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Order Flow Trading Glossary

44 Articles

Crossing the Market

In order for the market to move either up or down in price, participants must “Cross the Market”. For price to move up, buyers must be willing to “Cross the Market” and trade at the next available Best Offerprice, rather than waiting for a Limit Order at the Best Bid price to be filled. This is also known as Lifting The Offer. Alternatively for price to move […]

DOM | Depth of Market

This describes the LEVEL 2 data screen representing the bids and offers in the market. For the ES, there are usually 10 bid levels and 10 ask levels in most traditional trading execution platforms while others have full depth. We like the Rithmic feed best, because it is one of the few providing full depth and not limited to […]

Expectancy

Expectancy provides the expected outcome of a trading system over a given series of trades. Expectancy can be measured in ticks, dollars, pips etc. The formula for expectancy is (Average Win * Winning Percentage) – (Average Loss * Losing Percentage). Expectancy is used to: Measure the performance of a system, setup or trader over time. Assist in setting performance […]

Failed Auction

This is similar to 1-Tick Test described above. It is when the market moves to a significant low or high, 1-ticks it and then we see a forceful move the other way usually on strong volume. The market has tested a significant low or high and was unable to trigger continuation. This leaves many trapped and a […]

Flush

A Flush generally refers to when weaker hands in the market exit their trades, often creating a swift reversal of a move that happened earlier in a session. Generally the term refers to where a market moves lower, reversing or at least partially reversing, an earlier move up.

Gap Zone

A Gap Zone is considered to be ‘closed’ when the market trades back through the unauctioned area and trades the high (for a gap up) or low (for a gap down) of the day prior to the session that first created the gap. A Gap Zone can be closed during the same session in which it was created, the […]

HVN | High Volume Node

This describes a range of prices where there is a particularly high amount of volume or bulge in the profile.Why is it significant? Think of why it would have so many contracts…why did so many trades execute at these prices?When trading through HVN’s or VPOC’s, the market tends to be “stuck in the mud” or my […]

Hitting the Bid

Hitting the Bid is when sellers are willing to trade at the next best available Bid price, rather than waiting for a Limit Order to be filled at the current Best Offer price. By being willing to “Cross the Market“, and Hit the Bid, the participant is considered an Aggressive Participant.

Iceberg

Traders/institutions often have large orders to be executed in the market, and placing a large order all at once in the order book could be disadvantageous, as it may reveal their intentions. To assist them with this, the trader/institution can use a hidden, algorithmic type of order known as an Iceberg or as I often say […]

IB | Initial Balance

The Initial Balance (IB) is a measurement of the extent the auction has gone one way or another during the first hour since the open. It is defined as the high and low of the first hour of trading. This is the traditional definition that you will find. Just like with everything else, my view on this is not […]