THESE ORDER FLOW PATTERNS FALL INTO 3 BASIC CATEGORIES


Over the years, we have observered 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.

Category 1 | Conclusionary Buying or Selling - Order Flow Behavioral Traits That Arise at the End of Price Move

Conclusionary (Subcategories)

  • Decrementing Rate of Change of Order Flow

  • Discrete Surges in Either Buying or Selling

  • Late Demand or Supply

  • Panicked Trading


Conclusionary Order Flow has 2 stages.

    Stage 01 - Potential Conclusionary Order Flow - This occurs....
    
    Stage 02 - Confirmed Conclusionary Order Flow - This occurs after price moves to a certain point that traps those caught in the Conclusionary Order Flow

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)

      • Buy Programs Waning \ Sell Programs Waning

      • Order Book Having Been Swept


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.