How Does NinjaTrader Order Flow Work? A Complete Guide

You may be surprised to learn that over 50% of US adults invest money in the stock market. It’s no secret that this is one of the best ways to substantially grow your net worth. However, not everybody is able to do so on their own.

This is why people take advantage of day trading software like NinjaTrader. Using the Ninjatrader Order Flow functionality can be a great way to optimize your performance. Not everybody understands what they should about using it, though.

Let’s explore the key factors you need to consider.

What Is NinjaTrader Order Flow and How Does It Work?

Order flow is the study of how and why people buy and sell securities.

In day trading, order flow analysis is used to make decisions about entries, exits, and risk management.

There are two types of order flow in NinjaTrader: real-time volume and market depth.

The real-time volume shows the number of contracts traded at each price level. Market depth shows the number of contracts available to be traded at each price level.

Understanding both of these metrics is crucial when it comes to making the most of the platform.

NinjaTrader uses a proprietary algorithm to calculate market depth.

It’s based on the National Best Bid and Offer (NBBO). The NBBO is the highest bid and lowest ask prices from all participating exchanges.

Market depth can be displayed in two ways:

  1. The number of contracts available at each price level (the order book)
  2. The total value of all orders at each price level (the order flow)

The order book is more important for short-term traders because it shows the supply and demand imbalances that can lead to price moves.

The order flow is more important for long-term traders because it shows the accumulation or distribution of orders over time. This will provide insight into your performance and allow you to make changes where necessary.

Why Is Order Flow Important?

Order flow is important because it can give you an edge in the market. It’s not the only thing you need to focus on, but it can be a helpful addition to your toolkit.

There are two main benefits of using order flow in NinjaTrader:

  1. It can help you make better entries and exits
  2. It can help you manage risk more effectively

Let’s take a closer look at both of them below.

Making Better Entries and Exits

Order flow can help you make better entries and exits because it shows you where the big players are buying and selling. If you see a large number of contracts being traded at a certain price level, it’s a good indication that there’s strong demand (or supply) at that level.

So, it’s likely in your best interest to get involved in trading relevant contracts.

This information can be especially helpful when you’re trading breakouts. If you see a large number of contracts traded just above the breakout level, it’s a good sign that the breakout is real and has staying power.

Over time, this can lead to much greater profits. So, be sure that you keep this attribute in mind if you are on the fence about what this platform has to offer.

Managing Risk More Effectively

Order flow can also help you manage risk more effectively. As you might guess, this is a crucial part of successful day trading.

If you see a large number of contracts being traded at a certain price level, it’s a good indication of support (or resistance).

This information can be used to set more effective stop-losses. For example, let’s say you’re long the stock market and you see that there’s strong demand at the $25 per share level.

You could use this information to set your stop-loss to just below $25. This would give you a better chance of surviving a temporary dip in the market.

Order flow can also help you take profits more often.

If you see a large number of contracts being traded at a certain price level, it’s a good indication of resistance (or support). This information can be used to exit your positions more often.

For example, let’s say you’re long the stock market and you see that there’s strong selling pressure at the $26 per share level.

You could use this information to exit your position and take profits.

How to Use NinjaTrader Order Flow For Your Own Trading Strategies

Getting started is much easier than it seems. In fact, you can start using order flow right away with the Cumulative Delta indicator and the Order Flow Volume indicator.

The Cumulative Delta indicator shows you the net buying and selling pressure at each price level.

It’s a good indicator to use if you’re new to order flow trading and don’t have much familiarity with the platform.

The Order Flow Volume indicator shows you the total number of contracts traded at each price level. In contrast, this is an indicator you should focus on if you’re more experienced with order flow trading.

These two indicators will give you a good idea of where the big players are buying and selling. You can then use this information to make better entries and exits, which is something that will substantially improve your overall returns.

How Can I Take Things a Step Further?

It’s crucial that you regularly conduct market research on your own so that you understand what type of performance you can expect. Remember, even the best trading tools will only take you so far. The key is to understand how to use them correctly.

You should also take time to research the nuances of NinjaTrader as you use it. This will help you get the most out of the platform.

After all, you can’t expect to learn much if you simply set your chosen parameters and then walk away.

It’s also worth noting that working with a professional can go a long way in terms of helping you maximize your performance. They have all of the tools and resources necessary to help you take things to the next level.

They can also help you avoid obstacles you may have otherwise encountered. Not only could this help you avoid losing money, but it could also significantly increase the amount of money you make. So, they are often worth the investment.

What Should I Look For in a Professional?

Looking into their past reputation can go a long way. See what past customers have had to say and consider their experiences. Consider how enjoyable it was to work with them and what their results were.

As you might guess, you wouldn’t want to hire someone who isn’t able to provide maximal results. This would only cause you to waste your time and money.

You also can’t neglect their level of experience. Working with inexperienced firms is essentially rolling the dice. Although they aren’t guaranteed to fall short of your goals, they have a much higher chance of doing so compared to someone who has a more extensive background.

Hiring a qualified professional is the only way to avoid pitfalls you would have encountered.

Be wary of businesses that have not worked with people like you before. For example, there are professional consultants out there who only work with clients that have a certain level of previous knowledge. If you aren’t quite up to speed, you won’t be able to get the most out of your professional relationship with them.

Inquire about how they bill their clients. The last thing you want is to run into unexpected fees or expenses. To help avoid this, be sure to thoroughly read any agreement they present you with before you sign it.

You can fine-tune your budget from here.

You should also consider how communicative they are. Being able to get support when you need it is something you can’t overlook. Otherwise, you will have to fend for yourself when problems arise. In some situations, this could lead to you making a decision that negatively affects your overall performance.

Mastering NinjaTrader Order Flow Is Easier Than It Seems

Although NinjaTrader order flow can seem overwhelming at first, it’s not as difficult as many people anticipate.

Just be sure to keep the above information on so that you can fully take advantage of all of the utilities that this platform offers. Want to learn more about what we can do? Be sure to reach out to us today and see how we can help you.

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