Order Flow Trading
Reading real-time buying and selling pressure
Order flow trading analyzes real-time buying and selling pressure using Level 2 data and footprint charts.
Key metrics: - Delta: Buy volume - Sell volume per bar - Cumulative Delta: Running total of delta - Absorption: Aggressive orders absorbed by passive limit orders - Imbalance: One side significantly outweighs the other
Footprint charts show volume at each price level within a candle, revealing where buyers and sellers are most active.
Signals: - Positive delta divergence: Price dropping but buyers dominant → potential reversal - Absorption at key levels: Large limit orders holding against aggressive selling - Volume imbalance: 3:1 buy:sell ratio at a price level
Pro tip: Absorption at a daily support level visible on the footprint chart is one of the highest-conviction buy signals.
Common mistake: Over-relying on order flow data without price context. Better: Order flow confirms what price action suggests — use them together.
Key takeaways
- Delta = buy volume minus sell volume
- Absorption = passive orders absorbing aggressive ones
- Footprint charts show volume at each price level
- Imbalances signal strong conviction
Quiz
- Positive delta indicates: Answer: More buying. Positive delta = more buy volume than sell volume in that period.
Educational content, not financial advice.