Order flow

Trader's Glossary · Order flow

Definition. A record of how many contracts were bought and sold aggressively at each price level. It shows who is taking the initiative in the market.

How it works

Every trade on an exchange is a meeting of two sides. One waits in the order book with a limit order, the other arrives with a market order and hits its price. Order flow separates these trades: buying at the offer (ask) is aggressive buying, selling at the bid is aggressive selling. The difference between the two is the delta.

A candlestick chart tells you where price was. Order flow tells you how it got there: whether a move up was driven by buying or by sellers stepping back, and at which levels someone absorbed large orders without price moving.

Order flow tools

The footprint chart (buy and sell volume inside each candle), delta and cumulative delta, the order book (DOM), Time & Sales and the volume profile. Each shows the same market from a different angle.

Example

Dow Jones futures reach yesterday's high. The footprint shows heavy aggressive buying, delta is strongly positive, and yet price does not go higher. Someone is filling those orders with limit orders on the other side. That is absorption, and a candlestick chart alone cannot show it.

What to watch out for

Real order flow requires a market with one central order book, such as futures on the CME, and trade-by-trade data. At a CFD broker you only see the broker's own quotes and tick volume (exchange or CFD broker). Order flow is a skill of reading the market in the context of levels, not a ready-made system.

More in Hetman Capital Club

You'll find the full explanation with graphics, examples and exercises in the 🖥️ Order flow atlas space, and its use in the live market in the 🔴 Live Room. Both are available to Club members (in Polish).

Educational content, not investment advice.