The Tape

Order flow is the study of the transactions themselves rather than the line they leave behind. A price chart tells you where the market went. Order flow asks a narrower question: who had to cross the spread to get there, how much resting size stood in their way, and whether the effort accomplished anything.

The vocabulary divides into three parts. First the book, which is the mechanism itself: the standing orders, the rules that match them, and the ways participants conceal or advertise their intentions. Then the flow, which is the family of measurements built on top of the completed trades. Then the profile, which throws away time entirely and organises activity by price.

One warning worth absorbing before you start. Almost nothing here is reported by the exchange. It is reconstructed from a stream of prints and quotes, using rules that differ between vendors. That reconstruction is genuinely useful and it is also the reason two careful traders can disagree about the same session.