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How to flow with the order flow? 26 replies

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Discussions on Order Flow/Volume

Quoting DonPato
{quote} Yes this is what delta volume profiles do...they give this process at each and every price level within every candle. So you can actually pinpoint what price absorption occurrs. It would appear that your indicator gives a delta of the entire candle...and then places it as if it was a price bar. Not sure how that helps...often time I see your indicator moving away from price...divergence? {quote} This is the very definition of absorption. Again the clue is how does price respond to this absorption? There are many reasons that price would...
a CD candle on sierra is just a sum of all market vs limit orders. if it is flat, then CD is flat. divergence is what i'm looking for. especially when price is flat but also when for example in wheat chart i posted earlier price does a shallow dip and cd creates new chart low. when this happens then i could conclude that institutional buyers are in control of the market. buying dips and selling rallies like they do. wheat example is tricky for me and i have know that its bull market and that reduces trade risk.

i don't worry about the order book because of iceberg orders but institutions (as i understand it) don't make larger orders but feed small limits order in a bit at a time.

btw - i don't have any issue believing da boyz go for retail stop orders, it is a liquidity pool, why not use it. anyway i assume this an put my orders there.
In tea leaves we trust!
  • Post #462
  • Quote
  • Edited 11:11pm Jul 25, 2021 11:00pm | Edited 11:11pm
Quoting RickM
{quote} Hi Don I think that’s where the use of the Footprint chart really starts to make sense of all the absorption, imbalance and delta levels we see in a totally visual package. While the Cum delta is bearish as the market is bullish, I expect to see high absorption numbers occurring in front of our eyes along with strong Ask imbalance numbers. Liquidity is king during these times and no Buyer or Seller has any effect on direction till Volume steps up in my opinion. There’s always that one thrust candle that contains at least three sets of Bid...
Wow ! behind the scenes story.
Any small book where i may learn these technical jargons too. Though i am getting it in my own way but not good in explaining as you do.

I will go through the entire thread Donpato is also excellent in explaining, like on post #3 i just learned passive and agressive orders.

Thanks Rick and Don for the conversation.
"Exchange of hands"
Quoting RickM
{quote} Hi Don I think that’s where the use of the Footprint chart really starts to make sense of all the absorption, imbalance and delta levels we see in a totally visual package. While the Cum delta is bearish as the market is bullish, I expect to see high absorption numbers occurring in front of our eyes along with strong Ask imbalance numbers. Liquidity is king during these times and no Buyer or Seller has any effect on direction till Volume steps up in my opinion. There’s always that one thrust candle that contains at least three sets of Bid...
So that's what you were posting, footprint charts. Just when I thought there was nothing left to learn!
If you are good at something, never do it for free--Joker
Quoting Mcbeaners
copper bounce @ 41.90 meanwhile wheat is coming back to me. i'll be a buyer @ 666.75 ok, enough from me. see you all in the morning. {image}
my wheat order was hit. i'm long. as i was somewhat alcoholic yesterday, i'm not really feeling this one. will probably close before the pit opens.
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In tea leaves we trust!
closed wheat @ 670.25

i missed copper build, gone without me. i'm feeling my missed trade from last night.
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In tea leaves we trust!
looking to short silver @ 25.35 ish. about 25.28 spot

given i'm posting loads i'll chill, people can see how i'm doing it.
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In tea leaves we trust!
Quoting Mcbeaners
looking to short silver @ 25.35 ish. about 25.28 spot given i'm posting loads i'll chill, people can see how i'm doing it. {image}
silver setup didn't go anywhere - closed @ 25.278
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silver - is this a short or a long? days of old i would assume a screaming short but its a long imo.
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Quoting Mcbeaners
silver - is this a short or a long? days of old i would assume a screaming short but its a long imo. {image}
Sorry for the dumb questions. But how do you guys get your volume profiles like that? Did you have to code it yourself?
Quoting NwBoyy
{quote} Sorry for the dumb questions. But how do you guys get your volume profiles like that? Did you have to code it yourself?
assuming you are looking at CD on the chart - its the default setup of sierracharts i think. don't remember changing it.
In tea leaves we trust!
Quoting NwBoyy
{quote} Sorry for the dumb questions. But how do you guys get your volume profiles like that? Did you have to code it yourself?
Can you please specify which which profile you are speaking about. There is a link (I think several times) in this thread for the delta volume profile for cTrader. This covers most of the FX markets. Also for the futures market it will depend on the platform you use. The one I'm using is tradestation and the delta volume profile is an add on that is separate
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Quoting DonPato
{quote} Below is a screenshot of the depth of market (DOM) from my futures feed...(yes "real" volume). The numbers in the red column are the "depth" in contracts of the passive sell orders. The numbers in the blue column are the "depth" in contracts of the passive buy orders..the yellow line in the middle is the last quote. As you can see the DOM is only "visible" 10 ticks above and 10 ticks below the current quote. So my question was how is an imbalance in the bid/ask vs the liquidity detected at any level when these numbers are constantly changing...as...
Hello , thanks alot for your information . Quick question , how do i download the order flow and the volume profile and the tape and which platform can i find it on ?
Quoting Haz123
{quote} Hello , thanks alot for your information . Quick question , how do i download the order flow and the volume profile and the tape and which platform can i find it on ?
Pretty much any futures account can give you this information. I don't recommend any particular platform but I personally use tradestation. But any futures platform will give you this data. Again as described in my post, 10 ticks above and below the current quote.
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Quoting DonPato
Hello again Hefei. The histogram is for Delta volume at each price level. The longer the histogram the more volume. So the long horizontal lines are the price level where there was more aggressive activity. The color I have configured to identify buying and selling. Green for buying and red for selling. These colors paint in the area where at least 70% of the volume occurred. The lighter colors are for buying and/or selling outside this zone agua for buying and magenta for selling and represent "weaker" buying and selling.
is it the volume of contracts traded, or the volume of tics, inside the time-window you configure?
Also how do you determine, for each trade, if the bulk of contracts for this trade going from the seller to the buyer is part of a selling volume or buying volume ?
Quoting Ieis5
...also how do you determine, for each trade, if the bulk of contracts for this trade going from the seller to the buyer is part of a selling volume or buying volume ?
The definition of "Delta" means the net volume at each level. If there is more active selling then the delta is negative and prints a red histogram (or whatever color you configure). If there is more active buying then the delta is positive and prints a green histogram (or however you configure the color). The longer the histogram bar the larger the difference in Delta meaning more of whichever color you have configured. Again I did not write the indicator and do not support it.
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Hello All...Its been awhile since I posted anything worth reading. So while going over the weeklies and reviewing this week's trading activity I thought I would point out one of the clearest examples of Buying Absorption I've seen in a great while.
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From the above it is clear to see where the liquidity (The passive order flow) was situated and what clues one has to its presence IF you know how to read the order flow. Note the steep rise in price with a corresponding decline in volume (upper portion of image). With the large bullish candle closing near the highs many "technicians" will tell you it is a "strong" bullish indicator and price will continue to rise. Many have entered their buy orders or will do so at the close of this clearly bullish indicator...all the Technical analysis tools are showing "strongly bullish" signals.

Yet hidden inside this single candle is an indication of a pending reversal...and you are advised two days before it actually happens!! The clue is buying absorption!! Note the order flow candles (lower section of chart). See how the majority of the buying volume was near the top of this "strongly bullish" candle. Look and see how despite all that buying, price just kind of sat there and didn't advance, and in fact ranged there. Also note that early in this same day (candle), price rocketed higher on comparatively little buying. Why didn't price continue its skyward advance?

In a word, "Absorption". All this buying volume was "absorbed" by unseen selling liquidity. Its orders were densely populated in this area and "absorbed" all the aggressive order flow so as not to permit price to advance much beyond that area. The next day selling took place as many (like me) recognized the absorption condition and joined in with the clearly present "larger concerns" passive order flow. The next day, buyers took a final stab at advancing price and were again absorbed, causing them to liquidate and "whoosh"!! price plummeted. The very next day after that...buyers came in again trying to push price higher, and were once again absorbed buy selling liquidity.

Friends, THIS is what a good understanding of order flow brings. You leave behind the illusion and fantasy of "technical analysis" and truly read what the participants in the market are doing. Especially those "big players" out there...or the "big banks"...or what ever else you call them. You just follow along with what is going on on a minute-by-minute, day-by-day basis until you see the order flow do something outside the normal flow. You have at least one or two candles BEFORE the move, to analyze and position yourself, getting the best price for your order with the minimum exposure to risk.

Just by way of numbers...this trade is still open, its actual risk was 75 pips, and it is currently in open profit of 547 pips. Can you do the math on that RRR?

I hope this will inspire you to take a closer look at this kind of trading, and perhaps ask some question of probative value. Cheers
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Quoting DonPato
{quote} The definition of "Delta" means the net volume at each level. If there is more active selling then the delta is negative and prints a red histogram (or whatever color you configure). If there is more active buying then the delta is positive and prints a green histogram (or however you configure the color). The longer the histogram bar the larger the difference in Delta meaning more of whichever color you have configured. Again I did not write the indicator and do not support it.
yeah but what is the mathematical formula for the ''buying volume'' and the mathematical formula for the ''selling volume''?
Quoting Ieis5
{quote} yeah but what is the mathematical formula for the ''buying volume'' and the mathematical formula for the ''selling volume''?
I suspect you are trying to utilize this "formula" in a program or somehow create your own software...so just to repeat myself...THERE IS NO FORMULA!! It is simply data!! However you can certainly ask your broker for the following DATA:

 

  1. Volume of market orders (including all stops - which are market orders) transacted at ask. These are the active buyers utilizing selling liquidity. And of course this will be at any and every specific price.
  2. Volume of market orders (including all stops - which are market orders) transacted at the bid. These are active sellers utilizing buying liquidity. And of course this will be at the exact same price as #1.
  3. The difference between these two numbers will be "delta"

Therefore, Delta = Ask volume - Bid volume. And it calculated at each and every price level...1.000; 1.001; 1.002, etc.

Now as to how this is calculated in the FX market? It cannot be done this way. Because the spot FX is decentralized...remember? This information comes only from the futures market. As to how the indicator I posted does it? I don't know because I didn't write it. I can only assume it is extrapolated. But you can find the author yourself and ask him/her. Or just better yet buy the stupid thing and learn how to use it.

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hello good evening everybody from Italy
i've read all trhead (even the Mr Don Pato 's post and attachemet in his profile)but sincerly? i really don't know how to interptate the volume delta time frame indi that i just down loaded in ctrader platform( with the setting showed some page ago from mr Don Pato maybe my little braine needs some help.i got the snap shot of today sp500 drop and i would like that somebody try to explame how to use/read this indi.
In this way i would ask to mr Don Pato if he would be so kind to give me perhaps some privat lesson as a mentor.
bye see you and good night
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Quoting dieguito80
hello... i really don't know how to interptate the volume delta time frame indi that i just down loaded in ctrader platform...
The profiles are shown for the time frame you have listed in teh indicator settings themselves. The candles shown are for a smaller time frame. With this setting you are reading the profiles as if each was a single candle, and the smaller candles give you and indication of how price moved inside the single time frame.

I personally set the profiles to daily...and the underlying candles (I have them as OHLC bars) at 3 hrs or 2 hrs...your choice

Thus each new profile is a new daily candle. I trade daily candles and greater on the spot FX market...I've explained this several time in this thread.

The colors are straight forward. Green (or which ever color you chose) is buying delta. If a green bar is there it is because there was more active buying than selling at that level. Likewise, Red, (or which ever color you chose), is selling delta. If the Red bar is there there is more active selling than buying at that level. These setting apply and account for 70% of the total volume. The remaining volume (on my screen it is light blue, or magenta) is for that last remaining portion of the volume. Light blue for delta buying, and magenta for delta selling.

It is interpreted to show where active orders (ticks in FX) are being transacted and at which price level is most active, AND which side of the market is dominant. As I'm mention many times on this thread, the price response to this activity is where the true interpretive value is seen. It allows you to detect something in the market that NO indictor can tell you...the liquidity levels. Liquidity levels are NOT posted on any data set...they are not "visible" until they have transacted by an active and opposing order. So...not to beat a dead horse...watching how price responds to the active buying and selling you CAN see with this indicator allows you to "see" where the dense or thin liquidity levels are, and take appropriate action.

Quoting dieguito80
...i would ask to mr Don Pato if he would be so kind to give me perhaps some privat lesson as a mentor. bye see you and good night
If you want to discuss this please send me a PM and we can exchange email addresses...FX factory frowns on transacting business on this forum.
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