Trading strategies based on the volumes and Order flow arriving in a market are among the most effective for successful operations. If you are not considering supply and demand in your trading decisions, your trading decisions are lagging, you are taking more risk in your trades using price limits, and you have a hard-to-read chart covered by lines.
The Order flow trading strategies can simplify your approach to trading.
Trading with Order Flow is simple
Now, all you need to understand is what the trading with order flow is about:
- keep track of quantities that have been bought and sold at different prices
- using this information to identify supply and demand patterns – we can then notice the price levels at which there has been supplying or demand
- see if supply or demand is maintained or interrupted when these price levels are revised
You can use various tools to view buy and sell volumes at different price levels. These tools can organize and present the raw purchase and sale data. That's all you need once you're able to interpret supply and demand conditions from raw data. We can help you acquire these skills through our online material, training courses, and coaching..... however, applying order flow indicators to this raw data can save time and perform analyses that are too difficult for humans to do or too fast to interpret. Let your computer analyze the numbers and present this refined data in an easier-to-use way to make decisions. This is what vtrender.com's Order flow trading software does.
- Identify significant events in supply and demand
- Present them to you, and
- Follow the behaviour of the levels over time.
You can use this information for manual discretionary trading, for alerts, or even to automate trading.
Another amazing toll is the Order book
The order book is also referred to as DOM (depth of market). You can find the order book with the best bid and ask prices. For most brokers, it can also be used directly for placing and moving orders.
In addition, professional platforms for order flow trading strategies offer a variety of plug-ins and the possibility of customizing the DOM, for example via the so-called "Smart DOM". Nowadays, the biggest problem for order flow traders is algorithms, especially high-frequency (HFT) traders. The Smart DOM tries to recognize and analyse such algorithms.
Ok, so what can I trade with the order flow?
The short answer is anything – the behaviour of any market is regulated by the laws of supply and demand. If a market does not observe them, then it is not profitable for trade, however, some goods and markets are more favourable than others. That's why:
Forex
Very popular among retail traders due to the easy access to accounts and the low risk perceived by small pip values. However..... Forex is a decentralized market. If you are able to receive volume data, it will be the volume of your broker, otherwise, your trading platform will approximate the volume based on the number of trades that have moved the price up to and the number of trades that have moved the price down. As a result, supply and demand information is less accurate than information about stocks and futures.
Actions
Better information than forex, but in our opinion not as favourable as futures for day trading or swing trading using order flow. Because.....?
First, although shares are traded on their own exchanges (NASDAQ, NYSE, NYSE, etc.), there are several "trading venues" and dark pools, i.e. parallel exchanges where the same shares can be bought and sold. This means that the volume of information you receive from your broker does not capture the entire picture of buying and selling in the market.
Secondly, the 'pattern day trader' rule requires that if you trade daily 4 or more times in a 5-day period, you must maintain a minimum balance of $25,000 dollars in your account and you can trade up to 4 times your previous excess daily maintenance margin. This rule is designed to reduce risks for small traders, but the minimum account is large compared to that needed for a futures account.
Encryption currency
Popular among traders because of some exchanges that provide great leverage. As with forex, you will only see the volume that is traded on the exchange where you are trading.
Our challenge with crypto currency and order flow is that whenever we have examined these markets in depth, the sense of 'order' in supply and demand is low compared to forward markets.
Future
In our opinion the best markets to trade using the flow of orders.
Forward contracts are traded on a single centralized exchange. This means that you have visibility of all the volumes traded and you have the complete picture of supply and demand.
With Order flow trading strategies, you no longer observe the markets from the outside, but from the inside: you look directly at the heart of the markets.
Market profile seminars and events are provided by vtrender.
The markets move the average range in say a widely traded instrument such as the Nifty futures.
