Academy · 5 min read
What order flow is, and why it looks at what the chart doesn't show
Price moves because someone buys or sells with urgency. Order flow studies who does it, where and how forcefully.
A candlestick chart summarizes a period: where price opened, how far it went and where it closed. It's useful, but it hides the most important question: who pushed price, and who stopped it?
Two kinds of participants
Every market with an order book has two kinds of orders. Limit orders wait in the book at a set price: they are liquidity. Market orders don't wait: they execute against that liquidity at the best available price. Whoever sends a market order is the "aggressor".
When aggressive buyers consume all the offers at a level, price ticks up. When aggressive sellers consume the bids, it ticks down. Order flow looks at that exchange in detail.
What gets measured
- Volume per price level: how much traded at each price, not just in each bar.
- Delta: the difference between aggressive buying and aggressive selling.
- Liquidity: how many orders are waiting in the book and how they change (DOM and heatmap).
- Large trades: where unusually large sizes show up.
What it's for
Order flow doesn't predict the future. It helps you read context: whether a rally is backed by aggressive buyers, or price is drifting up without effort and stalling against a wall of orders. They're clues for better decisions, always with risk management.
One key requirement: order flow needs data from a centralized market where every trade is recorded with its real volume, such as CME futures or crypto exchanges.