Thursday, 28 May 2015

Context and Order Flow

There is a great misunderstanding about order flow and context. I see this from both emails and people I am mentoring. This misunderstanding can be corrected by looking at markets in a different way.

I have repeatedly espoused that CONTEXT RULES. I have also said that order flow needs to be read in context. For example, strong buying can be initiative action that will continue or it can be stops being hit at the end of an up move. To distinguish between the two, I need to see the context. Context is made up of Market Profile and indicators that tell me where I am in context. Indicators no longer trigger trades. Order flow triggers trades. Indicators tell me trend and its strength, where the mean is and how far I am from that mean.

An analogy to this is tennis. We have a tennis court with a net and lines. That is our context. As a player we watch where our opponent hits the ball in that context and how hard. We look at where he hits it from.

I draw your attention to the lows of the open on 5/22/2015. The previous day's Profile was split to reveal the VAL support that held on the open. Then look across to the order flow chart. The price bounced off the support on the open and then pulled back to provide the entry opportunity. From there it was just profit.


  1. Great post! Without context one is flying blind.
    What kind of bars are that in the chart? Are they time based? Or range based?
    Also I noticed you got rid of the Keltners. Weren't they used to determine how far price is from the mean? Staying with your tennis analogy, don't we need something that shows if we're inside or outside the field?

  2. jenrique42

    para cuando su libro EL?