TLT: Order Flow, Auction Process & Failures To Rotate

Hey traders,

If we zoom out to check the price action in TLT from a daily perspective, what do you notice?

Every single time there is a failure to rotate (hinted via diamond labels), the new expansionary wave leads the market towards a new equilibrium point that so far has been found at much lower prices.

I’ve circled each and every instance where these failures to rotate back up occurred. Each market is an auction process, and via the OFA script, we are able to get a pristine read of the constant ebbs and flows.

The structure depicted via the script should also be a clear red flag that in this type of well-anchored bear market, being a hero typically gets you in trouble, so stay with the trend.

Remember the two key main features of the OFA indicator:

Magnitude: A major clue that will help determine the health of a trend is the type of progress by the dominant side in control of the trend. We need to ask the following question: Are the new legs in the active buy-sell side campaign as identified by the script increasing or decreasing in magnitude?

Velocity: When it comes to the distance the price moves, the magnitude is only ½ the equation. The other ½ has to do with the velocity of the move or the speed. Was the new leg created after a fast and impulsive move? Or did price make a new low or high with the movement being sluggish, compressive and taking too long to form? A good rule of thumb is to count the number of candles it took to achieve a new leg.

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