''Understanding Orderflow - Footprint charts, DOM and Tape Reading''
My summary from the video of @abetrade. Be sure to check Adam's work out. He is awesome.
1/12
My summary from the video of @abetrade. Be sure to check Adam's work out. He is awesome.
1/12
Fallacy of Orderflow:
-Market fragmentation
-Use of wrong tools, or using the tools in the wrong way.
-Different behavior in different markets.
*Orderflow is best used in index futures, like the ES.
2/12
-Market fragmentation
-Use of wrong tools, or using the tools in the wrong way.
-Different behavior in different markets.
*Orderflow is best used in index futures, like the ES.
2/12
Orderflow in different markets:
-Thin and thick markets (Adam prefers thick)
-Spot forex vs currency futures
-Spot versus futures in the crypto markets.
*CVD is important to keep in mind.
3/12
-Thin and thick markets (Adam prefers thick)
-Spot forex vs currency futures
-Spot versus futures in the crypto markets.
*CVD is important to keep in mind.
3/12
Passive and Active Orderflow.
Passive Orderflow:
-Limit orders resting in the orderbook.
-Used by ''smarter'' players.
-Liquidity makers.
-More passive orderflow = less volatility.
-The advertisement .
-Heavier hand.
4/12
Passive Orderflow:
-Limit orders resting in the orderbook.
-Used by ''smarter'' players.
-Liquidity makers.
-More passive orderflow = less volatility.
-The advertisement .
-Heavier hand.
4/12
Active Orderflow:
-Market orders, executed at bid and offer.
-Used by ''retail'' traders
-Liquidity takers
-More active Orderflow and less passive Orderflow = more volatility.
-Weaker hand.
5/12
-Market orders, executed at bid and offer.
-Used by ''retail'' traders
-Liquidity takers
-More active Orderflow and less passive Orderflow = more volatility.
-Weaker hand.
5/12
Delta:
-Difference between finalized executions at bid and offer = market orders.
-Delta is either positive or negative
-Positive delta = more aggressive buyers
-Negative delta = more aggressive sellers
-Any healthy move in the market should be supported by delta.
6/12
-Difference between finalized executions at bid and offer = market orders.
-Delta is either positive or negative
-Positive delta = more aggressive buyers
-Negative delta = more aggressive sellers
-Any healthy move in the market should be supported by delta.
6/12
Time and sales:
-Shows market orders executed at bid/offer.
-Often used to build a ''reconstructed tape'' which filters out large positions only.
-Conventional wisom tells just to follow orders but in reality it is way more complex than that.
7/12
-Shows market orders executed at bid/offer.
-Often used to build a ''reconstructed tape'' which filters out large positions only.
-Conventional wisom tells just to follow orders but in reality it is way more complex than that.
7/12
-Great tool to use to see who is moving the markets, spot the absorption or large orders accumulating.
8/12
8/12
Cumulative Volume Delta (CVD)
-CVD plots an indicator that shows finalized executions at the bid and ask.
-In healthy trends CVD and price should go hand in hand.
-Divergences can show us when there is absorption or exhaustion in the market.
9/12
-CVD plots an indicator that shows finalized executions at the bid and ask.
-In healthy trends CVD and price should go hand in hand.
-Divergences can show us when there is absorption or exhaustion in the market.
9/12
CVD is a good indicator to use in both trend following and mean reversion. 10/12
Footprint Charts:
-Provide look inside candle to see transactions at each price point.
-Shows where buyers/sellers got interested or trapped.
-By proper understanding of the footprint we can see the intention behind moves and gather greater context not only by assumption. 11/12
-Provide look inside candle to see transactions at each price point.
-Shows where buyers/sellers got interested or trapped.
-By proper understanding of the footprint we can see the intention behind moves and gather greater context not only by assumption. 11/12
The Footprint chart is an extremely useful tool but has to be used within proper context. 12/12
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