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Really the question you should be asking is how has orderflow been working for you, I mean really. All the fancy terms being slung around here is crazy. Fancy terms like liquidity distribution, deltas, foot prints, whatever!
Everybody here needs to learn how to read a chart.
The following 2 users say Thank You to fwddetent for this post:
This is just how I trade the market every day, just my opinion.
On the order book, there is always a slight imbalance of Asks or Bids at any one time but normally it ranges between 5 - 8% in favour of one side. A small excess of Asks may tempt the market long or a small excess of Bids may tempt the market to go short but it all depends on the urgency of excuted market orders. For a tradable imbalance to occur, we need volume levels at three times average levels to increase ONE side of the order book by at least 30%. So for example on the ES, volume is 3 times average daily volume and the Asks on the order book are averaging 30% higher in order numbers over Bids - we have a strong and reliable tradable bullish trend that we can profit from. We are also hopeing to capture a cascading stop loss event as an extra bonus, a pay day in itself.
The relationship therefore is market orders need to dominate limit orders by three to one to create this reliable imbalance, the point where this strategy breaks down is if a market that is being heavily absorbed.
Simply we can't trade a market unless the Market orders are dominating Limit orders, or orderflow strategy's will mostly fail because delta data will be useless.
The following 3 users say Thank You to RickM for this post:
Hats off to any retailer out there that can scalp footprint charts. Beyond my capabilities My "orderflow is simple. I like to see the auctions, get a discount when I see its abosorbed, exhausted and most importantly in line with macro play (from fc v target wl) at the right time. Heres one example in the US session close that just happened. Note the full auction (risk) and tests of POC (entry).
The following 2 users say Thank You to Cools81 for this post:
We don't need to care about any hidden order flow data, the data we have already shows us fantastic average imbalance readings already. Any missing data won't change this imbalance.
I am a firm believer that we should only be worried about data in front of our eyes, then trade what we believe its telling us.
Cheers
The following user says Thank You to RickM for this post:
The imbalance starts in the DOM then will be present in the delta 10 seconds to 1 minute later. I believe we need to follow the imbalance on the DOM if recent data shows little signs of being absorbed. In other words, I want to see imbalance on the DOM producing imbalance on the delta levels by the end of each 1 minute candle.
Cheers
The following 3 users say Thank You to RickM for this post:
