how to harness order flow data

I read an emperical study that:

"echange rate change"= coefficient*(Interest rate country1-interest rate country 2) + coeffecient*orderflow + error term

This formula had 64% explanatory power when they made a regression. Thats awesome. They were looking at customer and interdealer order flow, from reauter 2000 data. And showed remarkable results as well when trying to forecast prices,where forecasting power decreased with time horizons, as fundamentals became more important. Interest rate differentials is of importance, but when taken alone, it had only 0.01 explanatory power.....

So what are the practical steps?

quite intriguing!

Well after some research, its hard to get good order flow data, that represent the whole market. There are options like cmfx, or those that ecn brokers offer, but as stated, they are not representative. But may still be of interest.

hower, they may tell something. though, from this equation we can derive that, it should be stupid to trade against interest points. However, it should not be traded alone, but as a supporting factor for your decision making.

So banks, have information advantage obviously, so it is really against your odds,trading against them. However, they cannot scalp, as big trades can take a long time to be executed. Thats, an advantage the small trader has.