Learn the three column order flow exercise.
Posted on February 5, 2011 on Forex Factory
Quote:
Originally Posted by CarnegieLIGHT BULB! LIGHT BULB!!!!!!Yesterday while sleeping with my girlfriend.. it fucking hit me! (twice)
order flow mentality is an art you know why? because no mechanical system will “discover” where orders will come in. The order flow mentality is about the art of knowing WHEN something will hit the market that will cause ORDERS. And you are an artist if you are correct in “knowing” when and why it will happen.
I have so much in my mind, I cannot tell or write everything that is going on up in my brain right now but I sincerely…
Yes you are making progress for sure. Although it will still require a huge effort.
It is an art because the market can do anything it wants. It is not a rigid thing that must conform to a specific mechanical system. The market can stall out at a level one time and blow past it another. The market can make a 1,000 pip move and reverse one time, but another time it will put it a 1,000 pip move + more to squeeze out even more people. Yet another time the market may move 900 pips, reverse 300 pips, then move another 600 pips. It can do whatever it wants.
Mechanical systems cannot pick up the subtleness of the information that doesn’t appear on the chart. Only an astute trader with a true order flow mentality can pick up the things that really move price.
Although are you sure that that move in USD/JPY wasn’t caused by something on a chart? I am sure I can find a trendline support, or the market bouncing off a fib level, or the market must of hit some moving average on some time frame, and there must of been divergence on at least one of the gazillion time frames.
Ahh ok.. I was just kidding 
I will give you another helpful exercise if you want to follow.
Create 3 columns.
First column is the currency pair you are trading. Second column is what your previous mentality about what caused price to move. You can fill up the second column with things like technical indicators like stochastics, macd, moving averages w/e. Now the third column is the interesting one. In the third column you right down what will actually cause price to move according to your newfound orderflow mentality, what will actually cause sufficient aggressive order flow to come in and move price. It could be a scenario, or a list of small things, or.. well the market is not a rigid thing so you need to figure it out on your own.
Dang it! Now I may have said too much, I better shut up before all my inefficiencies get taken away, but I will let this one slip by.
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