Forex glossary
Order Flow Analysis
Order flow analysis examines executed trades, their classifications and changes in displayed orders, depending on the available data feed. It describes activity within a market or venue. Currency futures have their own transactions and order book; they do not provide a complete picture of global spot FX flow.
Illustrative example
How does it work in practice?
Assume a 6E order book shows fifty sell contracts at 1.1000, then twenty. The change could reflect executions or cancellations; the event feed is needed to distinguish them in this hypothetical analysis.
A case to work through
Less displayed size, unknown cause
Hypothetical book snapshots show 100 and later 60 contracts at one level.
- The decline of 40 alone does not separate executions, cancellations and intervening new orders.
- An appropriate event and trade stream is needed.
What follows? Do not automatically record 40 as executed volume.
Example boundary: Snapshots may omit intervening events; the data covers a specified market.
Explaining a book change
Text description of the diagram
- Two snapshots: Show a change in displayed state.
- Event stream: Allows examination of fills, cancellations and new orders.
- Inference scope: Applies to the particular source and market.
A useful distinction
Order Flow Analysis / Order flow
Order flow is the stream of orders and trades; order-flow analysis is the process of interpreting it.
Check your understanding
Recognize what two order-book snapshots cannot resolve.
Show the answer and explanation
Displayed size decreased by 50
The cause has not been established.
Market data and interpretation limits
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Related terms
Sources and documentation
- CME – futures trading guide
Futures venues, orders and executions; futures data is not complete spot FX flow.
Document read: - BIS – foreign-exchange market structure
Fragmented FX trading and limitations of an individual source's market coverage.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.