What is Order Flow Trading?
Order flow trading is a method that attempts to anticipate price movement based on the current orders that are visible on both the buy and sell-side. How many bids are being placed versus asks? The unknown factor, of course, is the number of buyers and sellers that suddenly jump into the markets (or traders who might know if any large buyers or sellers are about to jump in).
As it always had been, order flow is the mechanism that moves prices up and down. It is the balance or imbalance of buyers and sellers (bids and asks). It’s the onslaught of market sell orders that overwhelm the buy limit orders, or the market buys that overpower the limit order sellers.
You don’t know which market orders are about to jump in BUT the current indications of buying or selling pressure might help inform your directional bias.
And when it comes to using order flow to your advantage, such information is probably the closest thing you’ll get to understanding the forces shaping the current market.
What do you see in a normal Order Flow Chart:
- Vpoc (most traded volume in the candle)
- Traded volume on ASK
- Traded volume on BID
- Candle open
- Candle close
- High and low of the candle
- Buy or sell imbalance (if you mark it)
The Order Flow Chart is so special because you see the traded volume on the price exactly. The market can only move through direct market orders which are consuming the limit orders of the order book.
Traders can interpret the traded volume and develop trading strategies. For example, it is easy to see in the Footprint Chart if the market stops trading on a price level or trades high volume. Also, you can see if there is more bid or ask pressure in the candle. There are many forms of analyzing the Footprint Chart and on this page, we will give you advice on this.
This order Flow is build base on possible calculated volume from your MT5 platform. Please note that this is a multi timeframe indicator. My suggestion parameter is:
+ For H1 timeframe and under: use base timeframe M1 and period timeframe D1 or W1.
+ For H4 timeframe and above: use base timeframe M5 and period W1 or M1.
+ Number of profile bar should be 50-60 bars for a HD resolution screen. It depends on your screen resolution.
