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Thread: Order Flow Trading

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    raa
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    Lightbulb Order Flow Trading

    Hi there. This is an experimental topic. Please don't try this at home, despite I am experimenting it with a real money (not too big though), as I found out I lose interest too fast with a paper account to concentrate. Instead, I usually kill a part of an account pretty fast doing all sorts of stupid things, then I get desperate to recover, step back, and then when it usually improves

    All that said, let's see if it is going to work. Here I will cover several tactics to trade order flow: channel scalping, option strike fading/gunning, stop hunting. I get all parts from different sources and concentrate on this ideology of order flow trading more and more, starting from August last year. Different pieces are inspired by different sources: channel scalping by Lance Beggs and YTC scalper although it's not exactly this that, option gunning and stop hunt - by Deamon Goldsmith (Darkstar) and his Order flow trading for fun and profit, and option strike fading by my own research and inventions.

    So let's see how it will be going together. Feel free to ask any question along the way.
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    I like this....

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    raa
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    Default Forex surfing

    The concept is borrowed from Lance Beggs: there is no certainty in market, especially in fx market, enjoy uncertainty. I add: there are zillions of factor influencing market tidal forces and at the lower level it is practically impossible and senseless to predict the next move. All those candle patterns, setups, break outs - it's all trying to apply certainty (like if there is an engulfing candle then market is going there, if there is a break of this little consolidation - market is moving there) to an absolutely uncertain thing such as market is. So, every little move is uncertain, but the way they follow one another - it has some order. So the idea is to eliminate the search of certainty in market fractals: candles, bars, trendlines, and replace it with very generic "waves" and make trading approach be similar to a surfing: you wait for the wave to come, you mount it, and it either carry you towards the coast and kick you off and you look for the next one.

    I am not talking here about Elliot or Gann waves, I am talking about a very generalized view of the market as a number of waves without an attempt to calculate their ratios, how much pips one if bigger than other - I argue that it does not matter. All you need is to select a direction, and mount the wave.

    Here is a little example of trades I took today in accordance to this principle.

    Order Flow Trading-screenshot030.jpg

    Indeed I exited too early but I did not want to go further today. However this should give you some idea how it may look like to "surf the forex waves". Enjoy.
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    raa
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    Example above features AUDUSD chart with 2.5 pips range bars, garnished by two Keltner channels set to 35,3 and 35,6.

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    raa
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    Here is the latest example of the order flow trading similar to news trading, on the back of 1Trl US IMF lending capacity announcement. Big success.

    Order Flow Trading-screenshot031.jpg

    Trading after news be it scheduled or unscheduled like this time, is done with stop orders, basically what you do is to place a stop order above or below a swing high or low of the pull back (or in the middle if there is no definite wave and momentum is very strong like in this example) expecting price to continue in the prevailing direction. You just ride momentum. This is different to the regular flow surfing where you enter with either limit or market order when price pulls back into the zone of the Keltner channel getting ready for the new wave.

    When trading news with stops, have your stop loss very small: 5 pips or less, as you ride on momentum, and if it doesn't work immediately, i.e. in the matter of seconds, bail out and close. I use 1.0 pip range bars for any momentum-based order flow trading, such as after news volatility trading.
    Last edited by raa; 18-01-2012 at 10:28 AM.
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    raa
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    Attempted to short it. Had BE kicked in after 10 pips profit, but it got triggered. Move looked exhausted at least temporarily. I expect a pull back to EMA20 on H1, around 5587 before moving any lower. Possibly will pass it on today.
    Order Flow Trading-screenshot033.jpg

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    raa
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    Another attempt, resulted in a long waiting, howering in a loss and finally closed for a 3 pips gain when GU raised right before the Merkel is about to open a Davos forum. I marked my original stop loss and take profit.
    Order Flow Trading-screenshot034.jpg

    update: looks like I was certainly right to close my position, like any typical pre-event market activity, any moves get more often than not reversed before the news come out

    Attached Thumbnails Attached Thumbnails Order Flow Trading-screenshot035.jpg  
    Last edited by raa; 25-01-2012 at 04:18 PM.

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    raa
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    We will have a EU Summit press conference by the end of the main session today, approx at 6PM London (subject to change), this should provide with some fantastic opportunities to profit using "wave surfing" approach discussed here.

    update: the summit was so bland and about nothing, there was no volatility to speak about. how lame.
    Last edited by raa; 31-01-2012 at 08:45 AM.

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    raa
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    Look at 14:30 for US Unempl. Claims for a possible volatility to trade using Forex Wave Surfing (this is what I call it!), or FWS. As per this method we use pending stop orders to entry with very small SL, 3-5 pips, after the news released and liquidity restored (usually 45-60 secs after), wait for a pull back and set the trap betting for the momentum continuation. This news event is tradeable on EU, EJ, UJ, I recommend EU. I will post some screen shots if there will be some tradeable volatility.

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    raa
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    Red face

    Again, NFP provided with a set of classy nearly risk-less trades. I graduated today with this approach in a sense I went to trade with 1 standard lot instead of 1 mini, needless to say I was rewarded rather well. All we need is a volatility and liquidity. NFP provides both starting 1 minute after release and today it went for as long as 30 minutes after, and it still moves fast as I am writing it, but I am done for the day and the week. The greatest part of this volatility surfing is that you trade an outright momentum, so it either moves into profit right away or you cut and don't bother holding, look for another entry. My fixed stop loss is as little as just 3 pips (three point zero!), and first target is 10 and second is 20 pips. I cut when price stalls and produces at least one clear range back back. here is how it looks

    Order Flow Trading-screenshot036.jpg

    I still have a lot to work on, namely to hold onto winners - this is my weak spot, I cut too early, but sky is the limit, it will improve. I think I could have grabbed up to 100 pips today within few minutes after NFP, not mere 30.
    Liquidity is great after release it means you can go heavy as much as with 100 full lots without getting slipped more than 1-2 pips.
    Last edited by raa; 03-02-2012 at 02:23 PM.

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