Order Flow Mastery — Step-by-Step Guide & Transcript

[00:00] This is a candlestick. The foundation of trading. But to be honest, it doesn t give   us very much information. What if we could enable a secret tool,   where it gives us 10x the amount of data. But not only that.  

[00:12] Telling us exactly who s in control.  The buyers or the sellers. Who s likely   to win. And if used correctly, tells us  exactly what price is likely to do next?   That would be pretty cool right? Introducing orderflow.  

[00:25] Imagine going to one of those bidding  auctions where they talk really fast.   Now say while at this bidding auction, you  simply sit in your chair and wait patiently   to hear what the next person bids. And  bid purely off that information alone.  

[00:40] That s kind of what a normal candle  stick is like. Very very limited.   But instead, imagine before you go to this  auction, you re sitting in the parking lot   and some creepy guy in a trench coat hands  you a sheet of paper of what every single  

[00:53] bidder in that room is going to bid. So even before walking into that room,   you know exactly what everyone is going  to bid, what the average bid is, how many   people are in that room, and most importantly  where the final bid is likely to be priced at.  

[01:08] Now I don t know about you, but I m grabbing  that sheet of paper from that creepy guy.   That sheet of paper .is called order flow. Now as a basic user when looking at your chart.   You might see a candle that looks like. Now the only information we can really  

[01:22] gather from this candle, is the buyers won  the battle and price closed right here.   So really, we re not seeing much. We re  really only seeing the outcome. Not the   actual story behind the candle. If we wanted to view this actual  

[01:36] candlestick on a deeper level, we would  enable whats called the volume footprint.  

[01:51] Now I get it, when first looking at this it  can look like the cockpit of f-22 fighter jet.   There s a lot going on and to say the  least, it looks pretty confusing.   But its actually pretty simple. To break it down, the left side is the  

[02:06] sell volume. The right side is the buy volum. The numbers within these boxes is simply the   amount of volume executed at that specific price. So if we zoom in here.   There was 1.68 million in sell volume  executed at this specific price.  

[02:22] While there was only 1.57 million in buy volume. so there were way more seller activity at this   price compared to buying activity. Meaning sellers held control,   while we were at this specific price. The volume footprint will color code these numbers  

[02:36] for you so you can quickly identify whats what. The darker labeled metrics show price levels   with lower volumes. The lighter colors  show price levels with larger volumes.   The metrics labeled white are the price  levels with the highs amount of activity.  

[02:50] So in this example, this was the price level with  the highest amount of volume. And where buyers   and sellers found fair value for the most part. This level can often be use for finding important   support and resistance levels, but we re getting  ahead of ourselves, we ll get to that later.  

[03:05] And can be identified by these 2 white  lines. The VAH (value area high) and   is where 70% of the volume occurred. So this zone here, is where 70% of the  

[03:22] volume from this specific candle occurred. This red number down here is the total of   all the sell volume. This green number  is the total of all the buy volume.   The difference between these two is the Delta. The delta is a very key statistic because it tells  

[03:36] us whos currently in control.  The buyers or the sellers.   control and there is more selling activity. If this number is green, that means the buyers   are in control and there is more buying activity. The next metric is probably the most important  

[03:51] one and is where we will generate a lot of  our strategy from .and that is imbalances.   These imbalances can be seen by these  small red and green rectangles on the   price level has at least 3x more volume  compared to the one across from it.  

[04:22] Its important to note that we don t  compare price levels horizontally.   We compare them diagonally like so. That s because when buyers attack sellers.   They do that one price level above. When sellers  attack buyers, they attack one price level below.  

[04:37] So if we take a closer look. The sellers had  990,000 volume compared to the buyers only   having 195,000 volume. Which is or more than 3x  the amount. So in return, a small red rectangle  

[04:51] or imbalance, is printed next to this number. If we use these imbalances correctly, we can   predict exactly where price is likely to reverse. For example. If we have this candle right here.   And There were a ton of buy imbalances at the top.  Showing buying aggression. Price should in turn,  

[05:07] close above these imbalances. Since  there was a lot of buy volume up here,   price should correlate with that and move up  from these imblances. That s a healthy candle.   buyers are being absorbed by the sellers. And  the sellers are starting to take back control.  

[05:25] down here. Price in theory, should close  below these imbalances. Showing seller   intent. If it doesn t, and price closes  above these imbalances. That shows the  

[05:37] sellers are being absorbed by the buyers. Now this can be a great tool to find when a   reversal is ABOUT to happen. But it s not showing  WHEN its actually happening. Thats why I added   what I call.. the absorption initiation pattern.  Or AIP for short. Yeah, I like the sound of that.  

[05:54] So we went over the absorption  scenario, but whats initiation?   initiation is nothing more than the  agreement between imbalances and price.   So in essence. what the candle should be doing. So going back to our example, if we have buyer  

[06:08] imbalances at the top of this candle. The  price should close above these imbalances.   Showing the imbalances held there weight and  there is directional intent with the candle.   Same goes for selling. If we have multiple seller  imbalances, price should be closing below these  

[06:22] imbalances to show directional intent. If we pair the absorption candle with the   initiation candle. We can get some  scary good reversal predictions.   As price starts approaching this area  of demand, we see price closing below  

[06:38] imbalances. Which in turn, agrees with  the idea of selling directional intent.   As price gets closer to this area of demand  though, We see an absorption candle.   where price closed above are seller imbalances.  So the moment price hit our area of demand,  

[06:52] buyers stepped in and start fighting  off the sellers aggressively.   Directly after that, we see an initiation  candle. Where the candle closed above the   buyer imbalances. Showing buyers  now have directional intent.  

[07:04] So if we pair these 3 powerful tools. A  strong key demand zone, an absorption candle,   and an initiation candle showing confirmation.  We can find some mind blowing reversal areas   where price is very likely to reverse. and in  return, we make millions of dollars.  

[07:20] have an absorption candle printed, then  directly after an initiation candle   printed. But that doesn t always mean, price  will react the way we think it will react.  

[07:32] So we have to find a way to  raise the probability even more.   The delta is simply the difference  between ask and bid volume.   If we have a negative delta, that  means we have more selling volume.  

[07:49] A bullish candle usually has a positive delta,  a bearish candle usually has a negative delta.   But this isn t always the case. You can have a red candle, with a positive delta.   And that my friends is called delta divergence. Delta divergence is a sign of absorption.  

[08:06] And to take advantage of this scenario, we  are going to use a little tool called the crv   Which is the cumulative volume delta. To do this go to your indicators tab,  

[08:19] and search cumulative volume delta. So to break it down,   if price is making higher highs. But the cvd is making lower lows.   This means even though price is going  higher, the delta is going lower.  

[08:34] Which means buyers are getting exhausted, and  price is likely to fade out and head lower.   Corresponding to that, if price is making lower  highs, and the cvd is making higher highs.  

[08:46] Which price is also likely head lower. The opposite of this also true.   If price is making lower lows, but  the cvd is making higher lows.  

[08:58] That means the sellers are losing steam  and price is likely to head upwards.   Same goes with if the price is making higher  lows, but the cvd is making lower lows.   by the buyers. So price is likely to go up. So now were not only looking at what the current  

[09:16] market is doing, but we re also adding a layer  of divergence to see what s likely to happen.   If we use this in coordination with everything  we just talked about, we can get a mindblowing   prediction of what price is likely to do next,  and on top of that. It s extremely accurate.  

[09:32] To do this, we are going to go on the  4 hour timeframe. This strategy will   work on all timeframes but I personally  like to use it on higher timeframes.   To start us off, we need to  find a key level of demand.  

[09:49] So here, this strong upwards move started from  this candle. So we ll mark from the bottom of   this candle to the top of this candle. This is our area of demand.  

[10:01] Next, we wait for price to come  back down to our area of demand.   Now instead of entering as soon as price  enters our demand zone and just guessing   that it will go up. We are going to use the  volume footprint to read the room and see what  

[10:14] buyers and sellers are thinking while in this  zone. To see if it will respect it or not.   To do this, go to tradingview. If you don t yet  have it ill leave a link in my description.   Go to the top here. Select this candle icon.  The scroll down till you see volume footprint.  

[10:29] Next. We ll zoom into the  candles inside our demand zone.   First, notice how there is a seller imbalance  down here. Saying there were a lot of sellers  

[10:45] down here at this price. But also notice,  how this specific candle closed above this   imbalance. Showing the sellers are  getting absorbed by the buyers.   Notice on this candle, theres  now a buyer imbalance.  

[11:00] Also notice how price closed above this imbalance.  This is our initiation candle. And it shows buyers   for the buyers in this demand zone. Next we go to our indicators tab, search cvd.  

[11:12] So there is something very interesting going on. Notice how the price is going down,   making lower lows. So in return, the cvd should be going down,  

[11:24] just like the price. But its not. Its making higher lows.   Which means. Theres delta divergence. And  is once again, a sign that the sellers   We found a key level of demand. By finding the  start of a strong move on a higher timeframe.  

[11:41] We then turned on the volume footprint  to see if price was respecting our zone.   We got an absorption candle, then  directly after an initiation candle.   Then we checked the cvd, and saw there  was delta divergence. Also showing the  

[11:59] So we enter here. Set our stop below the area  of demand and set our take profit at the highs.   And just as we predicted price does exactly what  we thought it would. And hits our take profit.  

[12:12] Actually, before I even entered into this  trade. I posted it in my newsletter.   Its basically a newletter where I share  my trade, important news, and overall just   really good place for trading knowledge. The best part is, its absolutely free. If  

[12:26] Well, that s how to use orderflow correctly. Try  implementing this in your trading and let me know   see you guys next time. To do this, go to tradingview. If you don  

[12:43] up here. Scroll down, and  click on volume footprint.