Order Flow Pullback Strategy: Trade Big Volume Clusters

Order Flow is great because it shows us where big players were active in the market. Those places are often very important, and price likes to react to them later as support or resistance. So, in this video, I’ll show you a simple way to find those areas with Order Flow and how to trade pullbacks from them.

With this strategy, you want to set the time frame to a 5-minute to 60-minute time frame. What I prefer is the 30-minute time frame. You can see that in the picture here. So, this is a 30-minute time frame, and you look for a volume cluster within a trend.

What you see here in this picture is Order Flow. It doesn’t show Bid and Ask. It only shows total volumes. And you see that in here, there was a strong uptrend. Within the uptrend, you want to see a dark area like this one, because a dark area, at least with my software, signifies a place where heavy volumes were traded. Heavy volumes mean big trading institutions.

So, you look for institutional activity within a trend. In this case, buyers were pushing the price upwards, and in here, they were active. They were adding massive loads of volumes to their longs. Then they pushed the price upwards some more. So, you want to see the price move away from that volume cluster, right? This is the volume cluster right here. Price moves away from that volume cluster, and you mark that level in your chart.

What I prefer is to mark the beginning of that volume cluster, and then you wait for a pullback. You wait for the moment when the price touches that support, that line, again. Then, because this was an uptrend, you trade long from there, right? So, you enter at a pullback.

The reason why price likes to react to this zone, to the heavy volume clusters, is that, as I was saying, the heavy volume clusters represent places where institutions were active, placing a lot of orders, and they are usually defending those zones. So, when the price makes a pullback to this zone, which is clearly important for those institutions, they become active here and actively push the price upwards away from those positions which they entered here, right? That’s why this setup works. That’s the logic behind it.

Now, here is another example of that setup. In this case, the price was dropping in a downtrend, and within the downtrend, there was a significant volume zone, a volume cluster in here, and also in here, which adds strength to it. So, there is a significant volume zone within a trend. You wait for a pullback, and when the price hits that zone, you go short in the direction of the trend.

In this case, sellers who were pushing the price downwards were active here, adding to their shorts. So, this is an important zone for those sellers. We wait for that pullback and trade from there as those sellers defend this heavy volume zone and defend their shorts which they placed there, right? So, again, you look for a significant volume cluster within a trend, and then you trade a pullback to it.

Here is another example, a long trade example. There was a strong uptrend, and within that uptrend, there was a significant volume zone in here. So, you wait for a pullback. When the price reaches the beginning of that heavy volume zone, you go long.

Now, people often ask me how long they should wait. For example, if the pullback needs to occur the same day or the next day. Well, usually, the pullback should happen within the next couple of days. Let’s say a week or two max. Then I usually don’t trade it. But what is very important is that the price makes some price action above that volume cluster when it gets formed. So, it’s not like an instant test. Actually, this also sometimes works, but what I prefer is if there is some price action above that volume cluster before that pullback occurs.

If we are looking at a 30-minute time frame here, then I would say at least two footprints above that heavy volume zone. So, one, two complete footprints above that zone. Afterwards, if there was that pullback, it would be a valid trade for me, a valid signal to go long from here.

Now, here is another example. There is an uptrend, and the significant volumes were traded here. This is the beginning of that heavy volume zone. This is a pullback to it. Boom. Beautiful reaction. See, we don’t even need Bid and Ask data to trade this, which is pretty cool, isn’t it?

Now, this is another scenario where I like to trade a significant volume cluster, and it is when it forms within a rejection. A rejection is when price goes one way aggressively, then turns and goes the other way aggressively. Somewhere within the rejection, somewhere close to the place where the price actually turned, there should be a volume cluster like this one right here.

This volume cluster is the place where buyers started to buy everything sellers were selling, and they started their buying pressure and pushed the price upwards from there. So, this is the most important zone within the rejection. This is the beginning of it. So, you wait for a pullback and go long from there.

Now, let me show you another example of this. There was a sharp rejection of lower prices, with a significant volume cluster formed within the rejection. So, you wait for a pullback and go long from there.

Now, here is another example. There was a sharp rejection of lower prices, with significant volume clustering here. And again, I want to emphasize that you don’t actually look at those numbers. They are not really significant. You only look at the shades of gray. If the Order Flow gets dark, then it means that heavy volumes were traded there. So, it takes just a bit of experience to start seeing those in the chart at first glance. Reading Order Flow can actually be pretty quick, right?

So, here is a significant rejection of lower prices with heavy volumes. You wait for a pullback and take it from there.

Now, one last example of this. There was a significant rejection of higher prices. Within the rejection, you need to see heavy volumes. If there are no heavy volumes within the rejection, then you just don’t trade it. You need to see that institutional activity. You need to see the heavy volumes there. So, this is the resistance. You wait for the pullback, and you go short from there.