How to Spot Order Flow Independent of the General Market

Today’s guest post is contributed by a respected member of our community, Lou R.

On October 20, after market hours during my very brief game plan process– I flagged the daily chart in FDX to watch for an early trade the next morning.


When SPY however closes on a topping or bottoming tail on the daily– I do see tremendous advantage to spend some time, and look for relative strength and/or weakness in a strong/weak stock that demonstrates independent order flow without regard for what the general market is doing.

FDX met that criteria… with these important characteristics:

1) Strong close relative to SPY (nearly solid green at the top of its candle vs SPY that had a topping tail close in lower half of its range).  spy fdx

2) “Day 1 Catalyst” trigger— a breakout from a daily trend line that occurs on high volume after a low volume pullback/consolidation phase.

The odds here are that there is a very high probability that there will be follow through in Day 2… however the tape will typically give clues near the open.

So what transpires, is my ultimate edge on 10-21 after the open— complete positive divergence with two green candles in FDX with a higher high/higher low vs SPY with 2 red candles with a lower high/lower low.

This tells me the stock STILL has independent order flow. Without SPY in front of me…I have no idea for sure. There is no other information I need to see… this is as about A+ as it gets for me.

If I see this 20x in a day I AM PULLING THE TRIGGER.

I am a FIRM BELIEVER that while entries do matter to an extent– it is not the most critical aspect of success– its the trade management and exit that makes or break you.

In my opinion, all that entry does, is determine how good the Risk / Reward ultimately is.

Article Contributed by independent trader, Lou R.

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