Indicators are calculated from price and volume after the fact. Order flow is the raw material underneath them — the live stream of orders hitting the market and the resting orders waiting to be filled. Reading it means watching supply and demand form in real time instead of inferring it from a lagging line.
What order flow actually is
Order flow is the sequence of buy and sell orders arriving at an exchange and the trades that result when they match. Every price move is caused by orders: nothing else can move a market. When aggressive buyers are willing to pay higher prices than sellers demand, price ticks up; when aggressive sellers accept lower bids, price ticks down. Reading order flow is the attempt to see that supply-and-demand battle directly — who is aggressive, where large orders sit, and where liquidity dries up — rather than through a smoothed indicator. It is the most granular view of a market a retail trader can get, and it underlies every chart pattern and indicator you have ever seen.
Bid, ask and the spread
At any instant a market has a best bid (the highest price a buyer is currently willing to pay) and a best ask, or offer (the lowest price a seller will accept). The gap between them is the spread, and it is the immediate cost of crossing the market. A buyer who wants to trade right now can 'lift the offer' by paying the ask; a seller who wants out now can 'hit the bid.' The last traded price sits at whichever side most recently transacted. In a deep, liquid market the spread is one tick; in a thin market it widens, which is itself information about how much real interest exists.
The order book and the DOM
The order book is the full list of resting limit orders on both sides — every price with buyers stacked below the market and sellers stacked above it. The Depth of Market, or DOM, is the tool that displays this as a vertical ladder: prices down the centre, resting bid sizes on one side and ask sizes on the other, as shown in the diagram. It lets you see not just the best bid and ask but how much size is waiting several levels deep. A ladder heavy with bids beneath price suggests support; one stacked with asks above suggests resistance. The DOM is the trader's window into standing supply and demand before it is consumed.
Market orders vs limit orders
There are two ways to interact with the book, and the distinction is the heart of order flow. A limit order rests in the book at a chosen price and provides liquidity — it waits to be hit. A market order executes immediately against the best available resting orders and removes liquidity — it is the aggressor. Aggressive market buying trades at the ask and is what pushes price up; aggressive market selling trades at the bid and pushes price down. This is why order-flow tools separate volume traded 'at the bid' from volume traded 'at the ask' — it reveals which side is being aggressive, which resting orders is not.
How a price move happens
Imagine 200 contracts are offered at 100 and buyers keep sending market orders. Those buy orders consume the 200 offers; once they are gone, the next-best offer might be at 101, so the price the tape prints jumps to 101. Price rose not because of a pattern but because aggressive buyers ate through the resting supply at 100. If instead a large seller keeps refreshing 200 offers at 100 and buyers cannot exhaust them, price stalls — that is absorption, and it often precedes a reversal. Every candlestick you see is the compressed summary of thousands of these little battles between aggressors and resting liquidity.
Why liquidity matters
Liquidity is simply how much size is available to trade near the current price without moving it. Where liquidity is thick, price tends to pause and chop; where it is thin, price travels fast because there is little to stop it. Large players care intensely about liquidity because they must find enough resting orders to fill their size without pushing the market against themselves, which is why they hide and slice orders. For a reader of order flow, spotting where liquidity is stacked (walls) and where it is absent (thin books, low-volume nodes) is often more predictive than any indicator, because it shows where price physically can and cannot go easily.