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Go Charting Order Flow Lesson 2

The document discusses the foundations of order flow analysis. It explains key concepts like delta, point of control, and imbalances that are generated from real-time trading activity. Understanding how buying and selling is transacting through these data points gives traders insights into what is happening in the market and who is in control.

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boons5141
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88 views

Go Charting Order Flow Lesson 2

The document discusses the foundations of order flow analysis. It explains key concepts like delta, point of control, and imbalances that are generated from real-time trading activity. Understanding how buying and selling is transacting through these data points gives traders insights into what is happening in the market and who is in control.

Uploaded by

boons5141
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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GOCHARTING

ORDER FLOW
TRADING COURSE
Lesson 2
Foundations Of Order Flow
By: Michael Valtos
Orderflows.com
What makes order flow so useful to traders is that it uses the
information that is readily available to traders, but formats it in a
way that can be easily understood.
Information is the most valuable thing a trader can get. People go
to jail for trading off inside information. Order flow is NOT inside
information. Order flow is information of how trading is taking
place by the traders.
Candlestick chart – when you look at a candlestick chart you think
you have all the information available. You don’t. All you have is
where price traded.
What’s going on
down here?

A footprint chart shows the intensity of trading taking place.


What does “the intensity of trading taking place mean?”

Being able to identify the strength of buying and selling taking


place when it appears.
In order flow analysis, there are three building blocks that traders
have to understand.

1. Delta
2. Point of Control
3. Imbalance
1. Delta – the net difference between aggressive buyers and
aggressive sellers. If there are more aggressive buyers than
aggressive sellers, then the delta is positive. If there are more
aggressive sellers than aggressive buyers, then the delta is
negative.

There are times when aggressive buyers and aggressive sellers


are exactly matched and delta is 0, but those instances are rare.
But they do happen.
Delta
There are different delta readings for traders:
Bar delta which is the net delta for a bar. This is the most common
delta traders look at.
Max delta which is the most positive delta was in a bar.
Min delta which is the most negative delta was in a bar.
Cumulative delta is the net delta for the day up to a certain point.
Delta percentage – bar volume divided by bar delta.
There is even a delta candlestick that shows you the delta at price.
Text
Point of Control (POC) – the price level in a bar with the most
volume traded. The POC is important because that considered a
fair price for the bar, so if you are looking at a 5-minute bar, for
that 5-minute time period that is where traders were most willing
to transact at.

Every bar has a POC.


POC
Gocharting offers several ways to view POC
POC Marker
Previous POC Marker
Virgin POC
Imbalances are an important part of order flow analysis.

When an imbalance occurs it is a result of lopsided aggressive


trading. There is either more aggressive buying against
aggressive selling in the two-way auction by a certain percentage,
usually 4 to 1 which indicates a buying imbalance. A selling
imbalance is when there is more aggressive selling against
aggressive buying in the two-way auction by a certain percentage.
Imbalances
By a ratio percentage or by volume
Imbalance S/R Lines (stacked imbalances)
Imbalance S/R Lines (stacked imbalances)
Imbalance S/R Lines (stacked imbalances)
Imbalances are a great way to see trapped traders.

Whats going on here?


Imbalance S/R Lines (stacked imbalances)
The thing to remember is that delta, POC and imbalances are data
points that are generated from the trading taking place right now.

When a trader starts to analyze the actual trading taking place, by


that I mean, how the buying and selling is actually transacting,
then a trader has a better grasp on not only what is happening in
the market, but why it is happening.

The information generated by the market is always giving a trader


clues as to who is in control of the market.
This concludes Lesson 2.

In Lesson 3, you will learn how to read Gocharting order flow


charts. The first time you look at an order flow chart it can be
intimidating. But really it’s not intimidating once you understand
what you are looking at. I explain how to read and understand an
order flow chart.

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