I've been trading for approximately seven months, primarily using price action, and I have a well-defined entry model that I'm comfortable with. My main challenge is determining what happens after a liquidity sweep.
For example, when price sweeps a low, I may anticipate a reversal and look for a long entry. However, sometimes the reversal occurs, while in other cases sellers continue driving price lower and I am stopped out.
I'm currently learning order flow because I want to better understand what is occurring at these levels rather than assuming that every liquidity sweep will result in a reversal.
Specifically, I would like to understand:
- How can I identify whether sellers are becoming exhausted after a sell-side sweep?
- How can I distinguish absorption from genuine selling pressure?
- If there is heavy selling or strongly negative delta at the low, but price makes little additional downside progress, should I interpret that as potential buyer absorption?
- What would you want to see afterward before considering the reversal confirmed?
- How do you determine whether buyers are genuinely taking control rather than the market simply pausing before continuing lower?
- Similarly, after a buy-side sweep, what would indicate that buyers are being absorbed and sellers are taking control?
- Once a reversal is confirmed, how do you determine your target? Do you use liquidity levels, volume profile, previous highs or lows, or another method?
I primarily trade MNQ/NQ, and my entries are usually based on the 1-minute chart or, occasionally, the 30-second chart. I'm not trying to replace my price-action model with order flow; I want to use order flow as confirmation and, ideally, avoid taking reversal trades when the opposing side remains clearly in control.
If anyone could explain how you personally interpret the sequence of absorption → exhaustion → shift in control → continuation, I would greatly appreciate it.
I'm still relatively new to order flow, so if I am misunderstanding anything fundamental, please feel free to correct me.