Order Flow vs Candlestick Patterns - Why Order Flow Reveals the Truth
Candlestick patterns show you what happened, but order flow shows you HOW it happened. Understanding the difference reveals why order flow is more reliable and powerful than candlestick patterns alone.
The Fundamental Difference
Candlestick Patterns
What they show:
- Price open, high, low, close
- Visual patterns
- Historical price action
- What happened
Limitation: They don’t show HOW price moved or WHY.
Order Flow
What it shows:
- Volume at each price
- Who was buying/selling
- Real-time activity
- HOW and WHY price moved
Advantage: Reveals what’s happening inside the candle.
Why Candles Can Lie
1. Same Candle, Different Stories
Example - Bullish Engulfing Candle:
Scenario A (Strong):
- Large buying volume
- Buyers absorbing all sells
- Strong institutional activity
- Real buying pressure
Scenario B (Weak):
- Low volume
- Few buyers, just no sellers
- Weak move
- No real conviction
Same candle, completely different story. Order flow reveals the truth.
2. Hidden Activity
What candles hide:
- Volume distribution
- Who was active
- Real buying/selling pressure
- Institutional activity
Order flow reveals:
- Where volume traded
- Buyers vs sellers
- Real pressure
- What’s really happening
3. False Signals
Candlestick patterns can:
- Give false signals
- Miss important information
- Hide real activity
- Mislead traders
Order flow:
- Shows real activity
- Reveals true pressure
- Confirms or denies patterns
- More reliable
What Order Flow Reveals
Inside the Candle
Order flow shows:
- Volume at each price level
- Bid vs ask volume
- Delta (buying/selling pressure)
- Real activity
Benefit: See what happened inside the candle.
Real Buying/Selling Pressure
Order flow reveals:
- Who was more active
- Real pressure
- Institutional activity
- True market dynamics
Advantage: Understand real market forces.
Absorption and Imbalance
Order flow shows:
- When large orders get absorbed
- Imbalances in buying/selling
- Real support/resistance
- True market activity
Value: See what candles can’t show.
Practical Examples
Example 1: Bullish Candle
Candlestick view:
- Green candle
- Looks bullish
- Price moved up
Order flow view:
- Strong: Large buying volume, buyers active, real pressure
- Weak: Low volume, few buyers, no real conviction
Order flow reveals the truth.
Example 2: Doji Candle
Candlestick view:
- Doji pattern
- Indecision
- Potential reversal
Order flow view:
- Reversal: Large volume, absorption, imbalance
- Continuation: Low volume, no real activity
Order flow confirms or denies.
Example 3: Engulfing Pattern
Candlestick view:
- Engulfing pattern
- Strong signal
- Potential reversal
Order flow view:
- Real reversal: Strong absorption, imbalance, real activity
- False signal: Low volume, weak activity, no conviction
Order flow separates real from false.
Why Order Flow is Better
1. More Information
Order flow provides:
- Volume data
- Buying/selling breakdown
- Real-time activity
- Complete picture
Candles provide:
- Price only
- Limited information
- Historical data
- Incomplete picture
2. Real-Time Insight
Order flow:
- Shows what’s happening now
- Real-time data
- Current activity
- Live information
Candles:
- Historical only
- After the fact
- No real-time insight
- Delayed information
3. Reveals Truth
Order flow:
- Shows real activity
- Reveals true pressure
- Exposes false moves
- Truth about market
Candles:
- Can hide truth
- May mislead
- Don’t show real activity
- Incomplete information
4. Confirms or Denies
Order flow:
- Confirms candlestick patterns
- Denies false signals
- Validates setups
- More reliable
Candles:
- May give false signals
- Don’t confirm themselves
- Need validation
- Less reliable alone
Combining Both Approaches
Best Practice: Use Both
Candlestick patterns:
- Identify potential setups
- See price action
- Visual patterns
- Entry points
Order flow:
- Confirm patterns
- Validate setups
- See real activity
- Make decisions
Together: More powerful than either alone.
Workflow
1. Identify pattern (candles):
- See candlestick pattern
- Identify potential setup
- Note key levels
2. Confirm with order flow:
- Check order flow
- See real activity
- Validate pattern
- Confirm setup
3. Make decision:
- If order flow confirms: Trade
- If order flow denies: Skip
- Use order flow for truth
Common Mistakes
1. Relying Only on Candles
Mistake: Trading only candlestick patterns.
Problem: Missing real information, false signals.
Solution: Use order flow to confirm.
2. Ignoring Order Flow
Mistake: Not checking order flow.
Problem: Missing important information.
Solution: Always check order flow.
3. Not Combining Both
Mistake: Using only one approach.
Problem: Missing benefits of both.
Solution: Combine candles and order flow.
Best Practices
1. Use Candles for Patterns
Candles are good for:
- Identifying patterns
- Visual analysis
- Price action
- Entry points
Use them for: Pattern identification.
2. Use Order Flow for Truth
Order flow is good for:
- Confirming patterns
- Seeing real activity
- Validating setups
- Making decisions
Use it for: Validation and confirmation.
3. Combine Both
Best approach:
- Candles: Identify setups
- Order flow: Confirm setups
- Together: Better decisions
Result: More reliable trading.
Tools for Order Flow Analysis
Professional order flow analysis requires:
- Real-time order flow data
- Footprint charts
- Volume analysis
- Market depth
Vtrender provides comprehensive order flow tools to see what candles hide.
Conclusion
Order flow reveals the truth that candlestick patterns hide. While candles show what happened, order flow shows HOW and WHY it happened.
Key points:
- Candles show what: Price action only
- Order flow shows how: Real activity and pressure
- Candles can lie: Same candle, different stories
- Order flow reveals truth: Real buying/selling pressure
- Combine both: Use candles for patterns, order flow for confirmation
Remember: Candlestick patterns are useful for identification, but order flow is essential for validation. Use both together for the best results.
Start seeing the truth with Vtrender’s order flow tools and understand what’s really happening in the market.
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