Discussions on Order Flow/Volume
- #344
- Feb 25, 2020 9:07am Feb 25, 2020 9:07am
- Joined Dec 2015 | Status: Trader | 1,505 Posts
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- #345
- Feb 25, 2020 11:26am Feb 25, 2020 11:26am
- Joined Dec 2015 | Status: Trader | 1,505 Posts
Hello Friends,
There is something I wanted to call your attention to that is very important when utilizing order flow to help you make trading decisions. This is the concept of "neutral" order flow. This is when the aggressive buyers and sellers cancel each other out. And it is a clue as to where the liquidity in the market is located.
To briefly explain: Neutral Order flow is when the aggressive buyer and seller (those taking action at the market) are pretty evenly matched, and there is not clear dominance in the aggressive order flow. When this happens, it is the liquidity (passive side) that is creating the price movement...
What do I mean by that? When the buyers and sellers (again AGGRESSIVE) are evenly matched there is no clear dominance established and neither side has enough volume to use up the available liquidity...BUT...a big portion of it has been used up and is now awaiting a few more orders to finish the job...again the deeper the liquidity the more stable the price and the more shallow the liquidity, the more quickly it is used up. Lets take a look below:
Not here how price came down and selling was absorbed at the bottom (1st clue of changes). Then in the same candle, buying overcame the selling and prices rose. Selling has now pushed price back into the same area where the buying originally overcame the selling, and the battle raged in this area.
The clue here is the tiny little histogram bars showing that neither selling nor buying could really create a dominant order flow BUT the BUYING liquidity is holding the price from falling...just as it did when sellers were originally absorbed.
Again as I have repeated here ad nauseum...watch how price responds to the order flow...in this case prices are rising, indicating a preponderance of buying AND an end to the selling liquidity...once the selling liquidity is used up...prices must rise.
Take a good long look at this area circled and note how small the histogram bars are...also note in this same area how the order flow was mostly dominated by selling until the buying liquidity absorbed it. Finally look how prices are responding to this scenario...
Again chose your favorite technical analysis set up and see how bearish everything looks. Perhaps start counting the bars until the technical bullish scenario finally shows up...THAT is how far in advance the order flow will tell you something's changing.
There is something I wanted to call your attention to that is very important when utilizing order flow to help you make trading decisions. This is the concept of "neutral" order flow. This is when the aggressive buyers and sellers cancel each other out. And it is a clue as to where the liquidity in the market is located.
To briefly explain: Neutral Order flow is when the aggressive buyer and seller (those taking action at the market) are pretty evenly matched, and there is not clear dominance in the aggressive order flow. When this happens, it is the liquidity (passive side) that is creating the price movement...
What do I mean by that? When the buyers and sellers (again AGGRESSIVE) are evenly matched there is no clear dominance established and neither side has enough volume to use up the available liquidity...BUT...a big portion of it has been used up and is now awaiting a few more orders to finish the job...again the deeper the liquidity the more stable the price and the more shallow the liquidity, the more quickly it is used up. Lets take a look below:
Not here how price came down and selling was absorbed at the bottom (1st clue of changes). Then in the same candle, buying overcame the selling and prices rose. Selling has now pushed price back into the same area where the buying originally overcame the selling, and the battle raged in this area.
The clue here is the tiny little histogram bars showing that neither selling nor buying could really create a dominant order flow BUT the BUYING liquidity is holding the price from falling...just as it did when sellers were originally absorbed.
Again as I have repeated here ad nauseum...watch how price responds to the order flow...in this case prices are rising, indicating a preponderance of buying AND an end to the selling liquidity...once the selling liquidity is used up...prices must rise.
Take a good long look at this area circled and note how small the histogram bars are...also note in this same area how the order flow was mostly dominated by selling until the buying liquidity absorbed it. Finally look how prices are responding to this scenario...
Again chose your favorite technical analysis set up and see how bearish everything looks. Perhaps start counting the bars until the technical bullish scenario finally shows up...THAT is how far in advance the order flow will tell you something's changing.
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- #348
- Mar 2, 2020 9:26am Mar 2, 2020 9:26am
- Joined Dec 2015 | Status: Trader | 1,505 Posts
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- #349
- Mar 2, 2020 9:29am Mar 2, 2020 9:29am
- Joined Dec 2015 | Status: Trader | 1,505 Posts
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- #355
- Mar 29, 2020 10:20am Mar 29, 2020 10:20am
- Joined Dec 2015 | Status: Trader | 1,505 Posts
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- #360
- Apr 23, 2020 11:07pm Apr 23, 2020 11:07pm
- Joined Dec 2015 | Status: Trader | 1,505 Posts
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