It has a wide variety of definition and it is not
essentially exclusive to other ways or methods of trading. The basis of order flow trading is predicting the
prices where traders have awaiting or pending orders set, especially important
market participants that have very large orders.
Clearly, order flow could not be traded with no
“picking levels”. This is one of the most common or usual reasons why traders
find this trading intimidating or threatening to trade. Even trading gurus
before, are not advising picking levels, as they base trading on what you
actually see and not what you feel or think. If you will consider, gurus are
advising the traders right when you are just watching a chart, mentally picking
levels and wait for their prices to blow up. But, that is not how it works, not
if you consider and think more regarding the levels that you choose, and
equally important, if you utilise tight stop losses.
The Truth Behind It
Many experts teach trading techniques and methods
based on identifying likely resistance and support levels, and watching for
verifying price action if the price get into these levels. If you will look at
it closely, this is also order flow
trading, since the method is base on expectation that there will be a lot
of orders coming to those levels. Though order flow traders will take it
further as they will not wait for the conformation of price action before
getting into the trade.
This is obviously a bit more dangerous than waiting
for confirmation, but if you will think about it very closely, you might be
wrong. If traders are just waiting for the closing of four hourly or hourly
candle before entering, just by picking the level will get them in at a price
that is far better, putting them well in terms of profit even before traders of
time price action start to get in.
How To Pick Levels?
This is actually the biggest question, there is no
definite answer to know how to pick levels right. But basing on traders’
experience, they share that the most productive levels are resistance formed or
obvious support at prior daily and/or weekly lows and highs.
It is important that traders on order flow are not afraid
or threatened to trade against what is trending. Few of the finest order flow
trades that you will see are activated or triggered by a strong and apparently
unstoppable move in the other direction that is slightly frightening and
threatening to trade against.
It takes experience and knowledge for one to be highly
successful in this field. But other than that, just like those pure or 100%
order flow traders, they are not afraid to trade on what they feel and think is
right.
Seeking advice from co-traders, reading books and
helpful articles can help traders big time in progressing their knowledge in
this type of trading. There are also experts or gurus which can help you dig
deep and learn what trading is all about.
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