ZoneTraderPro Order Flow Patterns Indicator

ZoneTraderPro Order Flow Patterns Indicator

ZoneTraderPro is now introducing the Order Flow Indicator to identify Order Flow Patterns just like the original indicator identified pricing patterns.  This addition makes ZoneTraderPro a truly complete software package.  The Order Flow Indicator currently has the ability to identify trapped traders, stopping and continuation ratios, and the exclusive ZoneTraderPro Order Flow Buy/Sell signals.  Additionally it identifies two major patterns that occurs in the order flow called Absorption and Extension Zones.

ZoneTraderPro Order Flow Patterns Buy / Sell Signals

This is a pattern that does a tremendous job of calling tops and bottoms all by itself.  Generally I am going to suggest using two charts, one fast 2 range chart and a slower 4-5 range chart.  The 2 range chart is the trigger for trade entry and the 4-5 range chart (or higher) is used to see volume accumulate and use other indicators in the suite.  These trade examples occur on 5/18/18.

The setup for the trade is a Tick Divergence Exhaustion price pattern trade.  This is a known reversal pattern that calls tops and bottoms very frequently.  But rather than relying on only the $TICK as a real time indicator we now have a suite of tools to identify order flow patterns.  The first chart is the 2 range trigger chart.  As price traded at the blue counter trend zone, there were no less than 4 ZTP Order Flow Sell patterns.  Additionally there was a .36 stopping ratio that occurred with the first ZTP Sell signal.

 

2 Range Exhaustion Sell
2 Range Exhaustion Sell

Absorption and Extension Zones

The chart above alone gives us a lot of information that the market is going to sell off.  But the longer time frame chart gives us even more information.

5 Range Exhaustion Sell
5 Range Exhaustion Sell

Now we have red and green lines on the chart along with blue, red and green boxes on the chart.  The red and green line are called the ZoneTraderPro extension zones and they are formed by the order flow history.  These are prices where the was significant buying and selling and act as areas of natural support and resistance in the future.

The red and green boxes and showing absorption by passive buyers and sellers.  I find it very interesting that at the exact price of previous aggressive sellers, there is now a passive seller at 2718.75.  In addition a new extension zone formed indicating an aggressive seller.  The result of this was a 9 point trade.  Notice that the ZTP Order Flow Buy with a stopping ratio signal marks the bottom.

What happens 5 minutes later?  An even stronger buy signal.  Here is the 2 range chart.  Again we have a Tick Divergence Exhaustion trade with a ZTP Order Flow Pattern and a Stopping Ratio.

2 Range Order Flow Patterns Exhaustion Buy
2 Range Order Flow Patterns Exhaustion Buy

The information on the 4 range chart makes this an even stronger buy signal.  We have a combination of the Point of Control (Blue Box) and Absorption Buy at the bottom of the bar.  Additionally we have a Trapped Seller pattern and a ZTP Order Flow Buy pattern.  One of the strategies I have personally developed is to take this signal because of an extremely high probability it results in a 5 point winning trade.

This trade was good for 6 points.  What was the reversal signal?  Another ZTP Order Flow Pattern and a Volume POC with Sell Absorption.

4 Range Order Flow Patterns Exhaustion Buy
4 Range Order Flow Patterns Exhaustion Buy

Order Flow Patterns for 2 Points

The other strategy I am developing for trading these Order Flow Patterns signals is generally looking for 2 points when trading a ZoneTraderPro price pattern.  There will be an upcoming video series on this, because it will introduce the concept of how to determine a high risk to a low risk setup.  High risk setups occur when the market is in price discovery.  A low risk setup occurs as the market comes back to test a previous high or low.  This will be a super important concept to understand because it employs the theories that make price patterns work.  If you understand how price patterns work, then you can ignore the high risk setups and trade fewer times with lower risk.

Using an 8 Range Chart for POC Absorption Setups

I also use a 8 range chart to spot these POC Absorption trades.  Here is a great sell example that develops less than an hour later.  Note the Extension Zones which indicate prior resistance.  This one did not get 5 points however, because there was a reversal POC Absorption Buy signal.  Again note the Extension Zone on the buy signal. Notice how the price is forming a channel around the two zones.

8 Range Sell and Buy Absorption Order Flow Patterns
8 Range Sell and Buy Absorption Order Flow Patterns

This is just an introduction to the new ZoneTraderPro Order Flow Patterns Indicator.  There will be follow up posts with videos showing how accurate these indicators are when combined with the price patterns indicator.

The indicator is currently being tested with good results.  There are no known issues or bugs.  ZoneTraderPro customers can contact me for an upgrade to the new software. There is no cost to upgrade to the NinjaTrader 8 version.  The distribution date is set for May 25 if no further issues occur.

The indicator will also be updated to identify when the Volume POC and absorption occur at the top and bottom of a bar to make an even clearer entry signal.

 

 

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