Trading Volume
How much was traded
Volume measures the amount of an asset traded during a period. High volume can indicate greater participation, but does not guarantee a particular price direction.
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Lesson 3: Order Flow & Volume Analysis
Understanding trading activity, buying and selling pressure, and price imbalances.
What Is Order Flow?
Order flow is the process through which buy and sell orders enter the market, interact with available liquidity, and become executed trades. Traders study order flow to better understand market activity.
A traditional candlestick chart shows price movement, but does not reveal every individual order or trade. More detailed analysis requires exchange-specific data such as trades and order-book updates.
Six Essential Trading Concepts
These are simplified educational illustrations, not live market data or trading signals.
Volume Delta
Aggressive buying versus selling
Delta compares volume executed by aggressive buyers with volume executed by aggressive sellers. Positive delta suggests more buyer-initiated volume; negative delta suggests more seller-initiated volume.
Footprint Charts
Activity at different prices
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Footprint charts display executed trading volume at individual price levels, often separating trades initiated by buyers and sellers. They require detailed trade data.
VWAP
Volume-Weighted Average Price
VWAP represents the average traded price weighted by volume over a chosen period. Traders sometimes use it as a benchmark to assess price relative to the session average.
Order Blocks
Potential reaction zones
Order blocks are price zones identified by certain trading methodologies, often around candles preceding a strong move. Their definitions vary, and a chart cannot prove institutional orders were placed there.
Fair Value Gaps (FVG)
Price imbalance patterns
A fair value gap commonly refers to a three-candle pattern where the first and third candle ranges do not overlap, leaving an area associated with a rapid price move. Price is not guaranteed to return to the gap.
Other Important Terms
Bid: The highest currently displayed price a buyer is willing to pay.
Ask: The lowest currently displayed price a seller is willing to accept.
Bid-Ask Spread: The difference between the best bid and best ask.
Market Order: An order seeking immediate execution at available prices.
Limit Order: An order specifying a price limit for execution.
Liquidity: The ability to trade without causing a large price change.
Order Book: A view of displayed buy and sell orders at different prices.
Absorption: A term used when substantial aggressive trading is met by opposing liquidity, limiting price movement.
Educational information only. Trading involves financial risk. No pattern or indicator guarantees future results.