Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

[Orderflow Tutorial] Big Buyer or Big Seller at the Days Extreme?

2 min read

“My Orderflow is showing Big Buyers at day low and your orderflow is showing Big Sellers at day low which one is true?”

these is one of the frequent questions we get in our slack trading community which puzzles the orderflow traders most of the time.

To solve this question there is a simple and easiest way to figure out whether the executed order is from Aggressive Big Buyers/ Aggressive Big Sellers. The key to the answer is Tick Charts.

What is a Tick Chart?

1-Tick Chart is a price chart which plots the price at each and every price transaction where price goes up with upticks and goes down with downticks.

If you are seeing the uptick in the price then aggressive buyers (Market Buy Orders) are responsible for that individual transaction and if you are seeing a downtick movement in the price then aggressive sellers (Market Sell Orders) are responsible for the individual transaction.

How to Get Tick Charts?

If you are having authorized data vendor subscription (Globaldatafeeds, Esignal, Truedata) with Tick level charts supporting software (Amibroker, Ninjatrader, Multicharts…etc) then all you need is how to setup tick charts in your favorite trading softwares. Most of the Authorized data vendors these days supports tick level data points.

Gaps in Tick Charts

If you are seeing gaps in tick level charts that indicates no liquidity zones where the buyers/sellers are no present in that trade location to transact. Which usually happens when stop hunting happens or when price is in the process of discovering a new liquidity zone.

To explain this example look into Nifty Future Jan Contract on 22nd Jan 2019 (Time : 12:10:06 p.m) where a big selling volume happened with a gap. Almost 1917 lots or 1,43,775 shares transacted as shown in the below tick charts (Charting software used Amibroker, Datafeed used Globaldatafeeds).

Big Transaction happens here with a intra gap down on tick charts because the big seller executed with a market order which matched with the Big limit buy order on the orderbook (i.e next available liquidity)

Nifty Futures – 1 Tick Chart (Amibroker

How does it get visualized in Orderflow Charts

Here is the Orderflow Charts at the same time looks like on a 5min charting timeframe. Tools used (Ninjatrader8 + BellTPO). One should be able to visualize those Bigger sellers on the left side of the Orderflow ladder as shown below (i.e on Aggressive sellers side)

Nifty Futures 5min Charts (Ninjatrader 8 + Orderflow)

How Orderflow Charts are computed?

Orderflow charts can be plotted using two methods

1)Bid x Ask method

2)UpTick / DownTick method

both the methods are more or less reliable. In a Bid x Ask method orderflow charts are based upon executed transactions at bid or ask. And Uptick/Downtick method is used when there is no executed Bid x Ask information which still closely matches with Bid x Ask Information

Last time when I had a discussion with Globaldatafeeds Product owner real Bid x Ask information is transmitted at every 1 second interval. I guess true data also uses same interval to record ticks. However not sure of Bid x Ask recorded tick interval from Interactive Data (Esignal).

Conclusion

So next time before asking someone else just open your tick charts and verify yourself from your trading software whether the executed transaction is an aggressive buy order or an executed sell order. If it is a big aggressive buy order then the big volume transaction comes with the uptick in the price else if it is a big aggressive sell order then the tick charts shows big volume transaction with a downtick in the price.

Not only the Bigger volumes each and every tick / transactions from tick charts you should be able to match in your orderflow charts. If you are finding mismatch between your tick charts and orderflow then something is wrong with the orderflow tool that you are using.

So What does it imply if there is a Big Seller Volume Transaction at days low? Learn more in detail in our upcoming crash course on orderflow live training session.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

More Short Covering Possibilities in Nifty Futures as the…

When more and more momentum selling is happening at some points it ends up with more emotional momentum traders. It is like how a...
Rajandran R
55 sec read

Another Waterfall Effect in Nifty Futures?

Waterfall Effect breaks the market when the price moves against the big momentum traders. which forces the momentum traders to liquidate their positions aggressively...
Rajandran R
30 sec read

Nifty Futures and Where the Buyers Commitment could go…

The last two trading days (9th Feb & 10th Feb) of Nifty Futures buyers provided a significant volume commitment. So what is so important...
Rajandran R
1 min read

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More