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First off, this is the first time I have heard of order flow signals, so I'm not sure what, in the context of order flow, would constitute a signal, as such.
Order flow is an umbrella term, which can mean different things to different people. Do you work on something based on your reading of the DOM (Depth of Market)? Is it something you see on the Time and Sales (a.k.a. the Tape)? Is it based on volume profile? Or just the speed at which orders are hitting the bid vs the offer?
If you could share an example of what a OF signal you use to tell you when to enter a trade, that might help clarifying things further.
Your rule of thumb of max 3 attempts per trade idea/zone sounds reasonable to me. Assuming you're day trading, obviously you don't want to blow all of your maximum daily risk on what could be one of several opportunities during the daily session.
In any case, it sounds like the main issue you highlighted is one of discipline. I don't know how long you have been trading but usually discipline comes with experience and, for your specific case, by 'experience' I mean repeated exposure to the results of jumping too quickly onto a trade.
The immediate drawbacks of entering too quickly are
a larger-than-anticipated downside risk to your trade, which in turn means ->
a degraded risk-reward (unless you have a reasonable expectation that you can increase your exit target to make up for fhe increased risk)
a worsened mental state because of the added mental pressure of having entered too soon and your trade may be going against you for longer
the risk of losing more money per trade
Number 4 on the list is redundant, but I wanted to leave it there because at the end it is the most significant to the bottom line: whatever your edge may be, entering too quickly may turn out to erode it in the long run.
The secondary drawbacks for me are psychological: in case you were right, even if just in a handful of occasions, your brain is going to start telling you that it is okay to enter early. Or that you can move your stop by 10 extra ticks just this once.
In other words, the risks associated with the negative psychological aspects are considerable and can damage your trading habits, and it can take a long time to correct those bad habits.
Again, this tends to get resolved once you have spent enough time "battling the markets",
All of the above assumes, however, that behind your trades there is a solid analysis that proves you have a well-defined edge, a sound risk/reward, etc.
To answer your question first: by an OF signal I mean something like absorption or a stacked imbalance.
On the discipline point — I don't think that's actually my core issue. I got a similar answer from someone else I'm working with Ticino. He answered:
instead of counting "attempts" per idea, cap your total loss per period (he uses roughly 4x initial risk) and the number of scratch/loss trades (also capped at 4) — once you hit either, stop and review before continuing, rather than pre-judging how strong a signal needs to be. I like that framing much better than "attempts," so I'd rather think in terms of signal count going forward.
What I actually think my problem is: not discipline, but adapting to the current market. I don't know beforehand what strength or type of signal I should even be looking for in a given moment — that's the part I can't nail down.
A bit more context on how I use tools: in a trend I prefer the DOM, because a trendline gives a much tighter zone where a reaction has to happen. In a range, "out of value" is a much bigger zone, so I prefer the footprint there instead — it lets me see absorption/imbalance at specific price levels rather than just reading the overall tape.
Where I actually get stuck is choosing the bar type itself. A 5-min candle is fine after a small move, but the same 5-min candle is close to meaningless inside a range that's already moved a huge distance. So depending on current volatility I might use a 5-min candle, a 250-trades bar, or a 600-volume bar — but I don't have a systematic way to decide which one fits the current market, and that's really the gap I'm trying to close.
Ok, so, in the prior post you mentioned a trading range. Now you're mentioning trending and a range.
In my experience, wanting to be able to adapt to trading all market conditions is typical of people who are at the very early stages of trading. I will refer you to this thread on the subject from 9 years ago. The OP had started trading live 3 months earlier and wanted to be able to trade highly volatile sessions (such as the US Election Day) in the same way he'd trade a normal day.
I, as well as othertraderschallenged him on his expectation that, especially this early on in his trading journey, he should be able to adapt to be able to trade any market condition.
That thread is fairly short (only 4 pages) and it's a good read so I'd highly recommend to read all of it.
Now, you don't mention how long you have been trading or the product you trade, so that situation may or may not apply to you, but, in my book, wanting to adapt to the market - while making a lot of sense - should come only after having mastered other, more mundane activities such as, for example, being able to identify the most common type of market movement - it's not trending, and it's not ranging either (subject to the product traded of course) - and being able to trade that first and foremost.
In order to being able to do that, one should start with a fairly fixed set of tools, e.g. pick one trading type chart - any type (5 mins candlestick, 200 ticks, 598 volume bars, unirenko, whatever) and stick with what you pick for at least a year. The very wise late founder of this website used to have a "stop changing things" in his signature.
Wanting to keep changing things (a different chart type, a different indicator, etc.) is a bit like trying to hit a moving target: you can never learn to hit the bullseye if it keeps changing shape!
If you're staring at the DOM, tape or footprint you are focusing on a very, very small time-frame. The DOM and tape aren't even charts. They are just "now" streaming by constantly with no history. This is fine if you want to scalp, but they are very noisy and are unable to give a larger picture of market direction. If these are your tools, stick with scalping. There's no way to determine the probability of a lengthy move with these tools.
Example (1).
Let's say price has been consolidating between two major options strikes for a couple of hours. Range-bound between two well defined, visible levels. Then inside the range, price starts to find stair-stepping support at points of gamma convexity. Then at the top of the range, there is a burst of buying. The DOM and tape go solid green and the footprint goes imbalanced buying. The prior price history, the consolidation, the sequential support and the breakout visible on the DOM, tape and footprint all give a high probablity that this is going to be a large move.
Example (2).
DOM, tape and footprint light up green. Without any prior historical behavior there's no way to tell what's going on. Some large player just opened a position? Closed a position? It may not even be directional because it's just one leg of a synthetic derivative. The only thing you know is that there is some immediate momentum so you can scalp it fast for some ticks.
The DOM, tape and footprint are very noisy. I use footprints as confirmation of a breakout trade. But I only pay attention to the footprint if there has been a larger time-frame pattern that contextualizes the footprint signal. Otherwise, it's just noise and momentary momentum. Which is fine for scalping. But I prefer to trade only a couple of times per day for larger moves.
