✴️ What is Order flow in trading?
In brief, it is the flow of trades of a major player. Order flow is searched for after liquidity has been captured or if the price enters the area of interest. Price is fractal and therefore the same areas of interest can be applied to different timeframes. The Order Flow trading method allows you to enter a trade even if you missed the original entry into the position.
✴️ How order flow is applied in trading
A large market participant is able to create a zone of interest in any market, and when the price goes to this zone - it places a large flow of buy and sell orders to move the price in one or another desired direction.
When the price reaches the area of interest, the large participant will start putting pressure with orders. For example, if the price comes to the sell zone of interest, a large player may start spamming sell orders, which will rebalance the orders and force the price to move in the desired direction.
A trader who takes order flow into account is able to determine the direction in which the large player is pouring orders. This will allow you to enter trades in the direction of the current pressure of the large market participant, and reduce your risks. When the bearish order flow is working, the minimums are being reprinted. The situation is the opposite with a bullish order flow.
✴️ How the order flow works
- So, the order flow is a manipulation of a large market participant for a position set and price movement in the desired direction. That is, we distinguish the entire momentum without pullbacks as order flow.
- Very often a large player holds two trades simultaneously, one of which is a deceptive position in order to gather liquidity from the crowd.
- It is difficult to enter from Order Flow point by point; it is much more effective to find an order block.
- Price most often tests the Order Flow zone.
- The Order Flow zone works only for one touch, you should remember that! You should not trade Order Flow when re-entering it, the efficiency will be much lower.
- On higher timeframes, Order Flow looks like an order block.
✴️ How the order flow is formed
To find a sell order flow, you need to check the following signs:
- A structure has broken down, or there has been a liquidity grab
- Liquidity has been taken
- A new low has been formed, below the previous low.
Confirmation of bearish order flow comes when the price touches the sell zone of interest, confirming the interest of a major market participant.
Here's what to look out for to find bullish order flow:
- The downward structure has been broken
- Liquidity has been taken
- A higher price high has been formed.
In the case of a bearish confirmation, everything is exactly the same as with a bullish confirmation, only it is the other way around. When the price starts to come back after an unclosed trade of a big player and touches the bullish interest zone, leaving the order flow zone, this is the entry point.
✴️ Bearish Order Flow
When a bearish order flow of a major market participant is functioning the price falls below the previous lows. During the correction we will be able to catch the entry point to buy, at the moment of liquidity refresh, when the price will recover to the orders of a large player. The price follows liquidity.
Of course, it is possible that the structure will break and there will be no new lows, but statistically most often we will see movement in the past direction of the downtrend. Our goal with bearish order flow is to open smart short positions. Ideally, we should wait for a liquidity update and a test of the zone of interest.
Just don't put stops too close, because close stops are often a delicious target for large market players. It is more reasonable to put a stop where the whole downtrend pattern will be broken for sure. A stop that is too close is likely to be hit by the price and you will take a loss.
✴️ Bullish Order Flow
Bullish order flow occurs when asset prices rise and exceed previous highs. During correction periods, price will take liquidity off sellers. Our objective here is to catch the correction to the zone of interest to enter long positions as carefully as possible.
Our priority is long trades after the test of the zone of interest and taking out the sellers' liquidity. The main thing, as in the previous case, is not to put a stop too close. Remember that stops right behind the zone will be a target for big players. According to market mechanics, large market participants need liquidity to fill their positions to one side or the other. If you want to enter a trade very precisely - it is worth paying attention to the zone of interest itself, for example, an imbalance or a order block.
✴️ Conclusions
Order Flow is the traces of a major player on the price charts. When we retest from the money flow zone, we are waiting for a pullback from it in the direction of the major trend. It is more reasonable to enter pointwise from the order blocks because it is very difficult to put a short stop on the Order Flow zone and a long stop is not so favorable for us in the long term. Also, a good entry point can be an imbalance to buy or sell in imbalance points concentrated large aggregate demand or supply. The order flow in this situation will act as the main complementary indicator for entering a position.
In brief, it is the flow of trades of a major player. Order flow is searched for after liquidity has been captured or if the price enters the area of interest. Price is fractal and therefore the same areas of interest can be applied to different timeframes. The Order Flow trading method allows you to enter a trade even if you missed the original entry into the position.
✴️ How order flow is applied in trading
A large market participant is able to create a zone of interest in any market, and when the price goes to this zone - it places a large flow of buy and sell orders to move the price in one or another desired direction.
When the price reaches the area of interest, the large participant will start putting pressure with orders. For example, if the price comes to the sell zone of interest, a large player may start spamming sell orders, which will rebalance the orders and force the price to move in the desired direction.
A trader who takes order flow into account is able to determine the direction in which the large player is pouring orders. This will allow you to enter trades in the direction of the current pressure of the large market participant, and reduce your risks. When the bearish order flow is working, the minimums are being reprinted. The situation is the opposite with a bullish order flow.
✴️ How the order flow works
- So, the order flow is a manipulation of a large market participant for a position set and price movement in the desired direction. That is, we distinguish the entire momentum without pullbacks as order flow.
- Very often a large player holds two trades simultaneously, one of which is a deceptive position in order to gather liquidity from the crowd.
- It is difficult to enter from Order Flow point by point; it is much more effective to find an order block.
- Price most often tests the Order Flow zone.
- The Order Flow zone works only for one touch, you should remember that! You should not trade Order Flow when re-entering it, the efficiency will be much lower.
- On higher timeframes, Order Flow looks like an order block.
✴️ How the order flow is formed
To find a sell order flow, you need to check the following signs:
- A structure has broken down, or there has been a liquidity grab
- Liquidity has been taken
- A new low has been formed, below the previous low.
Confirmation of bearish order flow comes when the price touches the sell zone of interest, confirming the interest of a major market participant.
Here's what to look out for to find bullish order flow:
- The downward structure has been broken
- Liquidity has been taken
- A higher price high has been formed.
In the case of a bearish confirmation, everything is exactly the same as with a bullish confirmation, only it is the other way around. When the price starts to come back after an unclosed trade of a big player and touches the bullish interest zone, leaving the order flow zone, this is the entry point.
✴️ Bearish Order Flow
When a bearish order flow of a major market participant is functioning the price falls below the previous lows. During the correction we will be able to catch the entry point to buy, at the moment of liquidity refresh, when the price will recover to the orders of a large player. The price follows liquidity.
Of course, it is possible that the structure will break and there will be no new lows, but statistically most often we will see movement in the past direction of the downtrend. Our goal with bearish order flow is to open smart short positions. Ideally, we should wait for a liquidity update and a test of the zone of interest.
Just don't put stops too close, because close stops are often a delicious target for large market players. It is more reasonable to put a stop where the whole downtrend pattern will be broken for sure. A stop that is too close is likely to be hit by the price and you will take a loss.
✴️ Bullish Order Flow
Bullish order flow occurs when asset prices rise and exceed previous highs. During correction periods, price will take liquidity off sellers. Our objective here is to catch the correction to the zone of interest to enter long positions as carefully as possible.
Our priority is long trades after the test of the zone of interest and taking out the sellers' liquidity. The main thing, as in the previous case, is not to put a stop too close. Remember that stops right behind the zone will be a target for big players. According to market mechanics, large market participants need liquidity to fill their positions to one side or the other. If you want to enter a trade very precisely - it is worth paying attention to the zone of interest itself, for example, an imbalance or a order block.
✴️ Conclusions
Order Flow is the traces of a major player on the price charts. When we retest from the money flow zone, we are waiting for a pullback from it in the direction of the major trend. It is more reasonable to enter pointwise from the order blocks because it is very difficult to put a short stop on the Order Flow zone and a long stop is not so favorable for us in the long term. Also, a good entry point can be an imbalance to buy or sell in imbalance points concentrated large aggregate demand or supply. The order flow in this situation will act as the main complementary indicator for entering a position.
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