Market Order Flow Basics: How Real Buying and Selling Actually Moves Price
Order flow is the raw truth behind price movement. It’s not indicators. It’s not chart patterns. Price moves because market orders hit limit orders in the book. If you understand that interaction, you understand why candles form the way they do.
The Two Types of Orders That Matter
All trading reduces to two forces:
- Limit orders = liquidity sitting and waiting
- Market orders = aggressive orders that remove liquidity
Price moves in the direction of aggressive orders. If buyers smash the ask with market buys, price ticks up. If sellers smash the bid, price ticks down. Simple. Brutal. Real.
How Order Flow Creates Candles
Every candle you see is just order flow aggregated over time. Here’s the breakdown:
- Large market buy orders → green candles
- Large market sell orders → red candles
- Thin liquidity → big wicks and violent moves
- Thick liquidity → slow and controlled movement
If liquidity disappears, expect chaos. This ties directly into market liquidity basics.
Absorption: When Price Should Move But Doesn't
Absorption happens when aggressive orders slam into a level but price barely moves because passive liquidity keeps eating the flow.
Example:
- Huge market buys hit the ask
- But sellers reload limit orders instantly
- Price rejects instead of breaking up
Absorption usually signals a reversal or strong defense by big players.
Imbalance: When One Side Dominates
An imbalance is exactly what it sounds like—one side massively outweighs the other.
| Type | Description | Implication |
|---|---|---|
| Bid Imbalance | More aggressive sellers than buyers | Downside pressure |
| Ask Imbalance | More aggressive buyers than sellers | Upside pressure |
Imbalances are the fuel behind breakout continuation or failed reversals.
Trapped Traders and Forced Liquidations
Order flow exposes trapped traders—those who bought at the wrong spot, got squeezed, and now have to puke the position. Forced exits amplify moves.
- Longs trapped above resistance → sharp selloffs
- Shorts trapped under support → explosive squeezes
These events often create the strongest momentum of the day.
Order Flow + Structure = Killer Edge
Order flow alone can be noise. Structure alone can be misleading. Combine them and you get high-confidence trades with clean context. For structure review, read market structure basics.
Order Flow Shows the Truth Behind Every Move
Once you know how liquidity, aggression, absorption, and imbalances interact, you stop guessing. Order flow is the engine under the hood. Learn it and your understanding of price becomes brutally clear.