Order Flow | Four Stages of Price Action

Order Flow: What is it?

What exactly are Institutions?” In trading terms, I’m talking about major financial institutions. Hedge funds, mutual funds, pension funds, the big players who need to earn returns to keep their jobs.

These players account for an estimated 67% of the volume in the stock market on any given day. You think you can benefit by tracking their action? OF COURSE!

Their actions leave a tracks, it’s now your trading mission to track the foot prints so you can hop on their back to make the big money.

The term order flow comes from market makers and specialists receiving large orders to work. The better price they got for the order, the more order flow they got. The more order flow, the more they made in commissions.

Imagine calling your broker on the floor of the NYSE and placing an order to buy 100K shares of WMT (knowing you have a total of 10 millions shares to buy). Your broker would go to the WMT post and give some of the order to the specialist to test the waters. They want to see if the order moved the stock.

The broker and the specialist work the order flow to get the best price. The better job they do in the natural ebbs and flow of the day, the more order flow they will get.