The market exists because of conflict buyers and sellers. For every trade, there must be a buyer and a seller; it is necessarily battle, and in each individual transaction there can only be one winner; the other must lose. It is impossible for both sides to be right and the order flow goes in only two directions, up or down or short or long. So, the importance of knowing the order flow is very important. What should be noted here as well is that many of the order flow movements are case settlements which occur when a short is covered, or a long is sold. Actually, a large percentage of price action is characterized by stops being hit, or in other words, the loser is liquidating. Only the loser must get out; the winner can wait. When the loser and winner leave the market, the market is vulnerable to a reversal – only winners are left. All price action is determined by an imbalance of orders over time. How and when those orders are filled creates price action. So, what you must attend to is whether or not your order is ahead of the next wave of orders in the direction of the price action. Your analysis, if you want to be consistently successful, must be designed to find where the eventual loser will be placing his orders.
Trading market orders
Forex and stock traders are looking for the consistently wrong investor, trader and take the opposite position. This will obviously lead to winning trades for them. All traders have read trading books that point out that increasing volume is good for the continuation of the trend. Many new stock traders will try and fight the trend.
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