Hello all;
I will try to keep this short. The purpose of this thread is to try and demonstrate how to use order flow and its resulting states to your advantage in your trading. To do this I intend to show what it looks like on a chart when market participants place orders that are either balancing or unbalancing and the resulting price action that takes place. I know this is sometimes a difficult concept to wrap your mind around but I hope here to show that it is much easier on the charts than one thinks.
To start: There are only two types of market participants...those who buy and those who sell. In fact in order for a market to exist at all there must be at least one of each...Two participants, one who buys and the other who sells, that mutually agree on a price to transact. Once this transaction takes place a "market" is born. From there, any other transaction must have both buyers and sellers.
These participants (in the modern market) now place orders to buy and/or sell into a machine which compiles these orders and matches buyers and sellers when they agree on a price to transact. Each transaction is recorded and a "price" is printed on your chart. Each time this happens a "new price" is printed on your chart...
When these orders are "balanced", that means that there are approximately the same number of buyers as there are sellers. and prices become stable. Prices will move up or down in limited area, most people refer to as a "range".
However, when there are more of one kind of participant than another...lets say buyers...more people wanting to buy than there are people wanting to sell...price will tick higher to induce more sellers to come to the market. This state is and UNbalanced state because there are more of one side (in this case buyers) than there are of the other side, and VIOLA!! prices move higher.
So how do we recognize these states in the charts? Simple!! Look at a chart - ANY chart. Do you see those really long candles (of either kind bearish or bullish)? Those are UNBALANCED order flow...the participants really only want to do one thing. Now do you see that each of these unbalanced areas ALWAYS starts and ends with what looks like a range where prices do not move very much (comparatively)? These areas are BALANCED areas...
That's it! There is nothing more complicated than that!! Trade with the and in the direction of the UNBALANCED areas and either hold through, or exit on the BALANCED areas...It doesn't have to be any more complicated than that, unless you wish to make it so.
In the following posts I will show charts where I will trade using daily and weekly charts (but you can use any time frame your little heart desires) to show how this can be accomplished. As these are longer term charts it will take some time for the set ups to appear.
I invite you to join me in following along. I hope you will find some value in this thread.
I will try to keep this short. The purpose of this thread is to try and demonstrate how to use order flow and its resulting states to your advantage in your trading. To do this I intend to show what it looks like on a chart when market participants place orders that are either balancing or unbalancing and the resulting price action that takes place. I know this is sometimes a difficult concept to wrap your mind around but I hope here to show that it is much easier on the charts than one thinks.
To start: There are only two types of market participants...those who buy and those who sell. In fact in order for a market to exist at all there must be at least one of each...Two participants, one who buys and the other who sells, that mutually agree on a price to transact. Once this transaction takes place a "market" is born. From there, any other transaction must have both buyers and sellers.
These participants (in the modern market) now place orders to buy and/or sell into a machine which compiles these orders and matches buyers and sellers when they agree on a price to transact. Each transaction is recorded and a "price" is printed on your chart. Each time this happens a "new price" is printed on your chart...
When these orders are "balanced", that means that there are approximately the same number of buyers as there are sellers. and prices become stable. Prices will move up or down in limited area, most people refer to as a "range".
However, when there are more of one kind of participant than another...lets say buyers...more people wanting to buy than there are people wanting to sell...price will tick higher to induce more sellers to come to the market. This state is and UNbalanced state because there are more of one side (in this case buyers) than there are of the other side, and VIOLA!! prices move higher.
So how do we recognize these states in the charts? Simple!! Look at a chart - ANY chart. Do you see those really long candles (of either kind bearish or bullish)? Those are UNBALANCED order flow...the participants really only want to do one thing. Now do you see that each of these unbalanced areas ALWAYS starts and ends with what looks like a range where prices do not move very much (comparatively)? These areas are BALANCED areas...
That's it! There is nothing more complicated than that!! Trade with the and in the direction of the UNBALANCED areas and either hold through, or exit on the BALANCED areas...It doesn't have to be any more complicated than that, unless you wish to make it so.
In the following posts I will show charts where I will trade using daily and weekly charts (but you can use any time frame your little heart desires) to show how this can be accomplished. As these are longer term charts it will take some time for the set ups to appear.
I invite you to join me in following along. I hope you will find some value in this thread.
