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The answer is easy...never will be outdated...order flow is what the market is, buyers and sellers (passive and aggressive), and they print a "foot"...order flow is much more than a setup, it's knowing how buyers and sellers interact and to be with this flow. If you want to see more than with a candle chart, then use order flow in the way you feel is understandable for you, there is no one way, the different tools around can give you many possibilities to find an edge using what you can understand.
Volume Delta gives me a very good bias on which side the market will be for a brief moment. That's why, it's an excellent tool for scalpers like myself.
I agree. I've used the volume delta indicator from ninza.co for quite a while. It's a simple concept although it takes screen time to learn to read it and observe the nuances. It's especially helpful to see intraday tops and bottoms.
Volume delta can tell the story when a move is over.
I thought I’d be reviving this old thread from its grave, but when I got to the end, I noticed some recent posts.
Here’s my $0.02.
My strategy uses a combination of Price Action and Order Flow. Price Action to identify historical key support and resistance levels and candlestick patterns. Order Flow to perform Volume Price Analysis to locate liquidity and identify price imbalances in supply and demand areas.
Price Action can be just one part of someone’s strategy. Order Flow can augment a Price Action strategy as indicators can augment a trading strategy. I use candlestick charts, Volume Profiles, DOM, and The Tape to identify liquidy. The DOM shows me what could potentially happen and where liquidity is located. The candlestick charts historically show what has happened, and the Tape shows me what is currently happening.
Order Flow is nothing new. Richard Wyckoff and Jesse Livermore were wrting about reading the Tape over a 100 years ago. It worked for them then, and it still has it’s place today.
You act as though these trading theorists knew How to interpret the tape.
Traders think simplistic things like "Big Size blocks price; and stops its advance,
or even reverses price trend."
Such naive thinking (and similar simple ideas which traders think they can "eyeball"
on the tape in various ways) is woefully inadequate to understand much more
powerful "tape analysis".
Retail traders trade, not amongst themselves, but against Market Maker. This is
my view. It is only Market Maker's "Super Position" that matters, as regards
where a price trend may reverse. And it is Market Maker who moves the markets.
I'm sure I've lost you with those claims; as you'll find all kinds of reasons why
I must be wrong. But with only those simplified assumptions, if you can determine
Market Maker's "aggregate net position" as well as an estimate of the Rate of
Profit MM is experiencing, then you can begin to find turning points of the market.
I keep coming back to this thread because comments will never end; and I'm glad
that it stimulates interest. A whole lecture is needed to set the stage, and an
algorithm which allows a computer to "calculate" MM's "estimated" position, as against
the entire population of Retail Traders...
Once you know that MM is experiencing a significant "loss on paper" relative to her VWAP buy or selling average price; then you can estimate when MM is experiencing
"temporary pain" in the same way (but on a larger scale) as you would, when you
experience Price Adversity against your VWAP position.
In performing the following "profit matching process" we will consolidate all BUY
transactions at each price; and also sort the Pricing either ascending or descending,
and same for SELL transactions. Then a matching process can be done...
FURTHER complicating this, all Inventory Analysis (as I call it) must be done over a
specific period of time from now, into the past. Over that Collection of ALL Buys
and Sell transactions which MM has performed against the entire population of
Retail Players, we would use a "matching process" where a Buy Price Volume can
be matched against at least 1 tick higher priced Sell Price Volume; which volume
is taken as MM Profit; and REMOVED from the Inventory collection. Then as will
have basically a list of all the BUYs which are NOT yet matched against a SELL,
(or SELLs not yet matched by a lower priced BUY volume). This is the OPEN INVENTORY
held by MM, when all potentially Profitable Inventory has been removed.
Then, to simplify things, we have a bunch of BUY transactions which MM has performed,
which are NOT yet matched with SELL transactions. (keeping in mind that all Retail
Buying is MM selling; and all Retail Selling is MM buying; and we want to see things
from MM's point of view).
So if the VWAP of the unmatched Open BUY transactions is calculated, and if the
Market Price is above that, then MM is "Long" but in profit. If Market Price is below
this Open Inventory Long VWAP, then MM is "Long" but is LOSING MONEY on a
temporary basis, which I call being in "Long Risk". When MM is in Long Risk, there
is an increasing motivation to stop a declining Price, and initiate an Up Trend;
and near tops; when MM is in Short Risk, there is the opposite motivation to stop
a rising trend; and initiate a Down Trend.
Keep in mind this evaluation is on a Specific Interval of Time; or Timeframe for
Evaluation of Inventory. Since Markets are "fractal" these patterns of alternation
between Long-Risk and Short-risk are happening at MANY OTHER ADJACENT TIMEFRAMES
as well.......
Anyway, you can't "eyeball the tape" and understand how the Tape predicts where
Price is likely to move. A complex algorithm is required to Estimate MM's relative
position, and especially when she is "at risk" or losing money on paper on that Inventory,
in order to make intelligent predictions when a Trend will change based upon Inventory
Analysis, or what people call "watching the Time and Sales Tape"....
'nuff said, but it takes a lot of imagination so I'd encourage thinking "outside the box"
Based on your comment, I assume you likely haven’t done much research on Market Structure, The Wyckoff Method, or Richard Wyckoff for that matter.
Order Flow may not be relevant for traders who trade multiple instruments or take trades longer than intraday, but large traders leave their footprints on the tape. For single-instrument retail traders, reading the tape and trading on the DOM can provide a statistical advantage.
From ‘Studies in Tape Reading’ by Richard D. Wyckoff.
“The element of manipulation need not discourage anyone. Manipulators are giant traders, wearing seven-leagued boots. The trained ear can detect the steady “clump, clump”, as they progress, and the footprints are recognized in enormous quantities of stock appearing on the tape. Little fellows are at liberty to tiptoe wherever the footprints lead, but they must be wary that the giants do not turn quickly and crush them”
