Basic Order Flow – Trade Like Littlefish

It’s been a long time since I had any time to focus on some of the more interesting opinion pieces on the site, so I thought it should be a welcome return and what better way than to show you some cool stuff using the Metastock Platform.

So those who know me understand my hatred for MetaTrader 4 and know I pretty much exclusively use NinjaTrader and Metastock. There are some really good reasons for this.

So today, I’m going to give you a really quick bit of insight into how you could have captured all of the EURUSD recent moves without any effort, just by looking at order flow.

//Note this chart is pre ECB (June 5th 2014) and given we are all expecting cuts, it is a bit mixed but pointing lower as the white line has crossed to the downside last night so short positioning would have been appropriate (white line is the key)

EURUSD = Pre ECB

Essentially what I’m showing you here is a way to proxy some of the cool stuff we do here at Littlefish. Ok, so it’s not the perfect solution, but it will get you about 70% of the way there. Combine this with some good skills with regards to volume profiling techniques and some solid money management skills, and you will have an extremely good system (and I dare you to come and get capital from us when you nail this system).

Anyway, the focus today is on these indicators.

  • Psych Indicator (pink)
  • On Balance Tick Volume – OBV (blue)
  • Linear Regression OBV (white)

And as for a quick intros to these indicators:

  • Psych Indicator is simply looking at open and close prices and typically looks at continual trends, in this case it is set to look over 5 days. This simply plays on trend following, based on very basic psychology theory (if you’ve seen my order book lessons then you know that retail traders typically short on the way up and buy on the way down).
  • On Balance Tick Volume is simply registering the number of orders in the market, it gives a good idea of volume , flow and net position. The trick with this is that you need a high end platform and really detailed price feeds to get this to work well, MT4 on one broker is less likely to work.
  • Finally, a basic regression of the OBV. All this is doing is allowing me to glance at my screen to see if orders are trending up or down, slowing down or accelerating.

Ok, so this is simple, blink and you will miss it.

All I want you to do is, using my set-up in these Metastock charts (you can easily recreate this on NinjaTrader too, happy to help people if they want it but you will need our Psych Indicator), look at the white and pink lines above and below the 0 lines.

Below I have given you a few of the previous charts to help with your analysis, but if you want to give it a go yourself then check out our Metastock Offers, or get in touch and we will happily help  you achieve something similar on NinjaTrader.

EURUSD = early 2013 EURUSD = early mid 2013 EURUSD = mid 2013

EURUSD = end 2013

As a final thought; signals pre ECB suggested shorts, although were slightly mixed. At the ECB statement the pink line crossed lower, also suggesting shorts.

EURUSD = Pre presser

Then following the ECB press conference…EURUSD = Post presser

Having then settled

EURUSD = Post presser 2

You can see how you could have used this intraday for shorts into the ECB and to jump long again towards lows as people started buying again.

My final offer for all you out there reading this who want to understand more – I am happy to do a free webinar if we get enough interest to show you how to set this up on Metastock, offering further thoughts on the key to what you are looking for. If you’d be interested to learn more, please tweet me @LFXSam or contact us here.

And if you get this consistently in one of our partner accounts to track, I’m sure you will be joining me on our trading floor soon enough.

Here Sam is using MetaStock, find out more about this platform at www.littlefishfx.com/metastock

— For more on the Order Flow techniques used by Sam and the LFX traders, try our new Forex Trading Course. To find out more or purchase the course, click here