Order Flow Trading 101

Order flow is the study of transaction data as it flows into the market. It is often considered the "purest" form of trading analysis because it deals with the actual cause of price movement: volume.

Key Order Flow Concepts

1. Imbalance

An imbalance occurs when one side of the market is significantly more aggressive than the other. On the DOM, this is often visualized when the volume hitting the bid is much higher than the volume hitting the ask at a specific price level.

2. Absorption

Absorption is one of the most powerful signals. It happens when aggressive traders are hammering a price level, but the price refuses to move because a huge passive player is absorbing all that volume. This often indicates an exhausted trend and a potential reversal.

3. Delta

Delta is the net difference between aggressive buy volume and aggressive sell volume. Cumulative Delta tracks this over the entire session, showing you who has the upper hand globally.