you are not a currency dealer. . Many novice traders will blame moves like this on unscrupulous brokers widening spreads and the like. Now that we are thinking more in relation to where orders are placed and the order flow dynamics which they create, lets go back to the concept of the metagame. If volume is greater than open interest, you know the trade is new. With his average entry price.50 and exit price of 51, he has made.5 ticks on each contract. The main players that accept larger orders are the interbank market institutions. (This is not to say that particular market patterns cant provide edge over time, but they are simply not the overall cause of market moves). An order book will generally see large volume trades further away from the spot price and many smaller volume trades near the currency spot price. If it is less than open interest it is hard to determine if the trade is new or an unwind of a position. .
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This method takes advantage of big traders like John who need to use these areas to execute orders without moving price to a disadvantageous position. John also surmises that there are is also at least 500 contracts in stop orders at 50 (due to it being an important area in his experience, where stop orders are likely to have gathered). What is Order Flow? If you know your competition is going to do the same move over and over, reacting to this and adjusting your strategy would be playing the metagame. Obviously, there will be a range of trades that a dealer will see within the forex institutional order flow. . This is an important concept in order flow analysis, due to trading and financial markets being a competition between humans. One phenomenon drives these order flow of markets. These companies will also be active in interest rates, commodities, equities market making. Just because you know where the orders will be, you dont know how many or how large the orders are there. Now that you are aware of where the market is likely to reach for and gravitate towards, there are ways to fit this order flow into your trading. The orders that sell side players receive from customers relay important information. Most sell side financial corporations that deal in the forex markets have a couple of dealers per location per currency pair. .