a sound risk/reward, etc.

xplorer 

Ok, now that's been clarified, onto your post: First off, this is the first time I have heard of order flow signals, so I'm not sure what, in the context of order flow, would constitute a signal, as such. Order flow is an umbrella term, which can mean different things to different people. Do you work on something based on your reading of the DOM (Depth of Market)? Is it something you see on the Time and Sales (a.k.a. the Tape)? Is it based on volume profile? Or just the speed at which orders are hitting the bid vs the offer? If you could share an example of what a OF signal you use to tell you when to enter a trade, that might help clarifying things further. Your rule of thumb of max 3 attempts per trade idea/zone sounds reasonable to me. Assuming you're day trading, obviously you don't want to blow all of your maximum daily risk on what could be one of several opportunities during the daily session. In any case, it sounds like the main issue you highlighted is one of discipline. I don't know how long you have been trading but usually discipline comes with experience and, for your specific case, by 'experience' I mean repeated exposure to the results of jumping too quickly onto a trade. The immediate drawbacks of entering too quickly are a larger-than-anticipated downside risk to your trade, which in turn means -> a degraded risk-reward (unless you have a reasonable expectation that you can increase your exit target to make up for fhe increased risk) a worsened mental state because of the added mental pressure of having entered too soon and your trade may be going against you for longer the risk of losing more money per trade Number 4 on the list is redundant, but I wanted to leave it there because at the end it is the most significant to the bottom line: whatever your edge may be, entering too quickly may turn out to erode it in the long run. The secondary drawbacks for me are psychological: in case you were right, even if just in a handful of occasions, your brain is going to start telling you that it is okay to enter early. Or that you can move your stop by 10 extra ticks just this once. In other words, the risks associated with the negative psychological aspects are considerable and can damage your trading habits, and it can take a long time to correct those bad habits. Again, this tends to get resolved once you have spent enough time "battling the markets", All of the above assumes, however, that behind your trades there is a solid analysis that proves you have a well-defined edge, a sound risk/reward, etc.

Hi xplorer,

Thanks for the detailed reply.

To answer your question first: by an OF signal I mean something like absorption or a stacked imbalance.

On the discipline point — I don't think that's actually my core issue. I got a similar answer from someone else I'm working with Ticino. He answered:
instead of counting "attempts" per idea, cap your total loss per period (he uses roughly 4x initial risk) and the number of scratch/loss trades (also capped at 4) — once you hit either, stop and review before continuing, rather than pre-judging how strong a signal needs to be. I like that framing much better than "attempts," so I'd rather think in terms of signal count going forward.

What I actually think my problem is: not discipline, but adapting to the current market. I don't know beforehand what strength or type of signal I should even be looking for in a given moment — that's the part I can't nail down.

A bit more context on how I use tools: in a trend I prefer the DOM, because a trendline gives a much tighter zone where a reaction has to happen. In a range, "out of value" is a much bigger zone, so I prefer the footprint there instead — it lets me see absorption/imbalance at specific price levels rather than just reading the overall tape.

Where I actually get stuck is choosing the bar type itself. A 5-min candle is fine after a small move, but the same 5-min candle is close to meaningless inside a range that's already moved a huge distance. So depending on current volatility I might use a 5-min candle, a 250-trades bar, or a 600-volume bar — but I don't have a systematic way to decide which one fits the current market, and that's really the gap I'm trying to close.

Curious how you'd approach that part.

Thanks again,
Vamous