ZoneTraderPro Order Flow Pattern Indicator for NinjaTrader 8
ZoneTraderPro now features a order flow pattern indicator suite which identifies major reversal points in the markets, giving users advantages over other traders. The indicator package features the exclusive ZTP Order Flow Signal, Exhaustion Signal, ZTP Delta Strength, Trapped Traders, Absorption, Stopping and Continuation Ratios, Point of Control, and Extension Zones.
These powerful patterns represent a major upgrade to the ZoneTraderPro indicator package. Use this upgrade in conjunction with ZoneTraderPro price pattern matching indicator. This gives the trader two unique advantages that no other software provides.
The first advantage is a set of rules that determine the risk involved in a trade. You determine if the trade being considered is high or low risk, all based on the ZoneTraderPro pattern. You can determine if a trade should be exited early if a reversal pattern emerges.
Order Flow is Useless Without Paterns
When order flow software was first developed you only saw the numbers of contracts traded. This seamed like amazing information because a trader could see where large volume came in, giving a false impression that price would continue to move in that direction.
Contracts traded is a completely useless number because it does not take into account buyers and sellers that passively are buying and selling contracts with limit orders in large numbers. What does the chart at the left really tell you? The chart does nothing to tell you about where the was past support or resistance. There is no way to determine if there was a stopping or continuation ratio present. It is impossible to determine the ZTP Order Flow Sell signal.
There was nobody to teach a trader what patterns to visually look for. What NinjaTrader did with the Volumetric bars was open up the charts to be able to program patterns that consistently yield results.
POC Absorption and Extension Signal
The ZoneTraderPro order flow indicator features the POC as its most powerful signal. The reason this signal is so powerful is that it normally occurs at market turning points. When combined with other ZoneTraderPro order flow signal it creates a complete and powerful toolset for your trading.
In this picture you have a combination of the 3 most powerful signals. First you have the point of control buy signal which has told us that a large amount of contracts traded the wrong way on the low of the bar. The second most powerful signal is the ZTP Order Flow buy signal, which is also an entry trigger on a smaller time frame chart. The third signal is that a stopping ratio on the low. Lastly ZoneTraderPro identified this as a Tick Divergence pattern.
There are two types of POC signals and they represent a different algorithm. It is possible to have both types of signals occur on the same bar, representing an even stronger trading signal.
ZTP Order Flow Signal
Use the ZoneTraderPro ZTP Order Flow signal on a smaller time frame chart as a timing trigger. When seen on a larger time frame chart the signal is more significant.
In the chart on the left we see two ZTP Sell signals. the first signal is at a ZoneTraderPro Tick Divergence Exhaustion trade. A stopping ratio is also present. Price tests the high and a second ZTP sell signal is printed. And this results in a significant winning trade.
The ZTP Exhaustion signal is a super powerful entry signal. The signal identifies buyer and seller exhaustion and is an excellent entry trigger to a trade. You need just 3 ticks of price movement to confirm a trade entry, making it an excellent tool for that purpose.
What makes the tool even more powerful is when you see a combination of other order flow signals occurring on the same bar, because that would be indicating a reversal.
The picture on the right is a perfect example. We see a confluence of signals occurring. The Delta Strength indicator is black indicating high volume and the number is high, and a ZTP Extension Zone and Absorption Zone were created. The market traded 3 points higher after the signal was given. Then a sell exhaustion took the market back down another 3 points
With the order flow indicator the chart now identifies when traders are trapped in their trades and price has moved away from there positions. We can now identify several patterns from the useless chart above.
The red boxes indicate areas where sellers passively sold large quantities of contracts on limit orders. The green box is where a large buyer passively bought contracts. That information combined with other information in the bar leads to a Trapped Seller and Trapped Buyer indication.
The chart also features an exclusive pattern called the ZTP Order Flow. This is an exclusive pattern that the indicator suite uses to identify market tops and bottoms. And it is very powerful.
The second way to use this indicator is using in conjunction with a larger timeframe chart. The chart on the right shows a POC sell signals at both of the same locations that we had the ZTP Sell signal was seen on a smaller time frame chart. Additionally there was previous historical resistance at this same price level as seen by the ZoneTraderPro extension resistance zones.
The ZoneTraderPro suite also includes a new concept called Extension Zones. The extension zone is formed when a large imbalance of market orders occurs. The Extension Zone is then drawn into the future and can act as future support or resistance.
In the picture on the left at the high there were many factors at work to signal a reversal. There had been a previous imbalance of market orders at that same price. Then there was a second large market order that came in on the current bar. Additionally at that same price there was a large passive seller also, causing an absorption sell signal. The blue box indicates the Volume Point of Control was also at that same price.
It is an extremely important trading signal that occurs when the VPOC and Absorption occur at bar extremes. These are significant reversal points in a market.
Stopping and Continuation Ratios
The order flow indicator suite also identifies stopping and continuation ratios. A ratio printed as a decimal is a stopping ratio.
In the picture on the right, there are several major indicators leading to a successful long trade. At the low, there is a stopping ratio (.67), along with a ZTP Oder Flow Buy signal, a POC Absorption signal, and a trapped seller.
At the high there is a stopping ratio along with trapped buyers and the next bar followed with a POC Absorption and a ZTP Order Flow sell signal.
The ZoneTraderPro Order Flow Suite identifies these patterns in real time. The bar does not have to close to see the patterns developing in real time.
Combinations of different signals develop several times during a trading day on a daily basis. And these signals also develop on bonds, oil, Nasdaq, and Dow futures charts.
ZTP Delta Strength
The ZoneTraderPro suite introduces a completely new concept called Delta Strength. The Delta Strength is not the delta of the bar. The formula is different and proprietary. For the first time you can now see visually how strong a particular move is.
You can also see the relative volume. Relative volume is super import because when it increases, that is the definition of buyers and sellers meeting and trying to reverse price.
In the picture on the left we see strong strength numbers to start the selloff, then the numbers become weaker. At the low, we see higher than normal volume, an Exhaustion signal, and extension zones created. That would be a great time to reverse the short to a long trade. Price is again reversed on high volume, extension zones and an exhaustion signal.