What is Order flow?
Simply put, order flow is just just the price fluctuations inside the market. “But how do you trade that” you might be asking, well you need a platform that can help you see it. The old school way is just to watch the level 2 and the Time and Sales; but with footprint charts, volume by price, and delta at price information available to retail traders through Sierra Chart and a few other platform it is easier then ever to implement an order flow strategy into your trading. If you want to read more on what a Footprint Chart, Delta at Price, and Volume by Price are you can click here.
All of these tools will allow you to pull back the curtain and see what is actually moving the future markets your watching.
Is this push up on light volume? — The Volume by price will show you this as will a properly setup DOM.
Are there more buyers then sellers on this push? — The delta at price will show you this as will buyers and sellers on the tape (also will the tool we built linked here).
How is the structure of the move? — The footprint will show you this.
These are all examples of order flow and once you learn to read them you will be able to more adeptly trade in your respective markets.
How to Trade the Order Flow
Trading order flow is actually quite simple (I said simple not easy), you will look at things like the following:
- Are there big buy or sell orders on the tape?(below)
- Is there any follow through by buyers and sellers? Are the continuing to buy and sell?(Last size column on the right in picture above)
- How large or small are the repeat buyers and sellers? Are the stepping volume up?(also last size column on the right in picture above)
- Was it a stop run or is this a legitimate push through a level?
- How does the structure look?(Completed Auction below)
These are the basics of Order Flow trading. While it is not incredibly complicated there are a lot of nuances that make it work.
For more on Order Flow and trading please read the rest of this article here
