Do you really think hedge funds are using RSI?
2024-12-15
Category: None

Back in the day when floor trading was a thing, cunning extroverts ruled the market by reading other people's mind and manipulating them, using their strategies against them face to face. When we stepped towards digital age, the upper hand transitioned towards people who were able to read the orderbook and decipher the intentions of the market participants, also manipulate them with their heavy limit orders. As the time progressed we become better at making the data accessible and some smart people invented their way of interpreting the market trough mathematical equations, which we call now "the indicators". As robots stepped into the game, the orderbook become too complicated for humans and the indicators and well established market formations remained as the last castle for traders. As it become more accesible trough platforms like tradingview more and more people started using indicator and even formation based strategies, which made it not work. The reason behind this paradox is that if we know a lot of people are using the same formula or pattern to take trading decisions, we can also use them as source of liquidity to execute our heavy transactions. So the indicators become the mask of the market makers. For example given the MM knows how an indicator is calculated, they also know what kind of price movement can make this indicator fire a signal and make traders step in. In most of the cases indicator based strategy backtests returns poor results and you can verify that by looking at almost every strategy published on tradingview that shows "realistic" performance aka no repaint no portfolio tricks etc, we see that they are not able to outrun the market. On the other hand a lot of people believes if we feed price and volume data to an Artificial Intelligence model, we got the money printing machine. I have been working on this idea since 4 years and I never met someone better than me in my field and specilization as a Computer Science Student at Georgia Tech and I tried eveything, trust me "everything" and it never worked out. So I knew that there is a missing piece candle sticks and volume are missing something, and I know what is it now: "orderflow"

When I first started learning about orderflow -around a month- I realized all of the indicators I did before including hundreds that I trade based on but not publish, are not explaning why the market moved and why the market can move or not, they are just my way of trying to make backtests work under the assumption if they did work they will work in the long run, law of big numbers. Conversly, the orderflow method is the first thing I encountered that answers questions like why and when and actually makes sense. I started consuming the whole online content like forums youtube books etc full time and got an actual understanding how market actually works. I got the cheapest subscription for the cheapest orderflow platform for 20 bucks just to give it a try and started analyzing historical data with tools footprint charts, delta-cumulative delta and volume profile. What I saw was the inside of the market, not only the results like candlesticks but rather the causation behind it. I made a mind map of all the information I gathered and come up with some strategies, and what is it? Something that works for the fist time in the last 4 years of my inhuman effort. I started forward testing with paper trading and it is going well so far. 

What I am trying to say is that without knowing the story you cannot be the main charachter, learn orderflow and got rid of all of the bunch of funny lines on your screen. It is not the wholly grail, you still need to be smart and cautious, and psychologically strong when trading, but it is something that can make what you want to achieve possible.