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Order Flow Trading
Order flow is essentially the interplay between two types of orders: 1) limit orders, most of which are visible in the order book, a.k.a. Depth of Market, DOM, price ladders, etc.; and, 2) market orders, which aim to buy or sell at the “best ask” or “best bid” respectively. These you can’t see beforehand. This interplay between limit and market orders is one of the main forces that drives price movement.
Order flow is a simple concept; it’s all about supply and demand. What makes it tricky is that it’s about the micro‐levels of supply and demand occurring at a rapid and real‐time pace.
This eBook covers the basics of Order Flow trading:
- What is Order Flow?
- The Order Book aka DOM
- How Order Flow Moves Prices
- Trade Imbalances
- Using Footprint Charts & Other Charting Studies to Interpret Order Flow
- Speed, Limit Orders, and the Other Side of Order Flow
- The Order Queue and Why Execution Speed Makes a Difference