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Order Flow Charts: The Key to Understanding Market Dynamics in Day Trading

Order Flow Charts

Welcome to our comprehensive guide on order flow charts, an indispensable tool for day traders looking to gain a deeper understanding of market dynamics and make well-informed trading decisions. In this article, we will delve into the intricacies of various types of order flow charts, specifically focusing on the total volume order flow chart, bid x ask chart, and delta order flow chart. By the end of this guide, you will have a solid grasp of how to interpret these charts and effectively incorporate them into your trading strategy. So, let's dive in and demystify the world of order flow charts!

What are Order Flow Charts?

Order flow charts are powerful tools that allow traders to gain deeper insights into market events by providing additional transparency and real-time analysis of historical and current data. These charts can be displayed in various time frames, typically ranging from one minute (M1) to five minutes (M5), and offer valuable information for traders.

The three most common types of order flow charts are total volume order flow, bid x ask order flow (footprint), and delta order flow. These charts can be customised with filters to enhance visibility and make it easier to identify relevant parameters based on individual trading strategies.

Comparison Candle Stick Chart VS Order Flow Chart

When comparing a traditional candlestick chart with an order flow chart, both display the open, close, high, and low prices. However, the order flow chart goes a step further by providing additional details. It showcases the contract volume traded by sellers and buyers at each individual price level, allowing traders to analyse the distribution of trading activity more comprehensively.

candle stick chart vs footprint chart

Having those additional information available, the trader ..

  • .. is closer to the actual market happenings

  • .. gets an insight to the candle

  • .. receives in depth market information in real-time

  • .. can see the volume on each price level separated in buyers and sellers

  • .. can discover price and volume patterns

  • .. can see how the buy and sell orders affect the price

  • .. better assessment of whether the market will continue its trend