Back to Basics with Order Flow

I have been tracking order flow since I was a local on the LIFFE floor in the mid 1980s. As we transitioned to electronic trading I have sought to maintain this focus.

In the early days order flow was not so visible. We just didn't have the tools. I have always been a great champion of Market Profile and used that tool to track changes in value and to reveal the context of the "now".

As I have said, there are only two types of trades:
1. Inside out - trading with the trend, usually entering when the trend has revealed itself and provides a pullback followed by a thrust in the direction of the trend, and,
2. Outside in - fading the trend when the "rubber band" has stretched too far and the momentum disappears.

Initially, we used indicators to see the footprints of order flow. Then, Trevor at MarketDelta provided a better tool to make order flow more visible. DB at Orderflow Analytics was another guy who provided tools to reveal order flow. Today we have NinjaTrader and MultiCharts who provide order flow tools as part of their packages. Additionally we have other third party providers such as Gomi who also provide more tools.

Now, can be true ElectronicLocals and be on the same competitive paying field as when I was a loc al in the pits. Everyone can see the flow. Its just a matter of working out a trading plan of how to profit by it, and that is now easier than ever before - even in these more volatile markets.

 

These charts use the basics of Market Profile/ Volume Profile expounded by Pete Steidlmayer and Cumulative Volume Delta. I additionaly use what has been called Volume Imbalance as a trigger when the context shows me a trade. Additional legacy ElectronicLocal indicators also help see the flow and trend.