Interpreting Order-Flow Imbalances with Price Action
Summary
The article explains inner and outer market volume as a basic measure of aggressive selling and buying: trades executed at the bid are counted as inner volume, while trades at the ask count as outer volume. It proposes reading these figures alongside price and total activity rather than treating either measure as a standalone signal. For example, an imbalance that agrees with rising or falling prices is framed as trend confirmation, while divergence between volume and price is presented as a possible sign of absorption or distribution.
It also describes low activity with a steadily rising price as a possible indication of tightly held shares, and a late-session surge in ask-side trades and price as a bullish clue for the next session. These are interpretations asserted by the article, not findings supported by reported tests or performance data. Order-flow classifications can be noisy or affected by trading behavior, and the document offers no validation, risk controls, or evidence that its signals predict future returns.
Key ideas
- Trades executed at the bid are classified as active selling, while trades at the ask are classified as active buying.
- Order-flow imbalances should be interpreted alongside price direction and trading activity.
- A large outer volume with little price progress is presented as possible distribution, while heavy inner volume during a rising price is described as possible accumulation.
- Low activity during a steady rise and a late-session surge are offered as clues, but the article gives no empirical validation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.