The tool’s limits and when it does not work

Order flow is a powerful tool, but it is not magic. Being honest with yourself about its limits protects you from trusting it where it does not apply. These are the most prominent of its shortcomings.

When the tool weakens

• Low-liquidity markets — the footprint and delta need sufficient volume to be meaningful. In a thin market the numbers become noise.
• Around major news — just before economic reports the flow dries up, then explodes afterwards with nervous moves led by weak hands, not institutions. Reading here is misleading, and it is better to step aside.
• Night sessions and quiet periods — volumes are tiny, so delta shrinks and loses its meaning.
• Liquidity manipulation — as covered, the book is deceived by the iceberg and spoofing.