Trading Order Flow Bulges

Posted by on Jul 27, 2019 in Blog

There are many ways a trader can use the information available from a footprint chart. Analysis paralysis is a real problem for a lot of traders. For many traders it is best to concentrate on a few things that are happening in the order flow rather than try to trade every single nuance that is occurring.

That is why I had the Orderflows Bulge indicator coded. I have written about and explained the Orderflows Bulge in the Delta Course as well as in some videos on YouTube and there was a lot of feedback from traders asking to have it “indicatorized.”

What makes the Orderflows Bulge so unique is that it is a combination of absorption, stopping volume and near term support or resistance.

Some people like to think there is some secret to market success, but at the end of the day it is going to come down to buying low and selling higher or vice versa.

What trips up a lot of traders is trading in terms of price and not in terms of volume. Price by itself does not support the market, traders coming in and buying is what supports the market.

Ask yourself what causes resistance in the market? Resistance is causes by sellers entering the market to sell their supply.

A few sentences ago I said what trips up traders is trading in terms of price. They look at their 30-minute chart and think everyone in the world is looking at the exact same chart and deciding if something is cheap or expensive based on the price it is trading right now on that chart.

Each trader views the market in their own time frame. Some traders have a 5-minute time frame while others may have a 5-day time frame. What might look expensive on a 5-minute chart time frame trader, can look very cheap to a 5-day chart time frame trader.

Firstly, forget about thinking that every trader uses the same time frame chart. Secondly, start looking for the areas where the longer-term time frame trader is active in the market.

Generally speaking, a longer-term time frame trader is one who has a macro view of the market, not a 5-minute view, not a 30-minute view not a 4-hour view. They think in broad sweeping terms of the market, long time frames: 6 months, 1 year, 2 years and sometimes longer.

Longer term time frame traders trade in the fundamentals not just of the market with the position, but also the markets affecting that market too. For example, they just don’t trade crude oil, they also trade the shipping costs, interest rates, and currencies involved.

The problem that the longer-term time frame trader face though is size. They trade much bigger size than the ordinary trader.

Small retail traders like you and me can capitalize on their activities by seeing it in the order flow. But we have to know what to look for and where to look for it.

The foundation of the Orderflows Bulge revolves around price delta inside a bar. There are several types of delta in order flow. There is bar delta which is the net difference between buyers and sellers in the entire bar. Then there is price delta which is the difference between the actual numbers of buyers and sellers at a price level in a bar. If the price level has positive delta then aggressive buyers were in control of that price level. If the price level has negative delta then it can be said aggressive sellers were in control of that price level.

Remember, when an aggressive buyer, buys the offer that registers as +1 delta. The buyer lifted the offer. If an aggressive seller sold into the bid, that registers as -1 delta.
So how do we translate that data into useful information?

An order flow bulge is not just about finding the biggest price delta in a bar and generating a signal. It is the starting point.

The delta at price is just a number, the next step is to put it in context with what is happening in the market. There are other factors that are analyzed as well: where in the bar it appears, the strength of the delta, recent price action, the price level it occurs in the bar.

The Orderflows Bulge Indicator makes it easy for the trader by instantly marking the chart when a bulge appears.

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