Orderflow Explained Stupid Simple

A lot of traders look at order flow and think it's too complicated. Bubbles, numbers. Yuck. I understand it. But here's the secret. Everything in trading and finance that matters is complicated. And as a great movie used to say, Wall Street likes to use confusing terms to make you think only they can do what they do. So here's Margot Robbie in a bubble bath to explain what order flow actually is. I know you expected Margot Robbie, but here I am. We're on a budget. Imagine the market with two types of participants. On this side, you have butchers offering turkey meat before Thanksgiving Day. Imagine it as sell meat and buy meat. The other side of the equation are hungry customers before Thanksgiving. If there's a lot of hungry sellers, they will basically eat all of the buyers' meat until they all are full. If there's a lot of hungry buyers instead, they will buy every sell meat they can find for Thanksgiving and consume all of the meat. Believe it or not, that's exactly how the markets work. So if all of these hungry buyers buy this Thanksgiving turkey, that's where price will be. If they're more hungry and they will buy more, price will rise. If they buy even more, price will rise again. If they buy all of it, price will rise very fast. So all of these buyers now are full and price went up. But now a very hungry seller will want some meat. And as soon as he takes that meat, price immediately drops and leaves a wick where it used to be, where the last piece of meat was eaten. If a lot of hungry sellers join the party, they will buy this meat again, price will drop. They will eat all of this buy meat and price will drop again. And again and again. So price in financial markets moves up and down based on how many hungry sellers and hungry buyers are in the market at a certain point in time. Now, imagine there's a big chunk of turkey meat all over here. If there's a lot, and I mean a lot, of hungry sellers, they will tend to eat all the way down to the nearest place where there's a lot of meat. So price is likely to gravitate slowly towards that area, and that is called liquidity seeking. So if all of these customers are full and have eaten all of this liquidity, it's likely that buyers now will step in and move price up instead when there's sell meat. And as soon as these customers are not hungry anymore, they're full, they've eaten all of the turkey. it's likely that hungry buyers will take control instead and drive price towards where the sell meat stands. Now let's get rid of the metaphor and think in terms of buyers and sellers. You have hungry buyers and sellers, also known as aggressive. We call these kids the market takers because they take the meat. And here you have passive liquidity or passive buyers and sellers. Also known as market makers, because they make the meat and provide it to the market. And if you zoom out a little bit and think, let's say this is the market of Bitcoin. Well, for you to buy Bitcoin, to buy a piece of meat, it's gonna be kind of easy, right? Because you're small. But if BlackRock wants to buy some Bitcoin, well, they want to buy a lot of meat, and there might be not enough meat in in the menu for them to get full. So what they will do is they will fraction their buy hunger into multiple buy orders, and they will fraction their orders in smaller and smaller pieces so they can fit whatever is the meat available in the book. And in financial markets, small players like you and me are a small percentage of the party. Most of the market is made by these big banks, big institutions, blah, blah, blah, blah, blah, that are typically very, very hungry. And that's why when you zoom out, you're going to notice a phenomenon called liquidity seeking, because as most participants are so big and so hungry, their ideal scenario is to find a lot of meat in the book. So whenever there's a big level with a lot of meat, price will tend to gravitate towards that level because big market participants are going to have way easier time to make business there. So you've basically understood how markets work. But how do we actually use this information in a useful way? Connected. And the problem is most retail traders only look at these type of charts, price action chart, charts where you can see where the market went to look for liquidity. But price is only the end result of liquidity seeking. So if you're only looking at price action, you're kind of always late to the party. That's why as soon as you enter, price spikes you out and then goes to your original target. And yes, you can use either footprint charts or charts like Deeptrades to show you where the big feast of hungry people eating meat actually happened. But these bubbles still only show you trades that just happened, meat that was just eaten. They don't tell you where the meat actually was. And that's why you need a software like Deepdump. Let me show you how it works. And this is exactly why you might need a software like DeepDumb that we're about to launch very soon. The link to know how the software works and get your hands on it at a ridiculous price are in the description, just so you know. And so with a chart like this, where, by the way, you can also have your normal candlestick charts plotted right on top of it, let's say the 1-minute chart, you're going to see all of the meat auction unfold in real time. And you're going to be able to see where the big liquidity areas actually are and see how price gravitates towards them. You see how all of the meat was right above here and price tried to gravitate towards it. But as soon as they moved up, some more meat started being offered right around here. Look at how hot this is. This is a barbecue of meat. So of course, so of course, when there's this much meat, Buyers will not be that hungry necessarily, and instead sellers will have more room to move downwards and eat some buy meat. And they will eat every level of meat until they find the big one. And as they find it and they're full, buyers take control again. And as you see, the auction keeps moving towards the next liquidity areas. So when they get full, the sellers get in the game, they get full, and buyers get in the game up towards the next liquidity level. They try to push above this huge level of meat, and here you can clearly see they were very hungry and they bought all the way through and they went to the next one and again to the next one. Let's see if they're going to get there. Well, there you go. But now look at what happened. A huge level of sell liquidity just happened, and it's likely that buyers will get full by the time they get there and that we'll see some form of reversal from price. There you go. More sell meat joins the party and price reverses. There you go. And with only a price chart, you are completely blind to all of this. So if you want to see more content where we use this in a practical way, and if you haven't yet, I've been using this in a recent video at Chart Fanatics that made hundreds of thousands of views. And here's a few examples of how I practically used it to live trade in front of the entire world. Want to see how liquidity is being interacted with? As you can see, there's a lot of liquidity areas, very heated areas like these, for example. They didn't quite get violated and they started auctioning lower again. And we have some big bubbles also from the heatmap that we can start monitoring on the lower end. This is a very vertical way down. So we had an attempt from sellers, they got absorbed here, you see 3,700 contracts. Let's take a look at liquidity now. Oh, we have a very strong level at 6,800 that we're likely going to be taking. These orders typically don't get filled and they either move constantly and they typically anticipate breakdown. And that's exactly how I used a liquidity heatmap to not only time my trades, but to to find the best targets where price could go towards. So you might want to subscribe to the channel to see more value like this.