In my opinion, order flow trading isn't really that different from chart analysis. I find it a big turn off that these guys are busy bashing technical analysis and charts when essentially they're doing much of the same thing. I guess it's part of their sales pitch...
You're basically looking at what price has done in the past (could be the last 5-10 seconds, it's still the past. What does price do moving from level to level? Does it slow down? Does it accelerate? Is the level respected? Does S/R hold? With a Jigsaw DOM (or Sierra or similar) you can see areas of high volume which are hypothized to slow down price movement and create support or resistance. The same thing can be visualized in charts...
So, to me, or maybe I have got it all wrong, there isn't a huge difference between reading order flow and reading charts. It's variations of the same theme.
I really feel like repeating myself here.
One order flow educator said that 'The chart trader is not paying attention to the activity and speed of activity and the overall bigger picture (are bids/offers getting 'crushed') or is a specific level holding or not. Or missing out on the ebb and flow of the market.
Paraphrasing.
As a chart trader/quantitative trader I strongly disagree with that. Even when I was a pure (time) chart trader I would always be paying very good attention to the upticks and downticks of price. Basically reading order flow as upticks and downticks and the speed of movement. Charts also very nicely illustrate recent ebb and flow, while the DOM trader needs to rely on 'memory'. Some of these DOM traders also use a volume profile which again is a chart.
These days, I'm also using tick charts and volume charts which certainly acts as a very good proxy of activity. Possibly better so than the DOM.
And bids and offers getting crushed? Well, price moving one way or the other (as shown on charts) is the evidence of that happening.
I wish these vendors could sell their stuff without the bashing of charts and instead market it as offering extra information (which is true) that could supplement or replace charts for those who prefer that.
I'm part of the first group. I now use the Jigsaw DOM and it's a tremendous improvement of most other DOMS I use. There's also some other bells and whistles which I might be interested in using. The T&S tools also seems interesting. In particular the reconstructed tape. So, I can highly recommend it on that basis.
But for me currently, it's just supplemental information which I find interesting to display and watch and I'm still learning to use it. But my core methodology is still based on statistics/charts and I swing for points, not ticks.
Jigsaw also have some gauges and meters, but personally, I think I'll stick with my tick/volume charts for that. They show very nicely volume transacted and the pace of the price change.
