Why I trust an OrderFlow chart…

I made a mistake the other day ( Tuesday- 3rd April) of being Live on Twitter during market hours and posting a comment that there were sellers in the Nifty and they were aggressively selling the tape at 10290- 10300F.


On Twitter to post Live Tradeable information is an anathema these days,  as a bulk of traders over there today are wise in hindsight and let you know how good they are post fact. So you get a boatload of “surf” all designed to show you what a massive job that guy did post-event, but the chap has disappeared when the action is happening.


So that’s why I classified it as a mistake :)…but moving on..


It was on Tuesday near the close around 3.00 to 3.30 pm when I posted that tweet.


Regular readers of my blog and our team members at VTR did not find anything different about the tweet as I keep talking to them about what I see on the charts every day.


But for a market which was running long from 10140 for two days, they had not prepared for the selling which was coming in as the market was closing at the highs.


The fact was that Hot money was using the higher prices to sell into and build a short position and we could see that happening Live in our OrderFlow charts, but I’ll talk more on that later.


That Tuesday, the market was long at the close and the talk of the town was of a move to 10500.


But our charts showed otherwise.



Here is a chart which we look at every day Live.



The chart is of Tuesday, Wednesday and Thursday.( 3rd, 4th and 5th April)


The pink bands are areas where sellers have entered and the maroon extension bands are to remind me later in the future that the area had sellers showing intent. The green bands are for buyers and we extend them likewise to show the zones the Buyers bought into the market.


So the shorts entered at 10295 on Tuesday-3rd April and held their position the next morning as a small buy program tested them, but they took control immediately afterward and drove the index lower to 10145 the same day for a drop of 160 points.


Quite clearly the market was surprised, but the story does not end there.


When we dropped to 10145, the Traders started talking of 9600 levels, but as you can see in the chart above, Hot money started cutting their short exposure and building long inventory.


This was reflected again in the OrderFlow charts as green bands.


What was clearly visible was that whilst the rest of the market was long at 10300 and adding longs , hot money was building shorts and whilst the market at Wednesday’s close built puts and shorts , Hot money was closing shorts and building longs.


The next day ( Thursday 05th April)  the market gapped up to 10270 and rose to 10360  and Hot money smiled all the way to the Bank again.


People think an OrderFlow chart is an analytical Technical Analysis method but they could not be more wrong.


It is just information plotted in a certain way which lets you see what is happening in the markets real time.


Market analysis of today has moved beyond the Open, High, Low and Close and trendlines and moving averages and the like. Indeed the market can no longer be measured through 3 or 4 variables (like the above) all of which are random anyway. That information is now redundant in a  Trading world which is evolving and getting faster by the day.


We live in a world where with Whatsapp and Twitter and Facebook the communication speed has just increased phenomenally and our mobiles today are faster than even laptops and desktops in terms of computing power. For you trading with outdated indicators in short-term derivatives, is like using an old Nokia phone when the world belongs to the Apples and the Samsungs.


Don’t get me wrong here, I loved my old Nokia phone but they became outdated as they did not update themselves to the changing times. Even Microsoft, a gaint in the sphere,  lost the phone war to Android as they did not keep pace with the moving times.


The question you have to ask yourselves is whether you are keeping pace with the changing ways of the market or you want to remain a Nokia?


As we speak today, Nokia is finally into Snapdragon processors and large QHD displays, but think about how much ahead they would have been if they had made the changes at the right time?


The Trading world works in different ways and there is no “one size fits all” approach here. Indeed there are, and will always be different ways to reach the same destination.At no time, I am saying my method is the best of them all and I have the utmost respect for everyone who works a process and is profitable. But I honestly do not care about what systems others use to trade and what numbers they are looking at, Cos I have an OrderFlow chart which reveals all…


I go to work with an OrderFlow chart which tells me clearly every minute of the day, what the other traders are doing, the trades they are taking and whether they are profitable or upside down. The markets move today, not just because someone or many have it right, but because the majority is leveraged and wrong. Wednesday’s 150 point slide was because the bulk of the market was long and caught wrong. Thursday’s gap up and continuation higher caught Wednesday’s late shorts off and they had to cover and the markets rose into the close.


The truth is that the market will punish you always if you are late to the game.


OrderFlow is the Buying and the selling of the market. It’s a bird’s eye view of the entire activity happening at the exchange and can tell you which traders are profitable and who is upside down. The markets work as price probes and rotations. Don’t let anyone tell you that they rise when people buy and fall when people sell. That is only half of the truth. The markets follow an auction process and they will continue rising till there is an equal and opposite force in the other direction which will balance the upwards price probe. The flow of the market is always from a Balance to an Imbalance and back to a Balance in every time frame.


OrderFlow shows you where the majority of trade is happening. Whether someone is buying value or is late to the value game. Just like you pick a stock and price it for a fair value, the derivatives trader has to purchase value. The one who is on the wrong side of the value hunt is the one who gets creamed.


OrderFlow looks complex from the outside but if you go one layer down and make an effort to understand it, it is a simple and efficient way of looking at the markets. But there are also “distributors” and “vendors” out there who mislead with poor quality data and substandard flow. I have seen charts promoted by such people where a Buyer is shown as a Seller and a Seller as a Buyer!! Indeed if you are not using the correct instruments to check OrderFlow, you start off with a negative strike against you. Working with no data is better than using poor quality data as your entire bias is built on the information the chart gives you, and if that is wrong, then the Heavens have to open to help you!!


I make that point always when I talk of OrderFlow because too many people have been disillusioned and led astray because they have not had a look at the right metrics or learn’t a proper way to use the OrderFlow or for that matter, the MarketProfile.


At Vtrender, we know that not everyone understands MarketProfile or the OrderFlow charts. So we have built a structure in place for you to come and build a foundation as you trade the markets. It’s a start for you to understand Trading as a process. You would have realized that even though it looks random from the outside, the people who trade with big money have a plan and a way of executing that plan. They follow a structure and know what they are doing. Sometimes they too are caught upside down but the worst thing a Trader can do when caught upside down is to chuck away a strategy or a trading plan. Vtrender is about a process in an environment where you see other traders and the rest of the market looking at the same information. The thing different about us is that we arm you with the right tools to exploit that information better.


I am one of the few who shares my charts with fellow traders in a Live Market. I also share my views of the market and what I expect it to do next, in real time. This is possible becuase we work with Live information ( OrderFlow)  changing a structure, which we see through the Marketprofile chart. Yes this little studio of ours is behind a paywall,  but it is designed that way to keep the gutter out. The digital world as many of you know it, can quickly move from the gutter to the sewer also, and it’s my job to make sure that I have the right environment in place for all of us to come together and trade. When you demonstrate a cmmitttment that you are serious about trading and want to work with us, we open our world to you and we really have a wonderful environment built here where you would get out of it what you put in it. There are days when we talk cricket, politics etc and there are others when its only the market which takes a hold over us.  Even with the friendly banter we ensure that we are doing the job which our accounts ask of us- That of trading the markets well.


Our process is simple and I have not shied away from laying it out.


  1. To understand what the market has done previously through a MarketProfile chart
  2. To see what the market is doing now through an OrderFlow chart


Together Market Profile and OrderFlow are enough to provide all the information you need to place that new trade or exit the old one.


Why do I do all this?


Because Pete SteidlMayer shared what he knew about the market with me and all of us.


Because Jim Dalton wrote all he knew in a book and shared with us


Becuase everyone from and before Jesse Livermore shared what they knew of the market with the world.


I do it and I do hope that you do it too.