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Order Flow Trading Glossary

44 Articles

1 Tick Test/Fail

This is a condition where the market tests the prior day’s high or low or the current IB high or low by 1 tick before finding the opposing force pushing it the other way. This is generally considered a failed test of a significant area.

Absorption

Price Absorption occurs when aggressive market participants Hit the Bid or Lift the Offer on high volume, and are met with participants who “absorb” all of the orders. The effect of this price Absorption is that price moves very little or not at all. Price Absorption can often lead to short-term reversals when the original aggressive participants give up and close their positions. See Absorption Reversal.

Absorption Reversal

An Absorption Reversal Long occurs where aggressive sellers attempt to move the market down through a key level by hitting the bid with heavy volume, but are met with buyers who “absorb” all of the selling. This price Absorption by the buyers prevents price from continuing in its previous direction and once sellers give up and cover their positions, […]

Aggressive Participants

Aggressive Participants are those traders who are willing to trade at the best available market price at that time. They are not willing to wait for a price to be filled at a specific level and end up Crossing the Market and “Lifting the Offer“ when buying and “Hitting The Bid” when selling. The level of ‘aggressiveness’ of these […]

Algo Executing

I say this when I notice that there is an automated, algorithmic computer system executing trades at an important area. Generally, I observe this by watching the DOM (Depth of Market – see below) and how a certain level trades. Algo’s usually have a big order that they seek to fill but they don’t want […]

Auction Market Theory

In order for you to understand what I’m looking at, you must understand auction market theory. If you see the market as simply a bunch of flashing lights, spaghetti lines on your charts and numbers, then you are likely someone who is approaching the market with similar odds as a gamer and it will be […]

Bid

A Bid is an order to buy from Passive Participants. These are orders that are waiting to be filled. They could be withdrawn at anytime.

BSO | Best Scale Out

This represents the maximum number of points where profits were taken on a given trade.

CHVN/CLVN | Composite HVN/LVN

Same as HVN/LVN described below, but it is derived from the composite profile rather than an intraday profile.

Collisions in Order Flow

A composite profile is a volume profile that includes data of more than one session. I only have interest in profiles of data occurring during regular trading hours. Sometimes, the big picture requires me to see what is happening over several sessions to determine high volume areas, low volume areas and significant multi-session VPOC’s. I do […]