What is Order Flow Trading?
The Order Flow Trading label has been applied to many things. From tape reading… to microstructure analysis… to option and stop hunting… to technical pattern rationalization -- it seems that any time a trader makes a decision based on order mechanics they call it order flow trading. While one could justifiably consider any of these to be “order flow trading,” the reality is that it’s all of them and more.
At its core, Order Flow Trading is a mindset. And not just any mindset! It’s a mindset that exists one level higher in abstraction than the one most other traders in the market think on.
OK… and uh, what in Sam Hill does that mean exactly?
Well, what I’m talking about here is something called the metagame.
In short, the metagame is the “game within a game” where players make decisions, not on the basis of an elementary strategy called for by a game’s rules, but on information that exists outside the game.
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