Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Thank you for the screenshots and explanation. My interpretation is a little different than yours and I would be very interested in hearing your thoughts. And yes, I do look at the candles as well as I think they complete the picture order flow is telling.
Looking at the bar with the -496 Delta, my take is that price went down compared to the previous bars run into limit buy orders (Passive Buyers) and bounce. I do not see this as sellers and I think those are actually the future trapped buyers.
The next bar with the 404 Delta, looks to me like price ran into limit sell orders (passive sellers) rather than buyers and then when it went down it hurt the -496 passive buyers who are now trapped and whose stops are getting hit starting at the -252 Delta in the next bar.
I am not seeing the larger picture in your screen-print and seeing the entire context might change my interpretation, but this would be my interpretation assuming price is trading at an area of interest. In the end, the result is the same even though our reasoning is different and perhaps this is all that matters in the end. Regardless, I would appreciate your thoughts.
It very well could be a setup for a future long perhaps. From a structural viewpoint, price was slightly above premium (also called Value area high). The telling parameter that it is a short opportunity (for me anyway) is the 49k volume where the +404 delta got trapped. 49k is 5-10x relative volume of the other bars, and is truly where the shorts took multiple large positions. This makes inherent sense from an institutional standpoint. Sell your product above fair price (premium) and have liquidity below in the neighborhood of fair price. This is why the volume is so significantly higher. The large trader(s) will sell into rising prices, which is exactly how anyone should operate in a capitalist system (it is much harder to sell into declining inventory pricing)
Here’s a short video of a different trade review I did for someone else. I think this video is of a long opportunity I took. (Same analytical style though). This is why I say no-need for indicators, rather just learn to read what is actually happening.
I'm generally humbled on a fairly regular basis when it comes to trading and continue to be extremely glad I registered on FIO almost 15 years ago as I still find myself learning new things here . I've spent the past 15+ years automating "indicator soup" strategies, optimizing & narrowing the thousands of strategies tested down to a handful that work "most of the time" but only good enough to use in a semi-automated manner (hence the dashboard shown below).
Integrating machine learning into the process helped somewhat but it wasn't until I recently decided to venture back into order flow analysis that I realized that I wasted a lot of time that should have been spent digging into auction theory (and tick-level volatility & momentum analysis, which I also hope ML will assist with on the strategy front). I ported my MultiCharts EasyLanguage code over to TradeStation OOEL a couple years ago and am now attempting to add order flow into both the UI and strategy engine. The "strategy" show below is nothing more than checking for Delta/Volume > 25%; simple enough for testing purposes but obviously needs help .
I'm not 100% sure TS data is 100% up to the task (particularly bid & ask prices based on what I've read in the TS forums) so will have to compare TS data to what I'm getting from DTN/IQFeed at some point.
Your recent insights have provided a much needed validation that I've switched onto a better path - many thanks for sharing! . You appear to be using Sierra Chart - not being that familiar with that platform, how much of what is shown is built-in vs. custom/private? Are you 100% discretionary or have you ever automated any of your trading method(s) (or even think that OF can be "automated")?
Thanks. I modeled what my screen looks like after a couple other institutional style trader’s screens. Its more about what presentation works for you. What you see is the product of years of trading, 1000s of hours of training and practice. I didnt get to this point alone. People that worked as desk traders in large banks and institutions taught me to read the market that way and how to successfully trade any market. Its all about product inventory and auctioning technique. It helps to contextualize what you see on the screen to what you know already about any given marketplace. Like used cars for example—used cars are purchased by a large transactor at a discount (in volume) and then subsequently re-sold to the retail public at what is typically ~ fair price (also known as the volume-point-of-control). Stocks, cars, cattle, art, futures, apples, sugar, coffee… everything works this way. The reason people cant seem to figure this out (I didnt either for many years) is b/c it’s not taught in school nor does anyone there have any idea anyway. You have to get info and training from someone who traded with a large institution (not a prop firm) in order to have a shot at success in the market.
Thanks for the many traders that reached out to me for the above words and videos. I have spent my entire adult life trading (I'm 53). I've traded houses as inventory, bonds, stocks, options, futures, and even car trailers. They are ALL THE SAME. They follow product inventory supply/demand curves that are points of data. This data follows bell-curve regression mechanics, and buyers and sellers are clearly obvious on a DOM to those who know how to use it. Everything you do in our western capital system operates this way. Apples, cars, oil, art, pork bellies, cotton...everything. Including SP500 futures contracts. What I am showing you is the result of 35 years of various product trading. I learned to trade options on the CBOE floor with a mentor I hired. I have been professionally mentored by an institutional trader, and I quickly recognize now who is not an institutional trader and who is not. Again, thank you. This is how to read the DOM in plain english.
@Ecclesiastes, Fred, this has been an interesting and informative/enlightening series of posts, and thank you for it. It is certainly the case that every competitive market is fundamentally the same.
It would be your call, but if you wanted to develop these ideas further, you might want to start a new thread on this topic. In a way, it is larger than the subject of this thread, which is whether indicators are a waste of time. The fundamental question is what is not a waste of time, and why.
Up to you, but I think it would be well-received.
And thanks for what you have done here. I think it can help many traders.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
For those interested. This is my bread + butter setup.
Take this and ignore it, or use it. It does not matter to me. I am merely stating the truth. Truth demonstrated through evidence and experience.
I reiterate for the record, you do not need indicators. You need to know how the market works.
I am an institutionally trained, independent retail trader with Chicago floor experience. I have been trading for my entire adult life, with alot of that in the candles and indicators / RSI /MACD world. I know exactly how all that stuff works. And so do institutional traders. You are being lured into a liquidity trap if you didn't realize it. You have to flow with the institutional money. 99% of traders do not. 99% of traders use indicators. Hmmm. I wonder if there is a correlation.
Institutional traders do not rely upon indicators. They would not have a job if they did.
You can use indicators, but unless you have a fundamental understanding of what the market is actually doing, then the probability of success is not in your favor.