An Introduction to Order Flow

The transactions between the buyers and sellers move the market. On exchanges, these take two forms: market orders and limit orders. The intersection of a market order upon a limit order is what keeps the market perpetually moving. 

Order flow is the study of these two components that move the market. These market orders and limit orders make up the total present supply and demand of the market. However, if market actors were fully honest, then a trader could simply read the supply and demand of the market and know for certain which way price is likely to move. Thus, access to total information on future market and limit orders would grant you a perfect look at supply/demand. 

Except, large market actors are not always honest and as Sun Tzu has said, all warfare is based on deception. Trading is no different. These traders are not entirely malicious, they just want to make money as do the rest of us. Although large order sizes and a large pool of capital means that they have the ability to use methods that traders who use lower amounts of capital likely cannot use. 

Think about how most smaller order sized traders typically trade. They typically rely on technical indicators such as moving averages, RSI, and simple chart/candlestick patterns. Now think about the typical end result that these traders receive across the board. If you want to achieve results similar to the masses, then simply use the same exact methods that they use. 

However, if you want to achieve results that only a minority of traders will ever receive, then it is imperative that you look for trading methods that the professional/consistently profitable traders use. Order flow is one of the main methods that professionals use in their daily trading. Look at any prop firm desk or hedge fund. Their screens will typically feature charts that include various heatmaps and other order flow metrics. 

The ultimate goal of reading this order flow is to uncover what the plan(s) are of larger traders, so that you can make an estimation about the future forces of supply and demand. If you correctly can read the hand of these players, then you can position yourself with confidence.

You are reading this book because you have chosen to take the next step in your trading. This book will assist you in every way possible: through text, through visuals, and through practice. At the end of this book, you can be armed with a strong pattern recognition that can diagnose how the price of Bitcoin will move with great accuracy.

However, remember as with all things in life, what you put in is what you get out. If you rapidly skim through the book and skip all practice examples, then at best you may receive a strong subconscious ability to read order flow. If you take your time through every scenario, identify patterns, use the practice examples, and then practice on your own as well: then the results will follow in time. Work hard, and I’d like to welcome you to the ultimate guide to order flow. 

Happy trading.