How to Use order flow

Order Flow Trading is not technical analysis or fundamental analysis, although both of those certainly do play a part in order flow analysis. Market depth of a stock shows the standing limit buy orders and standing limit sell orders. Simply put, the market depth represents the total bid and offer at different prices pending for execution.  Each bid and offer price represents, willingness to buy or sell the stock at a particular time.   However, that does not determine the direction of the market.  The price of the stock increases or decreases when the orders are actually executed.  Order Flow records all the traded information such as quantity bought or sold at a particular price and it is graphically displayed on the chart in realtime so that it becomes easy to identify what the market participants are expecting in the near future, whether the demand or supply is strong at a specific price.  For ex.  huge quantity of a stock is bought at a particular price by an institutional player, the price of the stock starts increasing and the same can be easily identified in the Order Flow trading strategies chart graphically.  This kind of information would not be displayed on a Candle Stick or Bar chart.   Order Flow helps to identify the internal structure or  sub divide the auction process in detail thereby the traders can determine the increase / decrease in the price due to the impact of demand of supply at a particular time.  By using Order Flow, the trader can decide the future price action of the stock from the graphically represented information.

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Auction Market Theory

Auction Market Theory provides information reliable enough that market decisions can be based on the Auction Market data.

In comparison to other trading disciplines, order flow trading does not contain that many trading strategies you can use. The reason why, is because there is no proper order book available which you can use to see when buy and sell orders are entering the market in real time. The strategies I’ve picked for this article aren’t full order flow trading systems, so you don’t have to worry about changing your current trading strategy in order to trade them, you can just use them as additional setups to watch out for when your trading the market.

Let’s move to defining core strategies.

When you have an idea what you want to use as core strategy, ask yourself:

·         What is the idea behind the strategy?

·         What are the strategy’s strengths and weaknesses?

·         What factors are giving my strategy an edge?

I’m using the stop hunt strategy myself, so I’ll answer the questions in the way I perceive it:

What is the idea behind the strategy?

Large traders cannot simply accumulate or distribute positions whenever they wish to do so, because they would suffer from slippage. Slippage can have a great impact on your P/L if you are one of the big players in the market.

What are the strategy’s strengths and weaknesses?

Strengths: Initiative of large traders behind it, clear sentiment gives us the support of other participants, clear profit target.

Weaknesses: Entry point can be somewhat hard to determine, another reason why we should focus on strong sentiment, so that we have the support of “the flow”.

What factors are giving my strategy an edge?

I only trade when sentiment is clear. I look for the market to trigger buy stops during positive sentiment and when sentiment is negative, I target sell stops. If sentiment is positive and price action starts to move accordingly, other participants will start to join the move.

There we have something we can already work with. As has been mentioned, the markets are all about greed of fear. Even professionals with a long and successful track record will sometimes find themselves in one of those states. It is not meant for us humans to be like robots, not even in trading. In combination with sentiment analysis, try to incorporate some psychology. Regarding those without a position yet, it is all about perception. Where will key demand and supply be located? And then are those with a position on, what’s their target? Do they have sentiment in their favor? Which side of the market is the weaker one? Where are the stops of the weaker side? Some questions you can ask yourself and note in your journal. While those questions are not easy to answer sometimes, it is about keeping it simple by observing and taking notes. Your subconscious mind is capable of amazing things and you have nothing to lose by trying it.

Your best bet is to focus on key supply/demand zones on higher time frames that will likely attract the flow necessary to ignite momentum.

Best Order Flow Trading Strategies for beginners

In comparison to other trading disciplines, order flow trading does not contain that many trading strategies you can use. The reason why, is because there is no proper order book available which you can use to see when buy and sell orders are entering the market in real time. The strategies I’ve picked for this article aren’t full order flow trading systems, so you don’t have to worry about changing your current Market profile tradingstrategies in order to trade them, you can just use them as additional setups to watch out for when your trading the market.

Let’s move to defining core strategies.

When you have an idea what you want to use as core strategy, ask yourself:

·         What is the idea behind the strategy?

·         What are the strategy’s strengths and weaknesses?

·         What factors are giving my strategy an edge?

I’m using the stop hunt strategy myself, so I’ll answer the questions in the way I perceive it:

What is the idea behind the strategy?

Large traders cannot simply accumulate or distribute positions whenever they wish to do so, because they would suffer from slippage. Slippage can have a great impact on your P/L if you are one of the big players in the market.

What are the strategy’s strengths and weaknesses?

Strengths: Initiative of large traders behind it, clear sentiment gives us the support of other participants, clear profit target.

Weaknesses: Entry point can be somewhat hard to determine, another reason why we should focus on strong sentiment, so that we have the support of “the flow”.

What factors are giving my strategy an edge?

I only trade when sentiment is clear. I look for the market to trigger buy stops during positive sentiment and when sentiment is negative, I target sell stops. If sentiment is positive and price action starts to move accordingly, other participants will start to join the move.

There we have something we can already work with. As has been mentioned, the markets are all about greed of fear. Even professionals with a long and successful track record will sometimes find themselves in one of those states. It is not meant for us humans to be like robots, not even in trading. In combination with sentiment analysis, try to incorporate some psychology. Regarding those without a position yet, it is all about perception. Where will key demand and supply be located? And then are those with a position on, what’s their target? Do they have sentiment in their favor? Which side of the market is the weaker one? Where are the stops of the weaker side? Some questions you can ask yourself and note in your journal. While those questions are not easy to answer sometimes, it is about keeping it simple by observing and taking notes. Your subconscious mind is capable of amazing things and you have nothing to lose by trying it.

Your best bet is to focus on key supply/demand zones on higher time frames that will likely attract the flow necessary to ignite momentum.

If you are at the beginning of your Order Flow TradingStrategy development journey and looking for more information, you should start with the training program, Check out our training program. https://vtrender.com/trading-room/

For more visit site 

https://vtrender.com/

 

Market profile analysis with monthly and weekly charts

Nifty Nov F:

NF opened below the Neutral Extreme reference of 10745-10779 which was a weak open and it made a balance in a very narrow range of 40 points in the first part of the day between the OH of 10749 & 10709 which was also the previous week high. It went on to give a pull back high of 10730 but then could not sustain above VWAP & started trending lower for remaining part of the day first breaking below the FA of 10693 & then tagging the VPOC of 10670 before making poor lows at 10650 as the selling looked a bit streched therefore gave a late pull back high of 10687which will be the first level to watch tomorrow on the upside above which we have a ledge at 10715 which will act as resistance. For now the PLR seems to have turned down as NF closed well below the FA of 10693 so the levels to watch lower would be the other multi-day FA we had at 10636 & then the VPOC of 10620 & next the 1 ATR move down from 10693 which comes to 10553.

·          

·         The NF Open was a Open Auction in Range

·         The day type was a Normal Variation Day (Down) with a 3 IB range extension

·         Largest volume was traded at 10720 F

·         Vwap of the session was at 10702 with volumes of 92.3 L in a session which traded a High-Low range of 10749-10651 for 98 points 

·         NF has a multi-day FA at 10636 and has tagged the 1 ATR target of 10779, the 2 ATR target comes to 10917

·         NF closed below the FA of 10694 (19/11) today and the 1 ATR down target comes to 10553

·         The vwap of 29/10 at 10175 is strong support now which was broken intraday but re-captured

·         We had a FA at 10111 on 31/10 which has done its 2 ATR objective & is now strong support

·         The VWAP & POC of 31/10 10250 & 10248 will be important levels going forward

For the weekly and other swing levels of the Nifty go to – https://vtrender.in/market-profile-analysis-with-monthly-and-weekly-charts/ (has monthly and weekly Profile charts updated to trade date 16/11)

Daily Zones:

BNF looked like giving a Open Test Drive Down at start when it moved away from the POC of the 2-day bell but the volumes were again very low & BNF for the third consecutive day made a narrow range of just 182 points (lowest in the last 3 months) and a bell profile on daily. BNF probed through the singles of the DD made on 15th and tagged the weekly extension handle of 26080 (mentioned in the weekly report). BNF also left a multi-day FA at 26395, the 1 ATR move down of which comes to 26035. We have a wide POC today at 26200 which will be the level to watch on any bounce above which we have the VPOC of 26290. On the downside, BNF remains weak below 26160 & the multi-day FA of 25811 (which got confirmed on 15th Nov) and is now at T+3 days can be expected to be revisited in the next 2 days.

·         The BNF Open was an Open Auction

·         The day type was a Normal Variation Day (Down)

·         Largest volume was traded at 26200 F

·         Vwap of the session was at 26185 with volumes of 28.7 L in a session which traded a High-Low range of 26262-26080 for 182 points

·         BNF negated the FA made at 26080 on 14/11 and the 1 ATR target to the upside is 26472

·         BNF closed below the multi-day FA of 26162 (made on 19/11) and the 1 ATR down target is 25801

·         BNF confirmed a multi-day FA today at 25811 and tagged the 1 ATR target of 26208 & is currently on T+3 days

·         The FA of 13/11 at 25429 is now strong support as has tagged the 2 ATR target of 26230 and closed above it

·         BNF has stayed above the vwap of 17/10 which was 25500 and is now support

·         We had a FA at 24625 on 31/10 which has completed 1 ATR of 25102 & has stayed above the 2 ATR of 25575

·         31st October’s VWAP of 24895 & POC of 24900 will be important levels going forward

For the weekly and other swing levels of the Nifty go to – https://vtrender.in/market-profile-analysis-with-monthly-and-weekly-charts/ (The BN Monthly and BN weekly F charts are posted at the same link)

Daily Zones:

·         Value zones ( volume profile) are at 26145-26200-26242

Hypos / Estimates for the next session:

a) The auction has supply at 26200 F now
b) 26014 is minor support
c) Below 26014, next support is at 25960

For more tradeable ideas and intraday trading strategies based on MarketProfile and the OrderFlow live charts with OrderFlow analysis Live, subscribe to the trading room. The Vtrender Trading Room hosts India’s largest MarketProfile community live every trading session from 9.15 am to 3.30 pm.

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Market profile analysis dated 15th nov

NF made an OAIR which was also inside previous day’s Value indicating a quiet first part of the day & it remained inside previous day Value for the first couple of hours before giving an range extension to the upside & giving a 2IB day with the same high as yesterday thereby making an Inside Day with poor highs in NF if we combine the last 2 day’s Market Profile trading strategies as that selling tail of 10655-10680 was negated today. However, we saw some long liquidation & fresh shorts coming into the last 45 minutes as it left a pull back high at 10670 to close below VWAP. The 2 day composite gives a perfect bell in NF & the close today is at the composite POC so we could get a trending move away from here.

• The NF Open was a Open Auction in Range (in Value)
• The day type was a Normal Variation Day
• Largest volume was traded at 10621 F
• Vwap of the session was at 10635 with volumes of 88.6 L in a session which traded a High-Low range of 10680-10586 for 94 points
• The vwap of 29/10 at 10175 is strong support now which was broken intraday but re-captured
• We had a FA at 10111 on 31/10 which has done its 2 ATR objective & is now strong support
• The VWAP & POC of 31/10 10250 & 10248 will be important levels going forward

For the weekly and other swing levels of the Nifty go to – https://vtrender.in/monthly-and-weekly-charts-analysis(has monthly and weekly Profile charts updated to trade date 09/11)

Market profile analysis dated 6th nov

Nifty Nov F:

NF gave a gap up just above 10570 & looked set for a drive up to 10640 & the 1ATR target of 10680 from the multiday FA of 10516 but volumes died down after open indicating lack of initiative players & once the OAOR got confirmed, NF just began to balance in a narrow range. It made a high if 10620 in the morning which was the start of the small selling tail we had in it from Friday (2nd Nov) & then kept probing lower. The first attempt to break IBL was met with swift rejection leaving a probable FA at 10562 after which it slowly climbed back above vwap but once the vwap was broken in the afternoon, NF made a quick fall breaking below IBL again & this time went on to tag the yPOC of 10539 and also made a 2IB extension downside making a low of 10512. The speed of the fall was too quick & the dPOC remained up at 10592 so there was a very good chance of NF going back up to tag that once but time ran out for the day & it could only make a pull back till 10568 by close. NF is in the process of making a nice bell on composite from last Friday which seems to need some filling in the 10590-10530 zone so once this low volume zone is auctioned well, we could see a move away in NF. singles below at 10505-10478-10450 and above 10595 we have a selling tail at 10613-10632.

• The NF Open was an Open Auction out of Range
• The day type was a Normal Variation Down Day
• Largest volume was traded at 10592 F
• Vwap of the session was at 10573 with volumes of 80.2 L in a session which traded a High-Low range of 10620-10512 for 108 points
• The vwap of 17/10 at 10612 is the resistance now for NOV which was tagged today for the second time but could not close above it.
• The vwap of 29/10 at 10175 is strong support now which was broken intraday but re-captured
• We had a FA at 10111 on 31/10 which has done its 2ATR objective & is now strong support
• The VWAP & POC of 31/10 10250 & 10248 will be important levels going forward

For the weekly and other swing levels of the Nifty go to – https://vtrender.in/monthly-and-weekly-charts-analysis(has monthly and weekly Profile charts updated to trade date 02/11)

Daily Zones:

• Value zones (volume profile) are at 10557-10592-10617

Hypos / Estimates for the next session:

• a) supply still persists  on the zone above 10590F
• b) 10520 zone today again showed buyers accumulating
• c)The auction ha supply at 10592 again , immediate support at 10532

For more tradeable ideas and intraday trading strategies based on Market Profile trading strategies and the OrderFlow live charts with OrderFlow analysis Live, subscribe to the trading room. The Vtrender Trading Room hosts India’s largest MarketProfile community live every trading session from 9.15 am to 3.30 pm.

If not a Trading Room member you can get immediate access at – https://in.explara.com/e/vtrender–trading–room/checkout

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BankNifty Nov F:

BNF opened in yesterday’s spike of 25783-25873 making a low just above the VAH of the 3-1-3 balance it had formed which was 25808 so it looked good for a further upside probe & it went on to get above the spike highs & make a new high of 25930 but got exhausted as the range kept narrowing down on 30mins for the next couple of hours. Post noon it gave a breakout & looked set to move away & even got above IBH but got swiftly rejected back into IB & once it broke below the previous week high of 25898 it went onto break vwap & then confirmed that FA at top at 25940 first tagging the yPOC of 25720 & then making the 2IB extension downside of 25682 & finally the VAL of the composite at 25658. BNF made a Double Distribution Day with the DD singles at 25805-25732 & the scene of crime at 25840 which will be the levels to watch on upside in it. On the downside, it has opened up the 1ATR move down from 25940 which comes to 25491 & below it we have the vpoc of 25370 though there is some immediate support at 25630 levels.

• The BNF Open was an Open Auction (in Spike)
• The day type was a Double Distribution Day (Down)
• Largest volume was traded at 25890 F
• Vwap of the session was at 25795 with volumes of 33.2 L in a session which traded a High-Low range of 25940-25617 for 323 points
• BNF has left a FA today at 25940
• BNF has closed above the vwap of 17/10 which was 25500 and is now support
• We had a FA at 24625 on 31/10 which has completed 1ATR of 25102 & today has closed above the 2ATR of 25575
• stayed above the FA we had on 30/10 of 25214 for most part today
• 31st October’s VWAP of 24895 & POC of 24900 will be important levels going forward

For the weekly and other swing levels of the Bank Nifty go to – https://vtrender.in/monthly-and-weekly-charts-analysis/(The BN Monthly and BN weekly F charts are posted at the same link)

Daily Zones:

• Value zones ( volume profile) are at 25702-25890-25930

Hypos / Estimates for the next session:

• a) supply seen at 25900 from earlier and is still persisting
• b) support at 25760 was broken and the BNF spiked lower
• c)25822 is also a new fresh supply now . Imm support at 25630

For more tradeable ideas and intraday trading strategies based on MarketProfile and the OrderFlow live charts with OrderFlow analysis Live, subscribe to the trading room. The Vtrender Trading Room hosts India’s largest MarketProfile community live every trading session from 9.15 am to 3.30 pm.

If not a Trading Room member you can get immediate access at – https://in.explara.com/e/vtrender–trading–room/checkout