2/18/2017 OrderFlowTrading

ForexForumandForexDiscussionBoard SignIn|Join| Search..

What'sNew? Forum Quiz

Today'sPosts FAQ Calendar Community ForumActions QuickLinks AdvancedSearch

Forum "HolyGrails" FreeForexTradingSystems OrderFlowTrading

WelcometotheBabyPips.comForexForum,theworld'sleadingforexforumforbeginnerforextraders.

Youwillhavetoregisterbeforeyoucanpost:clickJoinnowtobecomepartofourcommunity(it'sFREEandeasyandlotsoffun!).Tostartviewingthreads,select
theforumthatyouwanttovisitfromtheselectionbelow.ReadaboutmembersintheIntroduceYourselfforum,ormakeyourwaytoNewbieIsland.It'sagreat
placetostartreading.Happytrading!

Results1to10of415 Page1of42 1 2 3 11 ... Last

Thread:OrderFlowTrading

ThreadTools Display

02222013, 09:49AM #1

JoinDate: Jan2013
Dali Posts: 108
JuniorMem ber

OrderFlowTrading

OrderFlowTrading
LasteditedbyDali02272014at03:58PM.

ReplyWithQuote

02222013, 09:50AM #2

JoinDate: Jan2013
Dali Posts: 108
JuniorMem ber

WhatIsOrderFlowTradingandWhatItIsNot

WhatIsOrderFlowTradingandWhatItIsNot
OrderFlowTradingisatermthatcancreatealotofconfusion.Somepeoplethinkitistradingdirectly
fromflowinformationfrombanks(infothatonlyasmallcircleofpeoplehaveaccesstoandtheysurely
wontshareitontheinternet),somethinkitistapereadingandsomethatitissimplyanotherformof
priceaction.

Thereisnocleardefinitionandintheend,allabovementionedmethodsarebasedonanticipationof
futureorderflowinthemarkets.ThewayIviewitisthatOFTisamindset.Insteadofjustlookingfor
technicalpatterns,wegoonestepaheadandthinkaboutwhatothermarketparticipantsmightdo.Itsall
fearandgreedinthemarketsandwecanseethiseverydayinthemarket.

Itsabigchangefornewbies,especiallythosethatpreviouslyusedonlytechnicalanalysis.Butlikeany
otheractivity,itbecomeseasierwithtimeandyoustarttoviewthemarketwithcompletelydifferenteyes.
Youareawarehowpriceismoving,inwhichmanneritmoves(notasgoodasbankflowinfo,butPAgives
somegoodinsights),yourknowledgeaboutotherparticipantshelpsyouavoidcommonmistakesand
finally,yourknowledgeaboutmarketinefficiencieswillhelpyoucombineallthisandexploitthose
opportunitiesinlivetrading.

OnecouldarguealotaboutthetermofOFT,butforme,itisawayofthinkingadifferentapproachto
themarketsthanthecommonones,notsomethinglimitedtoaparticularmethod.Idonthaveany
privatebankflowinformation,butstill,myknowledgeaboutmarketmicrostructureandothermarket
participantsaregivingmeanedgeinthemarkets.

HowdidIgotintoit?IfoundathreadonanotherforexforumfromtheuserDarkstarthatmentioned
OFT.Itlookedallquitecomplicatedandevenafterreadingthewholethread,itdidntmaketoomuch
senseforme.Ithenfoundhiswebsitelaterandboughthisbook(Idontwanttobeaccusedof
promotinghereanything,soNOlink,butaquickGooglesearchfororderflowtradingdarkstarorthe

http://forums.babypips.com/freeforextradingsystems/51590orderflowtrading.html 1/5
2/18/2017 OrderFlowTrading
titleofthebook"OrderFlowTradingforFunandProfit"shoulddoit).Ithasaveryhighpriceforabook,
butitchangedalotformeanditwasaturningpointformytradingcareer.Thechatroomisabit
unorganizedsometimes,buttherearesomegreattraderstherewillingtohelp.Theforumunfortunatelyis
almostdead,anotherreasonwhyIpickedBabyPipsasplatformformythread.Again,Idontwantto
promotehereanything,IjustthinkitisfairIsharehowIdiscoveredOFTandgiveothertheopportunities
tocheckoutthesourcewhereIlearnedit.Afterall,thereisalsosomefreematerialavailaibleaboutit.

WhatarethestepstolearnOFT?
Learnaboutmarketmicrostructure(howpricechange,typeoforders,liquidityetc.)
Learnabouttheothermarketparticipants(commercials,banks/dealers,realmoney,
sovereigns,largespeculators)
Exploitmarketinefficiencies

IwillcovervarioustopicsintheupcomingarticlesandgograduallyfromStep1toStep3.
LasteditedbyDali02242013at03:25PM.

ReplyWithQuote

02222013, 10:32AM #3

JoinDate: Oct2011
Location: Bergen,Norway
Posts: 456

liftoff
SeniorMember

Bluefontlooksmightyfamiliar.Allthebestmate.Knowledgesharingisverymuchwelcomehere.Willkeep
aneyeonyourprogress

ReplyWithQuote

02222013, 12:53PM #4

JoinDate: Nov2011
Posts: 398

gs8888
SeniorMember

Allthebest.Hopethisthreadwon'tgetclosedlikethepreviousone's.

ReplyWithQuote

02232013, 06:53AM #5

JoinDate: Oct2012
vijaim Posts: 90
New bie

Interestingthread.Subscribing:)

ReplyWithQuote

02242013, 03:22PM #6

JoinDate: Jan2013
Dali Posts: 108
JuniorMem ber

TypeofOrdersandHowPriceChanges

TypeofOrdersandHowPriceChanges
Inthisarticle,Iwillcoverthethreemaintypeofordersusedintradingandhowpricechanges.Wewill
takealookwhatreallyhappensandwhatismovingprice.

Firstofall,thereisthetermliquidity.Ifyouwanttobuyanasset,youneedsomeonetosellittoyou.
Youarethereforelookingforliquidity.Thesamethingsappliesifyouareaseller,youarelookingfora
buyertotaketheassetyouwishtosell.Abidisalimitordertobuyanassetataspecificprice(better
thanthecurrentmarketrate)andanofferisalimitordertosellanassetatthedeterminedprice(better
thanthecurrentmarketrate).Bidsandoffersmakeliquidityinamarket,theyprovideittoparticipants
whichtradeviamarketorders.

Liquidityisaveryimporantfactorintrading,especiallyforlargetraders.Themoreliquidamarketis,the

http://forums.babypips.com/freeforextradingsystems/51590orderflowtrading.html 2/5
2/18/2017 OrderFlowTrading
moreitwillattractothertraders.Largetraderscannotsimplythinkabouthowmuchpricewillmove,but
alsohowtheywillgetoutoftheirtradewhenthetimehascome.Thisisnotaproblemforusretailtrader,
butdefinitelyakeyfactorforthosetradingbigamountsofmoney.

TypeofOrders
Marketorders

Marketordersconsumeliquidityprovidedbylimitorders.Theyareordersissuedtobuy/sellaspecific
assetatthecurrentmarketprice.Abuymarketorderwillbefilledagainstthebestofferandasellmarket
orderwillbefilledversusthebestbidavailaible.Marketorderstakeawayliquidityfromthemarketasthe
participantthatissuesthemwantstotradeimmediatelyandeatsavailaibleliquidityvialimitorders.

Limitorders

Limitordersprovideliquiditybecausetheygiveothertraderstheoptiontotradeagainstthem.IfIissuea
1millionbid(buylimitorder)at1.31000forEUR/USD,Iprovideliquiditytootherparticipantslookingto
sellatthemarketatthisprice.Theyarecalledlimitordersbecausetheycannotbefilledatapriceworse
thanspecified.Thismeansmybidat1.31000canbefilledATorBELOW(positiveslippage)therate,but
notabove.

OrderbooksorDOMs(DepthofMarket)aremostlyusedinFuturestrading,astheFXmarkethasno
aggregatedvolumedata.Example:

Name:DOM1.PNGViews:25995Size:5.5KB

Inthisasset,wehavenoordersat44and45,whichmeansyoucancurrentlybuyat46(thebest
availaibleoffer)andsellat43(thebestavailaiblebid).IfIdecide45isagoodpricetosellatandissuean
offeratthatrate,thespreadwillnarrowandbuyerswillbeabletobuyfrommeat45theamountIoffer
tosell.Letssaythereisanimpatientbuyerthatmoveshisbidsto44.Hewillagainreducethespread
andnowsellersareabletosellatabetterpricethanbefore.Theorderbooklooksnowlikethis:

Name:DOM2.PNGViews:25536Size:5.8KB

HowPriceChanges
Scenario1:TraderAbuys20contractsoftheassetatthemarket.Theorderbookaboveshowsthe
availaibleliquidityanditisvisiblethathewillnotbefilledat45asthereisinsufficientliquidity.Hewillget
filledasfollows:10at45,8at46and2at47.AsheconsumedALLliquidityat45and46,theorderbook
willnowlooklikethis:

Name:DOM3.PNGViews:25118Size:5.4KB

Theorderbookwillstaythiswayuntiltherearenewbidscreatedbelow47ORthereisevenmorebuying
atthemarketprice(atthebestoffer)whichdrivespricehigherandfurtherconsumesoffers.

DOMsarenotusedinFX(oratleast,shouldntbeused,asthereisnoaggregatedvolumedataforFX),
butthemechanismofpricechangeisthesameinallmarkets.Limitordersareprovidingliquidity,while
marketordersareconsumingthem.

StopOrders

Stopordersareorderstobuyabovethecurrentmarketprice/sellbelowthecurrentmarketprice.The
termstoporderisusedbecausetheorderisstoppedfrombeingexecuteduntilithitsthedetermined
price.Itisbeingstoppedbecauseotherwise,ifyoucreateabidatthepricewhereoffersalreadyexistor
above,itwouldbecomemarketableorderandwouldbeexecutedimmediately.

Mostofthetime,abuystoporderwillbeexecutedwhenitspricehashitthemarketofferpriceanda
sellstoporderwillbetriggeredwhenitspricehashitthemarketbidprice.Theywillbeconvertedinto
marketordersandwillconsumeliquidity.

Butthereissomethinguniqueaboutstoporders.Theycanalsoprovideliquidity.LetssayImalarge
traderlookingtosellanasset(pleaseforgetabouttheaboveorderbookforthisexample).Marketpriceis
currently44/46(Icanbuyat46andsellat44).Idontwanttosellat44becauseliquidityisnotgood
enoughfortheamountofcontractsIintendtosell.Imawarethattherearealotofbuystopsabovethe
priceof50fromparticipantsthatarealreadyshort.

Otherparticipantsarealsoawareofthisandpricewillbeattractedtothoselevels.Iwillthereforesetmy
offersabove50(letssay51and52)andgainadvantagefromthestops.How?Chancesaregoodthere
arenotmanybuyersatthoselevels,aspricewillbeperceivedashighandliquidityisabitthin.Butthere
areforcedbuyersabove50andtheywillhavetotakemyliquidity.Myshortswillbefilledandpriceislikely
tomovequicklyinmyfavorasmostbuyingcamefromshortsthatwerestoppedout.Priceisnot
attractiveforbuyersandwilllikelydropquickly.

StophuntingisacommonactivityinALLmarkets,notjusttheFXmarket.Retailtradersareawareofthis,
butmostlyinthewrongway.Imnottalkingaboutyourretailbrokerwideningspreadstotakesomefew
morestopsout,butstophuntingonalargerscale.Largetradersneeditforliquidityasabovedescribed
andbankdealerswillalsouseitalsotocontroltheirbookbetter.Butletsleavethatforlater
http://forums.babypips.com/freeforextradingsystems/51590orderflowtrading.html 3/5
2/18/2017 OrderFlowTrading

Ihopethisarticlegaveyousomegoodinsightsaboutthethreecommonordertypesusedintradingand
howpricechanges.

Asasidenote:Englishisnotmyfirstlanguage,soIapologizeforanyerrors.Idomybesttowrite
understandable.

Ben
LasteditedbyDali02242013at03:32PM.

ReplyWithQuote

02242013, 09:38PM #7

JoinDate: Mar2012
Paddymctaff Location: Sydney,Australia
JuniorMem ber
Posts: 172

Veryinterestingindeed.Notlikelytostartusingthisstuffyetbutisdefinitelyaneyeopenerintohowthe
marketswork.Lookingforwardstofurtherreading,manythanks.

ReplyWithQuote

02252013, 12:58AM #8

JoinDate: Jun2011
Location: Dubai
Posts: 509

salimvp
MasterContributorandMember

Ben,

Veryinformativearticlemate. YourEnglishisverygood.Lookingforwardtomorearticles.

Happytrading.

ReplyWithQuote

02252013, 02:37AM #9

JoinDate: Oct2012
vijaim Posts: 90
New bie

HiBen,
Thankyouforyoureffortstoteachus.
Ifind,'Stopordersalsoprovideliquidity'isbitconfusing
Couldyoupleaseexplainmewithanexampleifpossiblewithascreenshotimage

ifDOMsarenotusedinFX,willitbehardtopredicttheorderflowinFX?
Regards,
Vijai

ReplyWithQuote

02252013, 09:11AM #10

JoinDate: Jan2013
Dali Posts: 108
JuniorMem ber

OriginallyPostedbyvijaim
HiBen,
Thankyouforyoureffortstoteachus.
Ifind,'Stopordersalsoprovideliquidity'isbitconfusing
Couldyoupleaseexplainmewithanexampleifpossiblewithascreenshotimage
ifDOMsarenotusedinFX,willitbehardtopredicttheorderflowinFX?
Regards,
Vijai
HiVijai,

Toansweryoufirstquestion:Stopsarenottechnicallyprovidingliquidity,butinanindirectway.Let's
againtaketheabovementionedexample.I'mlookingtosellanassetwhichiscurrentlyat44/46(Icansell
at44andbuyat46).Idonotfindthisagoodratetosellat,soIwillissuealimitorder.Iknowthereare
stopsabove50andthosewilllikelygettheattentionofpredatorytraderswhichwillpushpriceintothe
directionofstops.Ithereforeissuetwoaselllimitorderat51and52.Let'sassumesentimentforthe
http://forums.babypips.com/freeforextradingsystems/51590orderflowtrading.html 4/5
2/18/2017 OrderFlowTrading
assetisrathermixedandtherearenotmanybulls.Withthis,therelikelywon'tbeanybuyersat51and
52andpricewillnotevenreachthoselevels.Butwiththebuystopsabove50wehaveforcedbuyers.
Thosetradersdeterminedthattheywanttogetoutoftheirshortpositionatthoseratesandtheir
demandwillacceleratethemoveandtriggermyoffers.Iprovidedliquiditytothem,butIexploitedthe
weakersideofthemarketandgotintoapositionatabetterrate.Withouttheforcedbuyers,theylikely
wouldn'tgettrigeredatall.

Iwillcoverthetopicofstophuntinglaterseperately,butIhopethismadeitmoreclearforyou.

Regardingyoursecondquestion:YoudonotneedtheDOMtopredictorderflow.Evenifyouhavethe
DOMfori.e.futures,itshowsyouonlyordersfortheupperandlowerfivepricelevelsandwiththose
marketsbeingsoliquidandfastchanging,youwon'tbeabletoextractanyusefulinformationfromit.I
usedtheDOMabovetovisuallyexplaintheprocessofpricechange.Iwillcoverthetopicofprojecting
futureflowalsoatalaterpoint.

ReplyWithQuote

Page1of42 1 2 3 11 ... Last

QuickNavigation FreeForexTradingSystems Top

PreviousThread|NextThread

SimilarThreads

OrderFlowwheretogetit? Replies:12
BycdutoitinforumOtherTopNew bieQuestionsandProblems LastPost:08232016,10:04AM

BankOrderFlowTrading(readcarefullycouldchangeyourlife)maybe!!! Replies:550
Bybankorderflow inforumShow methemoney![Daytrading] LastPost:05052016,01:12AM

OrderFlowTrading Replies:26
ByCuddykidinforumNew bieIsland LastPost:04222013,05:55AM

OrderFlowTrading Replies:5
Bycarl89inforumNew bieIsland LastPost:09072012,10:12AM

TheTruthAboutOrderFlowTrading&HowToTradeIt! Replies:170
ByDavidJeffersoninforumFreeForexTradingSystems LastPost:08072012,02:33PM

TagsforthisThread

orderflowtrading
ViewTagCloud

PostingPermissions
Youmaynotpostnewthreads BBcodeisOn
Youmaynotpostreplies SmiliesareOn
Youmaynotpostattachments [IMG]codeisOn
Youmaynotedityourposts [VIDEO]codeisOn
HTMLcodeisOff

ForumRules

AlltimesareGMT4.Thetimenow is10:43PM.

BabyPips.com LEARNFOREX
WhatisForex?
FOREXTOOLS
ForexCalendar
COMPANY
AboutUs
WEBSITE
PrivacyPolicy
LearnHowtoTradeForex.BabyPips.comIsThe ForexArticlesandNews ForexCalculators ContactUs RiskDisclosure
Beginner'sGuidetoForexTrading.YourBest ForexTutorials ChooseaForexBroker Advertise TermsofUse
ForexQuizzes Contribute FAQs
SourceforForexEducationontheWeb.
ForexForums Testimonials
ForexGlossary

Copyright20052015BabyPips.comLLC.Allrightsreserved. Facebook Google+ Twitter

"Knowingisnotenough,wemustapply.Willingisnotenough,we
mustdo."
JohannWolfgangvonGoethe

http://forums.babypips.com/freeforextradingsystems/51590orderflowtrading.html 5/5