Price-Structure-Order flow

Yes I do take my directional bias from the weekly chart. And if you look closely at the weekly chart on USD/CAD you will see that the weekly chart too is/was balancing in a bearish flag that may be, just now breaking down. For this last year, this market has been "choppy" from the viewpoint of the weekly chart, so I have been trading both sides of the "CHOP", as I would any large range. It would appear now that I am looking at it as though the flag has broken down and made a lower low. BUT, I'm not seeing the "whoosh" as you put it. (That's how gspajon described it also). So I am suspicious of the down side still, but that has nothing to do with the market...it is only my "feeling" about the market.

You would not have been wrong by doing that as long as you follow the trend on the your trading "window" and true to its nature of late, you would've had to deal with a "choppy" and frustrating probes higher. It would also appear looking at the 12 chart on Friday, that buyers are the ones who are driving this price lower...Yes BUYERS are driving the price lower.


Why is that? Take a good look at the 12 hr chart and also the intraday chart...which ever one you like. Each time the buyers get a foot hold on the price, sellers come in and stop them out. But the sellers are only on the intraday highs. They are not willing to sell at the lower prices, thus no "whoosh". However as the buyers put their stop orders (which are really sell orders) lower and lower each time they enter, the market moves lower to hit their stops, but then...nothing. No new sellers come in, and thus the buyers are again encouraged and buy the market sending it up again. Thus the "balance" is at the extremes of a choppy and directionless market.

The down side of this market (or the upside depending on how you see it) is that most of the trades are occurring on small time frames...this tells me it is the intraday traders that are moving this market...not the "big boys". The upside is that although it has been going on for some time, it cannot continue forever, and so I will most likely just wait and see which side wins.

New Trade Opportunity: AUD/USD - Short:

I've been monitoring this market since it came up into these tops established last year. A look at the weekly chart (on the left) shows there was long and arduous battle where the sellers finally took the field and pushed price back down. This last move down, then the retrace all the way back, has established a large range...where we want to only engage at the "edges". For all you "price action" traders, note the "hanging man doji" that formed last week.

The intra week chart (middle) shows that upon reaching this area, once again the sellers have balanced the buying and are now starting to have a greater influence on the price movement.

Intraday chart shows the sellers are gaining momentum and have triggered my two positions. Now that I am in, I will just have to sit on my hands with this trade and see what the order flow does. I am not expecting a quick profit here...but I do expect the price to bounce around and "scare" me a few times. Once the price does give way, I do expect a quick push down, as the last two have been. If I am stopped out, I will look to buy on a retest of this same balance zone.

Update on AUD/USD - short:

Price has returned to the top of the channel and sellers are more active now. I am counting on these sellers to hold the price at least inside the range...and hopefully the buyers have moved their stops higher to when the buyers stop out it should send price back down to the bottom of the range.

New opportunity EUR/JPY - Short:

After balancing for 8 agonizing weeks, this market has stopped out the longs and is now retesting the resolve of the sellers. Price rose back into my target area and has pulled away again. I just saw this opportunity and missed the really primo entry, but have placed pending orders above the manual entry. I am unsure if I will be happy that price returns to fill those pending orders however, because it might signify that buyers are still active and in greater numbers that it would appear at present.

Thanks for your nice thread hope you dont mind .....
here is my trade on AU

Well done!! You have a profit and if you are going for a short term trade I would suggest you take profit at the opposing end of the range. You have placed you limit outside the range...and if it breaks it may move down to the bottom of the larger range as seen on the weekly chart....that is the range I am trading. However, if you only wish to trade inside the smaller range, I suggest you "engage" only on the edges of the range...that means, entry AND exit.

I m out already thanks for your attention ...

Thanks alot for your detailed replies and your time Donpato, it has been very helpful and I will continue to study it. Now that you point this situation out quoted above I can envision this happening but I do find it hard to see it with my own eyes, this will take some practice I think. I think your AUD/USD looks like a very good setup, plenty to be gained if you hit your TP!

update on AUD/USD - short:

Short position stopped out for a -40 pips on the aggregate. Since we have a solid 12 hr close above the balance zone, I have set pending orders for longs at the positions seen here. Lets see if these get filled at at least give me back my 40 pips

update on EUR/JPY - Short:

The price has stalled again in the same balance area as before. Currently I am showing a very slight profit - consider it break even. Stop on this trade is tight so I will hold this a little longer, but I am not liking this set up either. Who knows, often the setups I don't like are the ones that work the best.

A note to all...It seems to be as though as of late, every set up I find, has not had the results I have wanted to see. I have noticed this since the US election. The USD (which is principally what I trade) has been in a "tizzy" with politics that have ensued since the election. Thus (as can be clearly seen in the charts) the USD has had the "jitters" and can't seem to make up its mind which way to go. Any moves have been what I would characterize as nervous and uncommitted. Thus the balance zones that we have seen pretty much everywhere. This tells me that the short term traders are still the ones that are moving the markets. These are usually small institutions, or hedge funds that are looking to book profits on a daily basis.

Thus the trading opportunities are presenting mostly on intraday charts. As I do not trade these charts in FOREX, I will probably be on the sidelines "stalking" some moves, but will not be as active but will be checking these charts every day (as always) and will post as I feel new opportunities present.

This is a good time for anyone who has questions or comments to post. I have said this several times before and usually get several private messages. Come on friends...don't be shy. I enjoy the discourse. You may or may not agree with my ideas but as long as we are polite with each other, I think many others will learn, especially when there are opposing points of view.

Hello again all...

One of the viewers of this thread contracted me and asked me to remove the logo from the charts claiming it made them easier to read. I have removed the c-Trader logo from the charts. And you are all free to comments on the ease (or lack thereof) to read these charts now. I really didn't notice or pay any attention to the logo, as I tend to look more at the right hand edge. But if this makes it easier to understand then I hope this helps. I thought we might look at the USD index.

It can be seen here that there is perhaps a retrace occurring intraweek. and I would suspect a retest of the last balance zone seen just above the target zone drawn here on the intraweek charts.

Should we get a bounce from that area, I suspect the USD index trend will remain intact. However, if we get a push through this area and form a new lower low, I will consider the bullish trend reversed, and start looking to sell rallies on all USD/xxx markets, and buy dips on all xxx/USD ralies.

Amazing what can happen when you go out to run errands...I had problems with my computer and had to have it looked at. While I was looking at the USD/JPY market, my computer froze and refused to function. I was unaware that these orders had actually been placed because the computer froze before I got back the confirmations.

But look at that...all filled and price moving my way...will wonders never cease?

So I am long on this trade and am expecting another retest of the highs seen on the weekly chart. The weekly char also shows well the current trading climate we've been in over the past 5 weeks. So I am anticipating a run up into the "clear air" above this weekly balance zone. keep your fingers crossed.

While USD/JPY stops out for a -45 pip loss, this trade is currently showing a 100 pip open trade profit.

EUR/USD - Short:

Buyers attempting to push price higher near my target zone, have now stopped out and this move lower is typical of a liquidation move as long positions in the market have become sellers to exit their position. Price is now entering an area where I might anticipate some buying to resume, because this is where buyers overwhelmed sellers at the beginning of the month. I have moved my stop down to reduce risk to approximately 50 pips, but will still leave it above the last swing point as I am wanting to see if price returns to the last balance zone to retest it before moving down further. IF that is going to happen it should show some signs during this session.

Appreciate you sharing your thoughts and approach to the market Don. I've come to similar conclusions over the last year or so. I have probably a total of 4-5 years under my belt between Forex and futures trading, took a 3 year break to develop my day job career and got back to the charts about 1.5 years ago. I'd say the best thing I did for myself in trading is removing ALL indicators and just staring at a plain chart. I had similar "AHA" moment that I believe you described as seeing supply and demand levels, it was like a veil was lifted from my eyes. Market moved and it consolidates, moves and consolidates.

Looking at naked charts led me to price action and candlestick patterns, the James16 group and others. I studied that for 4-5 months but began to realize at the RIGHT levels it didn't matter what formation candle sticks had taken on. It wasn't till several months ago that I really accepted the fact that candlestick patterns are crap, literally have no value, the LEVELS have value. Sure, candlestick patterns could have value if you boil down to what's really making them work, the levels, their only value is pointing you there.

Not long after I got into supply and demand, studied this for 4-5 months but I think the group I was with over complicated it, they convoluted the simplicity, trading is generalities, it's not a science.

I definitely haven't thrown out supply and demand because of this experience, but I do feel that it's much of the same thing as I see, the same concept. Where they bought before I believe they'll buy again, where they sold before I believe they'll sell again. Move consolidate move consolidate is just imbalance balanced imbalance balanced.


I believe you said you typically win about 60% of the time, any thoughts on why not a higher win rate if these levels are so powerful?

Also, I see you scale in/out. Have you worked any hard numbers on if this is the right course of action? I've been back and forth on whether or not this is the right move. I trade mostly off daily charts, often times I'll see multiple levels where sellers came in, which will it be this time? No one knows. This is where scaling is helpful. But say it grabs my first of 3 positions and takes off to target, technically it's only a 33% of a win as far as risk reward. Now say the next one fills all 3 positions but gets stopped out, now I have a 100% loser. BUT there are many instances where due to scaling I was able to get a piece of the action when say just having one order wouldn't have been filled. So maybe it balances out. Curious if you've dug any deeper into this.

Hello sw True...welcome...it is so nice to have someone who actually wants to have a conversation. If you read this thread through you will note I was practically begging to have some salient conversation about this subject. I had literally gave up and stopped posting. One person pointed out that unless I was going to give specific instructions or have some "gee wiz look at that" indicator, that no one would really be interested...so thank you for posting

You make some very good points that are worth mentioning. I think the first and most obvious to me is the idea of supply and demand, which many people equate with order flow. While it is true that supply and demand are considered the market forces at work, it is really order flow that creates such support and/or demand. It is the condition know as "bid" or many buy orders all coming in at the market that creates the "demand" that sends prices moving higher. Likewise it is the condition know as "offer" or many sell orders coming in a the market that creates the "supply" that sends prices moving lower.

Learning to "see" this in the charts is what causes you to better time your entries and exits. You mentioned price action is meaningless...while I do agree mostly with this concept, I do use the price action to indicate changes in order flow, because the FX market has no central clearing, and thus volume is unknowable. While trading futures, I have found ways to see when the order flow piles up on one side or the other, and that is when I start looking for changes indicating continuation or reversal. Those same price patterns occur in all markets and I am translating those into trading on the FX side. It has proven a bit more difficult because of the unknowable volume issue.

Thus your "levels" where you can clearly see "supply/demand" changing, are really areas where one side of the order flow has dominated the other. The thing that many have difficulty grasping is that it is not a single price, or even a price zone. It is a range of prices where the buyers and sellers literally fight it out until one side gives up. These changes have specific and distinct patterns in the price action.

I have lately begun using a volume indicator, called "better volume" it is a little more helpful, but still only uses tick volume (which is all that's available) and thus can only advise when lots of transactions are occurring but not the real volume of those transactions. Still its better than nothing.

So I have been doing a great deal of studying on the issue of "scaling in or out". I have a good body of evidence now, based on how I trade, holding trades into trends is not nearly as productive as is targeted profit taking. Again, the way I trade, it is more profitable to take profit at a set Risk-to-Reward Ratio, than to hold and watch profits evaporate, hoping that the current trend will turn again and go my way...before it hits my stop, no matter where it is placed. BUT I do scale in...This is because I cannot pinpoint with any accuracy, a signal price point, that will trigger my entry, and then turn and go my direction without significant drawdown. Thus I divide my position into halves, or thirds and "scale in". If price moves my way after just one (the shallowest) price point, I move the stop up as soon as possible, and cancel the other entries...but if all are triggered, the totality of the position is never more than 2% of available account balance.

I have found that a target of 2.8 x risk is the sweet spot for taking profit. Usually the way I trade, that point is hit and very soon after, the price will retrace...how far is anyone's guess...I have give up too much profit to keep my fingers crossed and hope the retrace isn't really a reversal I missed. Just take your profit, be grateful, and move on to the next trade.

That being said, my last scale in scale out did much better, but this was the first move down after hitting a 2 year high...


I am currently long with 2 positions, and awaiting a 3rd to trigger, on this same market.


So we'll see what happens. It seems clear to me that the 12 hr chart (middle) has given a signal that the sellers are worn out and will not have much left in the current (supply) zone. If renewed USD selling does occur my risk is small.

Just to clarify I was saying "candlestick patterns", an aspect of price action are worthless. I wouldn't say price action is worthless, I watch price action. But many traders put so much value in an outside bar, or pin bar or this or that. Those are all subjective to the time frame you're looking at, and if they're subjective they lose most of the value. But key levels are key, if you see price bounce 100 pips off a level whether it's a 1min or 1 day chart, you'll see it.

I see what you're saying about supply/demand vs. order flow. While one could argue they're one and the same you're saying order flow specifically created those levels if you boil it down. Supply and demand in general creates/drives markets but order flow more specifically creates the levels. Noted.

It looks like we trade in a similar manner with different terms, but I may be wrong. For the most part I'm looking at key levels on daily/weekly and trading with the daily trend. Now trend is one of those completely subjective terms but for me I'm just looking at market structure at it's simplest form. If we're getting HH HLs then we're in an uptrend, once a HL is broken to the downside I start looking for shorts and a possible trend reversal. I'm similar in that I don't typically try and ride trends, I like to take my profits, I can always re-enter.

At key buy/sell areas if clear enough I'll take a shot, or if the level is more convoluted I'll look for consolidation on a smaller time frame, balance, knowing that price will break off and my money is back with the main trend.

It looks like you see a similar picture when you look at these balanced areas, areas where it appears you enter your trades. If you see it like I do when price consolidates it tends to make a box/or triangle, typically has a high, low and mid point, it looks like you like to scale in on these levels. I have been back and forth with scaling as well and for simplicity sake don't do it currently. I think consistency is key. Either scale consistently or don't, swapping around will through off your game.

LOL! I took the USDCAD trade as well, but to the short side. I see the solid level you looked to buy off of, noticed it as well and took profits off the table.

As I've said, the last year or so has really been eye opening, it seems like layers of the market continue to whittle away but gets clearer. Look forward to comparing notes and seeing where this goes.

Well I guess I'm red faced on this trade...yep I was stopped out of my longs, and because I was traveling at the time, I was unable to adjust my stops to break even, when I had the chance. It would appear we do indeed trade the same way. Semantics aside, it would appear you like to put lines on your chart where as I place zones. It would also appear that where your lines accumulate, would form the edges of my zones.

From what I can see on your charts, you seem to draw your supply/demand lines at relative highs or lows, where as I try to draw a zone in the areas where I see that one side (buyers or sellers) took dominance away from the other, as would be clearly indicated in the price action. It has been my experience and observation that once that happens, price almost always returns to that zone to retest it before moving on.

This observation, when viewed through the lens of order flow is that only thing that has helped me make sense of the market action. I will try to explain:

If you look at what you term a "consolidation" area. You mentioned they form patterns...boxes, triangles, flags, etc. (In fact many people use these patterns to trade). I have found these patterns irrelevant and distracting. But that pattern of consolidation (what ever shape it may take), indicates a change in the order flow from dominant to balanced. Every consolidation pattern is preceded and followed by dominance (one side dominating the order flow). But the fact that price is "consolidating" means the domination of one side has exhausted, and new traders are coming into the market. The opposing order flow starts to balance the dominance...this is usually profit taking. Once this starts price stalls, and starts to move the opposite direction. This encourages new "counter trend" entries, and once price moves back a little way, the new "trend traders" take their positions...and viola...balance begins to appear.

The new entries on either side don't have the volume to push price in either direction...up or down. So, price "consolidates" or moves back and forth. This is where it is so important to understand order flow. What results is a small range. Most traders I know, really don't like to trade ranges...they just get "stuck" in them. But once the range forms and can be defined...all the range traders jump on board. and start slamming the volume at the top and bottom. But only enough to find the edge of the range then volume drops off precipitously.

So what happens to the "counter trend" and "trend" traders? They start moving their stops closer to the market to "protect" their positions. Once those stops start pilling up on both sides, the area is "ripe" for a break. The longer those consolidations occur, the more stops are piling up outside that range. So the range traders will now hold their positions just a bit longer, to find those stops...and at times you will see larger range traders with large counter orders there waiting to find those traders....you get a break and then a return back to the other side...(false break or head fake)...that happens at least once in the life of a range....any range.

So finally, what happens...a larger order come in...perhaps a news event happens...and one side or the other stops out...the traders that drove that break are already in...so after the break happens and 1/2 the traders are stopped out, who's left to continue driving the price in the break out direction? Answer, no one!...so price returns back to where that 1/2 of traders stopped out, and that is where the new orders start coming in to the market...that is also where I place my order, (usually a limit order).

Instead of trading a break out, and running the risk of a false break, I wait for price to return to the zone where once side took dominance from the other, and place my order there...the risk is smaller, because I usually don't have to risk the entire range if I'm wrong. Usually I will know within a few candles if my trade is working or not, and can either bail out or move my stop in tightly to keep risk small.

I hope this makes sense and why I see a much bigger difference in order flow than simple supply and demand.

Well hopefully the vacation was worth the loss! Always a bit frustrating though...

I do put lines/box but it's more of a reference point, I view them as more of a zone...an area. So I would agree with you there.

You could call them supply/demand levels but sup/dem levels have very specific rules for what makes up a level. I am more liberal, more general, I mark out where buyer/sellers came in before and look for them to do it again. See chart below. True, I probably do see the area at the extremes, but I still look at them as zones.

100% agree, I believe those patterns don't really hold much value themselves, the average trader looks for those. But they point out conflict, or balance in order flow. Not really a term I'd use before reading some of your threads but completely makes sense.

"Every consolidation pattern is preceded and followed by dominance", so perfectly put. This is what I saw when the veil was lifted...but I couldn't state it as clearly as you did. That line is what every trader on here needs to read and see. It's not the holy grail, but it's what 100% of successful trading is built on whether the trader knows it or not.

You painted a great picture as to what's going on order flow wise in these ranges. I've always thought fake outs/false breakouts were so cool cause you could see what was happening, I worked on a strategy a little bit based on this. You'll see my GBPAUD trade below I normally give myself a little more breathing room but got caught in the stop flush.



Here's how'd I say I probably differ from typical supply and demand levels



Here's another trade I'm in, stops more liberal as it's off a daily buy level and not really honed down using hourly, probably will go to BE or just close it out with the weekend approaching.

So how have you been using volume? Do you use this same concept intra day?

I've read through some of the other threads you started, specifically Market Relativity and I think it captures some of what I've been chewing on over the last several months. Like trying to view the market outside of time, because a time frame is something we choose, it make everything subjective, price is outside of that. Candle stick patterns change depending on the time frame, but the fact that the market hit a certain level and dropped 200 pips, that will be seen on almost all time frames, so those levels, that price, transcends time. But I've been trying to quantify that I guess or get my hands around how to make that tradable.

I would look endlessly at a blank chart and ask myself what's happening, what am I missing, what is everyone else missing. What's the constant? Buyers and sellers, all day every day. I tried different chart times, renko, heiken, line, looking for what most traders miss. But I think I was caught up in trying to reinvent the wheel instead of just looking at and using the wheel differently.

I'm hoping that in time I'll feel more systematic in my approach.

I'd like to see more charts, trades that you take etc. and compare notes. Although I think we see the market similarly, maybe with different terms, I think there's still much to learn. I don't know exactly what to ask but I think it will help organize my market beliefs.