Ever wondered why prices skip over fair value gaps or order blocks? This leaves your pending orders unfilled. There’s a way to fix this. Today, we’re diving into order flow, a key concept many traders miss.
By getting this, you’ll predict price movements better. You’ll also know why your trades don’t always work out. Plus, I’ll share a special trading plan to make the most of order flow. Don’t forget to like and subscribe for more tips!
Why Understanding Order Flow is Crucial
Many traders wonder why prices sometimes don’t hit key zones. Even with a solid strategy, prices might move away before reaching these zones. This is where order flow comes in.
It lets you map and analyze market structure better. Order flow shows where the most trading volume happens before big price moves. These areas often show where smart money is hiding or starting positions.
Order Flow vs. Order Blocks
Think of order flow as the big picture and order blocks as smaller zones. Order blocks are key areas before big institutional orders are placed. They often get a lot of respect from price.
However, the market doesn’t always hit these zones before reversing. Focusing too much on extreme zones might make you miss other chances.
Identifying Order Flow
Order flow is about chart areas where buying or selling pressure builds before a big move. There are two types: bearish order flow for bearish markets and bullish order flow for upward markets. Knowing these areas can greatly improve your trading skills.
Order Flow Categories
Order flows are divided into three types: mitigated, unmitigated, and failed. A mitigated flow is one price has respected at least once. Unmitigated flows are yet to interact with price, while failed flows don’t lead to big price moves.
The Relationship Between Order Flow and Order Blocks
An order block is a detailed version of an order flow zone. Price can reverse before hitting an order block. Knowing this helps traders focus on broader areas of interest.
Real-Life Application and Strategy
To use order flow well, follow these steps:
- Identify Key Zones: Find unmitigated order flows on a higher time frame for high-probability setups.
- Switch Time Frames: Once price hits a flow zone, switch to a lower time frame to check for market shifts.
- Optimize Entries: Look for refined zones like fair value gaps or order blocks for entries. This reduces risk and boosts rewards.
- Set Targets: For take-profit, aim for the nearest liquidity draw or higher time frame zones, based on your model.
Conclusion
Order flow is key to understanding market structure and improving strategies. By mastering it and its link to order blocks, you’ll trade better and with more confidence. Stay tuned for more trading tips and strategies!
