What is Order Flow Trading?

What is Order Flow Trading?

Today we will answer the question; what is order flow trading: Unlike Technical and Fundamental Analysis, which try to use historical activity analysis techniques to predict where the market will go next, Order Flow Trading is a discipline focused on the actual orders placed. To understand the answer you must first ask a different question: Why Do So Many Traders Fail? Trading is a rather unique enterprise. It would seem that it is the only career field in existence where the people least likely to become successful at it are willing to risk huge portions of their net worth for the right to apply. Yet, year after year, the same kind of people jump into the markets hoping to make it big; never realizing that the chips are stacked against them. Research suggests that aspiring traders near universally share three defining characteristics: They are not happy with their existing career – Let us be honest; if someone is making ok money doing something they enjoy,...
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Why does Order Flow Trading work?

Why does Order Flow Trading work?

To explain the influence of order flow on asset prices, economists tend to focus on three things: Trading is not cost-free: Dealers generally charge a bid-ask spread. In the presence of such spreads, aggressive buying/selling automatically move the price up to the ask and down to the bid on average. Limits to arbitrage: Trading is never unlimited, as dealers are...
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