Order Flow Trading is used by traders to increase their profits through trading. Often, traders feel stuck and wonder why there isn’t any movement in the market. This is exactly where traders can use Order Flow Trading and assess the direction of market movements aside to identifying where the important support & resistance areas are. In this article, discover how to identify and take advantage of the market imbalance using Order Flow Trading.
Different Types of Orders
Before proceeding further it is important to know about varied order types that exist in the market. To begin with, traders have the option of placing Market Orders, which implies that orders are placed through selling or buying. Apart from this, there are Limit Orders, Stop Orders
Order Flow Liquidity
When using Order Flow Trading, traders need to check the liquidity i.e. which means they need to see the selling limits (Ask) or buying limits (Bid) which can be used for trading. Certain markets have high liquidity when compared to other markets. In case the market has low liquidity which can be used for getting slippage with just a single contract.
Most of the traders look forward to using Order Flow for trading. In order to do this, they need some amount of knowledge. One of the biggest markets for trading is the spot forex market (i.e. the interbank market) wherein most of the forex traders trade. But, within the Spot Market, one cannot utilize Order Flow since every broker as well as bank differs in terms of liquidity.
Next, you can view order flow within the futures market, traded on stock exchange. Thus, for using Order Flow trading, traders should consider trading the future, which experiences a lot of movement. Also, Order Flow trading is possible through trading of future contracts, stocks as well as other products that are traded within the stock exchange. This means traders can trade assets such as commodities, forex, as well as metals are traded with futures.
How to Use Order Flow?
In order to use Order Flow Trading, traders can use a number of indicators and tools which can be accessed through Order Flow Software such as ATAS.
Traders can therefore look at the chart and check the Volume Profile which shows the volume traded on every price level. If one buying or selling limit is filled through one market order then it is considered as one volume and reflects within the Volume Profile. Using this indicator, traders can view which particular prices are widely traded and the areas that are least traded. Most of the times, the markets expect to stay within volume area.
Apart from this, traders can also use the Order Flow Indicator for viewing the biggest volumes/trades made on the real or actual price. Therefore, traders can alter the settings when they want and take a decision regarding their trade entries. For instance, when traders see that there is great deal of pressure for buying on a prominent price level, then they can enter the trade. In addition to this, traders can also use advanced analysis and keep an eye on the big buying as well as selling trades to use Order Flow Trading to make huge profits.