We have to dig deeper into orderflow. Understand where pressure is one-sided, and not go against thewave - focusing solely on the signs which present themselves.

“Even when your ETFs show a move, keep in mind this can turn into an OTE against you.”

Example

Imagine here we are offbeat on M2, and we see a clear sweep and want the price further to the upside to target that LRLR around BSL.

See how on M2 everything looked very great, potentially managing to partial sure. But you are going against the flow. Again for that reason, why we have diÉerent states and diÉerent time frames. You are like trying to blow against the wind especially once you become more advanced and go into lower time-frames.

Example

M2 showing a good buy opportunity.

M5 ended up being a perfect overlapping OTE and imbalance to go lower.

I often enough like to compare it to those infamous optical illusions.

You see, the markets are like the above optical illusion. You either see some form of goblet if you fixate on the middle lighter section, or see two heads starting at each other outlined on the outer darker section of this image.

The reason I am sharing this is because the markets, candlesticks, do this every day as well. We are the only ones that can interpret the markets, so as we progress with our knowledge, it becomes easier to see both sides of the story. We don’t know which side is true, and we go with our instincts and take a guess. But that is exactly the issue, we don't want to be guessing.

Understanding Orderflow.

Look closely at what you see in this case of Orderflow.

The easiest sign to understand Orderflow is the simple concept of, Price respect ting certain arrays, and disrespecting the opposing arrays.

In the previous case, you saw price inducing bearish arrays, and respecting bullish ones. Simple.

Easy to spot and to say we are in bullish orderflow. The other sign we must pay attention to is candle formation. We talk about this a lot, one-sided candles, leaving behind imbalances, creating intent. Icannot emphasis the above more.

Let that be the moral of volume 3. Understand intent, engrave it to the back of your head. When price leaves behind imbalances and breakaway gaps, you know that there is some sort of one-sided orderflowin price. As show below;

Leaving behind intent, clear obvious bullish orderflow.

Tape reading Orderflow

See how when we go into the 1 minute - > You notice how there are deeper pullbacks, wicks going into bullish arrays.

We do NOT want to trade against those. Understand the fluidity in this motion, the art of how price can move. Once you see and get that feeling with orderflow, you are in sync.

Read the tape, what does price want to do? -> Grabbing liquidity lower, but still closing higher signifies what? -> Buying pressure... right? C'est simple. Another way of spotting liquidity is when price leaves actual gaps, yes the infamous volume imbalance. Finally.

Volume Imbalances

So lets introduce you to the theory of Volume Imbalances - Many traders know how to draw it, but cannot give it a place and function of when to use it.

Why are volume imbalances created firstly? Why do you see them?

Volume imbalances occur because the data feed that you are watching your instruments on cannot match their dealing desk. Stay with me now. On futures, this happens a lot more compared to your CFD chart. Let's keep futures in the back of our mind for now. Focus on CFD.

When it happens on CFD - IE - Forex.com data feed, it means that there is no completed transactions for BID and ASK at those price where the gap is created at that time specifically for them.

Re-read that sentence again to avoid ambiguous thoughts. There is no algorithm once again trying to rapidly run price lower or higher.

“The theory behind it is simply, just like with imbalances showcasing intent. a volume IMBALANCE is indeed just an imbalance in volume, yes. So its showcasing intent, but to such an extent that your data feed cant even match bid/ask data at those price points where the gap is created.”

When we see a volume imbalance price is showing extra illiquid intent. A concept we will get into later.

The goal here is to understand that we are trading away from the gap, the VI. Price automatically goes into a seeking liquidity state. It is rushing to find liquidity, to move to an area where transactions will occur again, otherwise the VI and lack of bid/ask transactions would now have happened.

So you can see in this example, the direction in which the volume imbalance has been created - in this case to the downside - showcases that pressure that it is seeking liquidity on HTF - here we notice it goes to PWL.