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Order Flow

Order flow trading is a type of market analysis which focuses on how other traders in the market make decisions.

The idea is if you can understand when and where traders are likely to place trades then you can come with a good determine what direction the market is about to move in, and the effect their orders have upon the price in the market, order flow trading itself is not a new method of trading, its been around since the dawn of financial markets, itís just never been properly understood when compared to other trading strategies.

Order flow trading is less of a strategy and more of a mindset, itís a way of looking at the market, not necessarily a way of trading it.

Itís important to distinguish between what order flow trading is when compared with price action trading.

Order flow trading falls into the category of price action trading as it does not require any indicators placed on the chart to make a trading decision.

Source: flow trading has a very wide definition and it is not necessarily exclusive to other methods of trading. The cornerstone of order flow trading is anticipating the prices where other traders have pending orders set, particularly important market participants with very large orders.

Obviously, order flow cannot be traded without "picking levels." This is a big reason why many traders find order flow trading too frightening or intimidating to trade: traditionally, trading gurus warn their students against picking levels, admonishing them to "trade what you see, not what you think." This seems to be good advice when you watch a chart, mentally pick levels and watch them all get blown away by the price. However, it does not have to be this way, not if you think a little more about the levels that you pick, and equally importantly, if you use tight stop losses.

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All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
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