I’ve compiled a list of the Best Order Flow Indicators I have used throughout my 20 year career to share with you.
At my first trading job, GPC in Chicago, we learned to trade order flow by reading a Level II. It was an amazing strategy to trade back then. You literally could feel the pulse of the market.
However, relying solely on Level II (advertised prices) as a strategy became impossible as the majority of market volume became dominated by algorithms.
I had to adapt and expand my trading strategies or I would have been done trading. I knew what style of trader I was already but I was missing the clarity on supply and demand that a Level II used to give me.
I started studying volume intensely and tried every volume indicator known. In time I developed a fundamental understanding of volume allowing me to define new trading edges, some of which I will share with in this post.
Best Order Flow Indicators
There’s two primary forms of analysis in order flow. The first focuses on executed orders and the second on advertised orders.
Executed orders are trades that actually took place between a buyer and a seller where as advertised or resting orders are the advertised bids and offers (resting orders). We will use different tools and indicators to analyze the data depending on the type of data.
I lean towards executed orders but indicators like time & sales and a Level II still play an important role in my trading.
All the order flow indicators we cover in this post will be focused on executed orders. However, liquidity viewed through a Level II is still a very valuable tool. Training your mind to be able to read a Level II in real time takes experience, but something I highly recommend.
I already have dedicated individual posts to the first three order flow indicators we’re going to discuss. Therefore, I will discuss them in less detail here but include links to the in depth posts.
1. Footprint Charts
Footprint charts come in several different variations. Let’s take a look at the main ones and how they can be used.
The Bid/Ask footprint chart above displays all of market orders that traded on the bid and the ask for every price level. I primarily use these charts on a longer time frame to find stacked imbalances.
Stacked imbalances are simply multiple buy or sell imbalances that form in a tight range. Stacked imbalances illustrate extreme buyer or seller aggression.
- Confirm reversals, breakouts, or trend continuations
- Use for future Support/Resistance
- Discover Unfinished Auctions
Volume Delta measure the difference between buying and selling power. It’s calculated by taking the difference of the volume that traded at the offer price and the volume that traded at the bid price.
- Trading Delta Divergences: Absorption & Exhaustion
The volume footprint chart is the primary footprint I use. Volume is a very in depth topic, which is why my next post is a deep dive into the volume profile.
- Determining S&R through High Volume Nodes
- Finding Low Volume Nodes (low liquidity) for breakouts
- Determining if the market is balanced or imbalanced to make sure you’re trading the correct strategy
- Use HVN range to determine R on potential setups
If you’re interested in taking a deep dive read this in depth guide on Footprint Charts.
Note: I use MotiveWave for my charting software
2. Delta Indicators
We briefly discussed what delta is now let’s take a look at two different indicator
The Volume Delta Indicator takes the value of delta for a session and plots it on a positive/negative bar graph allowing you to quickly see when price and delta are diverging.
On the above chart we have divergence at the 10:15 a.m. candle. Sellers were aggressively hitting the bid represented by a negative delta yet price closed higher.
- Spotting Potential Reversals
- Confirming Trend Continuation
Cumulative Volume Delta
The cumulative volume delta indicators plots the cumulative value of delta on a price graph.
In the above example price makes new high but delta does not. This is an example of Exhaustion. Price went back to highs but buyers were less aggressive this time (displayed by delta) and price began to fall.
- Trading Divergences (Exhaustion and Absorption)
- Trade Management
If you’re interested in learning more about volume delta and cumulative volume delta read this post.
3. NYSE Tick
If you trade any U.S. stocks or index futures this is a very handy indicator. It takes experience to become proficient but once you do you will boost your strategies by timing your entries and exits a little better.
This indicator works best for scalpers on short time frames.
NYSE TICK = Stocks on Upticks – Stocks on Downticks
I consider the NYSE Tick similar to delta but for the entire market. It’s a real time display of buyer and seller aggression for the entire market.
In the example above you will notice the extreme tick reading at highs (Blue Highlight) and divergence forming at the 2:17 candle.
- Better Entries
- Trade Management
- Confirm Breakouts
- Find extremes highs and lows on the day
If you’re interested in learning more about the NYSE Tick read this post.
Volume Weighted Average Price, known as VWAP, is an indicator every trader should use no matter your trading style. Why?
VWAP not only works really well, but it’s used by every big trader and most institutional traders.
VWAP = (Volume * Price) / Volume
- Take profit when playing fades
- Retracement Trades
- Mean Reversion
- Support and Resistance
The Volume Weighted Moving Average indicator calculates the average weighted price by volume over a period of N bars.
Volume Weighted Moving Average = SUM(vol*price)/SUM(vol)
Doesn’t a moving average that’s weighted based on the amount of volume traded make sense? BAM! VWMA is it. You can use similar to any other moving average as well as VWAP which we just discussed.
- Trend Trading
- Trade Management
- Support & Resistance
6. Time & Sales
The time and sales (the tape) indicator shows you the time, price, and size of executed orders.
Speed and size are the key metrics when analyzing the tape to forecast future market direction. You can identify buyer or seller aggression (momentum) by seeing an acceleration of multiple buy or sell prints.
- Highlight Large Orders
- Identify Momentum
7. OHLC Indicator
The Open High Low Close indicator is pretty self explanatory. Most platforms have some additional options you can use. Personally I use the Developing High/Low Lines, Previous Day H/L Lines, Initial Balance H&L on almost every one of my carts.
- Support and Resistance
8. Volume & Volume Profiles
There’s a reason why volume is a standard indicator on every single chart platform out there. In the above example you can see volume increasing as price broke out of the range to the downside.
Volume Profiles are such an integral piece of order flow that I wrote an entire guide that you can read here. Volume should be number one on this list but sometimes I save the best for last. Your dedication has paid off for nearing the finish line.
- Breakout Confirmations
- Trend Confirmations
- Determining Balance
You should become familiar with all of these order flow indicators. Every single one on this list will provide you with another trading edge.
If I was brand new to order flow I would definitely start by focusing on volume and volume profiles.
To become an expert using any of these order flow indicators it will take experience. The only way you’re going to get that is more screen time, so get after it!
What’s your favorite order flow indicator? Leave a comment below!
Hi Adam, thanks for the amazing post. I’m just getting into trading. Very interested in Order Flow, everything seems much more logical than anything I have looked at. Any suggestions on what to focus on first?
Hi Mike! Thanks for the comment and the kind words.
I’d start by focusing on volume and volume profiles. Learning different setups or patterns is easy. Where most traders fail is learning how to apply context around those patterns to make them profitable.
Hello Adam and thank you for this superb summary of order flow indicators! in your previous comment you say, “Where most traders fail is learning to apply context around these patterns to make them profitable.” Could you explain in more depth what you mean please…?
Thanks for the compliment!
When you apply context to a trade you’re essentially defining the market conditions that have to be present in order for your strategy to be profitable.
For example, if you trade some sort of trend strategy, you need to be able to determine when the instrument you’re trading is balanced (range bound) or imbalanced (trending).
Obviously if the markets balanced you wouldn’t want to be trading a trend strategy.
Read the post on Auction Market Theory and then Volume Profiles and it should come together a bit for you.
Great quote… “Without context words and actions have no meaning at all”, Gregory Bateson
Oh okay, I understood, you mean that we can greatly help ourselves with order flow indicators if we apply our entry conditions with our trading plan (OUR context therefore). You want us to understand that applying the exits/entries of the indicators whose understanding you give us on this page out of context would not be of much use; and you are completely right. Thank you again for your feedback!!
Is there a Candlestick volume profile indicator we can use for Ninja trader 8? I am looking for an alternative to Sierra Chart and Motive Wave as I am already familiar with the platform.
Morning Huw, I’d reach on to NT and ask them. I know they have what they call volumetric bars but I think it only comes on there most expensive package. There’s also third party add ons that do it if you do a google search.