No conclusions yet. I still keep an open mind and am interested in exploring this further. Last week would have been too much to process for me though and my existing methodology served me well. So, I might wait until things slow down a bit again... As mentioned already, I am a profitable day trader and am not new in the markets. I don't scalp and averaged 15 ES points per contract last week each day. So, for me, I don't need order flow to become profitable. It's more of a supplemental tool that could potentially give even more precision to my entries. I'd be very interested if you have any specifics to share on the subject. How so, may I ask? By watching resting orders (and changes in them) or actual transactions on the tape? I have the feeling that fast volume charts can serve much of the same purpose particularly in a fast market such as last week. A DOM and T&S adds granularity of course. The question is if it can be used profitably in say ES. Keeping an open mind for now.
Time and sales was my bread and butter for a few years... I could trade the ES with only the tape although I prefer a thinner instrument like SPY; it's less convoluted and much easier to read quickly; plus, level 2 in equities is occasionally immensely helpful whereas the DOM associated with the futures market is a one-trick pony and largely useless. I rarely daytrade anymore but if I did, it would be for quick but sure plays that yield maximum reward for risk and almost exclusively my entries and exits would be value based first, time and sales based second. I do not believe that technical analysis yield anything more than confusion, I do not scalp, I do not use charts with one exception, and I would consider my own market view to be very different from most others that I read here. Translating time and sales properly requires a pretty comprehensive understanding of market structure, otherwise the rhythm and cadence and time and volume are just technical distractions, much like most everything else in the industry. Having said all of that, comparing a fast moving chart to time and sales is like saying that viewing this website is the same as seeing the code layered beneath it - there's just no comparison. In saying a lot I've said very little but I encourage you to keep asking questions to the effect that the answers are worth discovering.
Yes, it’s always useful but in the right context. In my methodology, it has it’s place in the market display and it’s data is ‘swept’ through bar-by-bar. The sweep goes from coarse to fine detail, from daily, 30m, 5m annotated charts on one monitor and the trading platform on the other that contains what was described in an earlier post on this thread. Unless one breaks down the market in it’s fundamental granularity, it would take longer to derive utility from all the flashing colors, shapes and movement since there is no underlying structure to build meaningful associations.
Yes. I imagine it's much easier to proper read a thinner market. Due to the 'thickness' of ES and related activity, I find myself wondering how much one can really infer from T&S/DOM on this market.
Time and sales is invaluable. I really don't know how anyone can trade short-term without it. Being able to identify in real-time a large buyer or seller in a specific area opens up a plethora of opportunities to exploit. The tape on the ES is no less valuable than a thinner instrument - after all, it's not individual transactions that matter but the sum of buying and selling and the rhythm created therewith. Each tape sings its own song, it just takes some getting used to.
A few days ago, I was off sick and was watching the tape in the afternoon. I posted this in a different thread: The seller sat at that level until this morning. Identifying his purpose is second to acknowledging his continued presence, his supremacy, and the fact that the market is not going to surpass that level until he lifts his offer. The truth is that there are a few large players responsible for most of the volume on any given instrument - take a look at a COT report and see what percentage of activity is overrepresented by only a few traders - and then understand that these traders all have the same problem: there are only a finite amount of methods to use to get into, and out of, large positions as well as a few prerequisites necessary for facilitating trade. That is the market. The tape is a tool for identifying who is doing what and whether or not they're of any significance to the market. 99% of the gobbledegook on this site has nothing to do with actual trading and is just distraction and confusion. I've said enough now. Best of luck.
It's a good question. Some would consider the motivation of the buyer/seller is reduced to simply offering or taking liquidity. Anything other than that is speculation of the motivation behind an resting order. The T&S for beginners in orderflow at times is difficult to parse. This difficulty is the advantage of products that reconstruct a tape to show market orders in actuality vs just the colors oscillating on the T&S. The easiest for a beginner to discern is filtering the T&S to see what price levels larger players shift from offering to taking liquidity. The perception of support and resistance zones can be validated by the activity of larger size. There are markets orders that are instigated through 'want' and those through 'need'. Want is those that can discern turning points, need is by stop's being triggered and activating market orders. Depending on the software, the increase/decrease of depth of market limit orders as a histogram on the DOM is informative. Generally, larger players work with longer timeframes and embark on campaigns to build a position and intraday movements are 'noise' unless that price movement is pushing against the limits of standard deviation. The part that is mostly unseen, in the re-supply at limit/market on the inside spread. edit: Insight is used to expand the limits of what could be termed 'zone of understanding.' At first anything beyond the zone of understanding is noise and not informative. Either through observation and deduction or assimilating knowledge through new material with an open mind can the limits of understanding increase via insight. The zone of understanding increases through this process. If the insight is close to limits of the zone, than a teaching/learning situation can occur - which paradoxically one in the same. If it's farther away, then it's often met by disbelief and ridicule. If it's farther yet, then anger and hostility arises. The anger comes from a cognitive dissonance that threatens an underlying identity and attachment to an invested perspective/reality. Your questions have a fundamental doubt of whether orderflow has any informative value. You ultimately get to choose and whatever you do will become true for you. For a longer timeframe trader, maybe not so much. However, for an intraday trader it's another tool to master and has a place in the toolbox. Some can use it like a leatherman, others it's just a screwdriver. To others still, this post is a result of having a screw loose.
Very valuable comments, @mbondy and @Sprout. I have much yet to learn. Thanks for sharing your insights.