Over the years we have observed some neat patterns in order flow.
Some of these patterns have enough staying power that they have been incorporated into some of the basic workhorses that we regularly use in our own prop trading.
These order flow patterns fall into 3 basic categories:
Category 1 | Conclusionary Buying or Selling - Order Flow Behavioral Traits That Arise at the End of Price Move
When analysis of these 'Conclusionary' order flow patterns is integrated with classic technical analysis the results are astounding.
For instance, when a market is oversold, would it be interesting for you to know, in real-time, that when a market is deemed oversold, whether information can be gleaned from the markets concomittant order flow that 1 or more of the Conclusionary Selling's subcategories (Decrementing rate of change of order flow, surges in HFT selling, or 'Late' supply) has entered the market?
Category 2 | Tipping Point - Order Flow Behavioral States That Arise That Are Fertile For A New Trend To Begin
Tipping Point (Subcategories)
When analysis of these 'Tipping Point' patterns is integrated with time-tested price action techniques (Engulfing Bars, Dojis, Known Support & Resistance Levels) the results are astoundingly eye-popping.
Category 3 | New Fuel - Order Flow Behavioral Traits That Are the Stimulus and the Sustenance That Fuel A Trend
New Fuel (Subcategories)
Increase in the Rate of Change of Order Flow
Discrete Surges in Either Buying or Selling
New Informed Supply or Demand
Resumptive Supply or Demand
When analysis of these 'New Fuel' patterns arise after a typical sequence of Price & Order Flow evolving from 'Conclusionary' through a 'Tipping Point', a trader can infer that a new trend is ensuing and that there trader posture should adapt to fit that new trend.
In Thursday's workshop we will be digging into a few of the more obvious Order Flow 'tells' that we have learned from the above categories.
Hope to see you there.
Register for this free Order Flow Workshop on Thursday, June 25th @ 4:00 P.M. ET .
Looking forward to seeing you there.
Algorithmic Architect @ ...sceeto
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