Identifying key levels with OANDA’s
MT4 Open Order Indicator
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
For many years, institutional traders and dealers have enjoyed access to client flow information
through their order book, which enables them to quickly identify important levels in the market.
These insights can deliver a strong competitive edge.
Thanks to OANDA’s MT4 Open Order Indicator, retail traders now have access to this information,
which can be used to create a real-time order book for a wide range of currency pairs.
EUR/USD GBP/USD USD/JPY
Sentiment: Short Sentiment: Long Sentiment: Short
1,2460 Buy stops 1,5770/80 Offers 120,80 Offers
1,2440 Offers 1,5730 Buy stops 120,15 Buy stops
1,2400 Buy stops 1,5680/00 Offers 119,80 Offers
1,2370 Current 1,5667 Current 119,34 Current
1,2360 Sell stops 1,5650/60 Bids 118,60 Sell Stops
1,2330 Bids 1,5630 Bids 117,80 Bids
1,2300 Bids 1,5600/10 Sell stops 117,40/50 Bids
AUD/USD NZD/USD USD/CAD
Sentiment: Short Sentiment: Short Sentiment: Long
8425 Offers 7790/00 Offers 1,1505 Offers
8375 Buystops 7765 Buy stops 1,1480/90 Offers
8340 Buy stops 7725 Offers 1,1460 Buy stops
0,8309 Current 0,7690 Current 1,1462 Current
8280 Bids 7650/60 Bids 1,1435 Sell stops
8240/50 Bids 7620/25 Bids 1,1415 Bids
8215 Sell stops 7600 Sell stops 1,1390 Sell stops
An example of an order book
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
Introducing the order book
Much like the example opposite, an order book contains a list of orders that represent the levels at
which buyers and sellers are interested in transacting on a currency pair. In foreign exchange, there
is no central clearing hub and as such the actual volume of orders is unknown, so the order book
acts as a list of influential price levels.
Interbank forex trading has always been about order flow information. By knowing where client
orders are placed, bank traders could execute short-term trades with confidence. With the MT4
Open Order Indicator, retail traders now have access to similar information about OANDA’s client
base, notably where stop orders and limit orders are concentrated.
The order book allows traders to highlight key levels on their charts. These levels suggest where
buy orders have a high probability of acting as support and make for potentially good long entry
levels if the trend is up, or profit taking levels if the trend is down. Conversely, they suggest where
sell orders have a higher probability of acting as resistance and make for potentially good short
entry levels if the trend is down, or profit taking levels if the trend is up.
Building an order book
Using EUR/USD as an example, you should include the following information when you are building
your order book:
EUR/USD
Sentiment: Short Market sentiment
1,2460 Buy stops 1. Buy stops – open orders non-cumulative
1,2440 Offers 2. Offers – open positions non-cumulative
1,2400 Buy stops
1,2370 Current
1,2360 Sell stops 3. Sell stops – open orders non-cumulative
1,2330 Bids
1,2300 Bids 4. Bids – open positions non-cumulative
A sample EUR/USD order book
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
To find the necessary data to create an order book, follow the simple steps below. The following
example uses EUR/GBP.
1. In MT4 open two EUR/GBP charts
2. Insert OANDA’S Open Order Indicator on both charts
3. On one chart, select Open orders, non-cumulative, while on the other select Open positions,
non-cumulative
4. Click Tile charts button so they are placed next to each other, making it easy to extract the
relevant information
Tile Charts button
OANDA’s MT4 Open Order Indicator applied to EUR/GBP
5. Identify current market price – The charts show the current market price is between 0.86428
and 0.8643, rounded to the pip
6. Identify current retail sentiment – Both charts demonstrate a 64.5% short position, so retail
sentiment is short
7. Identify buy stops including stop entries and stop losses – On the open orders chart, the blue
bars extending beyond the current market price show buy orders at 0.8860, revealing an
evident order imbalance at around 0.8810
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
Open orders
Large buy orders above current market price reveal buy stops
8. Identify sell stops including stop entries and losses – On the open orders chart, the
orange bars extending below the current market price should identify sell stops, however
there aren’t many visible in this example. This is because most traders are short at levels
slightly above market, so there are very few stop losses below market and no evident
levels where stop entry orders have been inserted. In cases where no evident orders are
illustrated, you could use round numbers (such as 0.8600 or 0.8500), which often act as
support or resistance.
Open orders
0.8600
0.8500
Large sell orders below current market price reveal sell stops
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
9. Identify offers (sell orders to close existing long positions or open fresh short positions)
– On the open positions chart, the blue bars extending beyond the current market price
identify long positions opened between 0.8790 and 0.8810. Since these positions have
been in a drawdown for a long time, it’s likely they will be sold if the price reaches the
entry point.
Open orders
Large long open positions above market price reveal offers
10. Identify bids (buy orders to close existing short positions or open fresh long positions) –
On the open positions chart, the orange bars show the largest shorts are above current
market price and therefore aren’t useful. However, looking lower on the price ladder, a
solid number of shorts have opened between 0.8540-55 and 0.8588, which have seen
price movements more than 300 pips against them. Since these shorts have been in
a drawdown for a long time, it’s likely these positions will be bought back if the price
reaches the entry point.
Open orders
0.8588
0.8540-55
Large short open positions below market price reveal bids
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
11. Create your order book – Based on the information highlighted so far, the order book
would look something like this:
EUR/GBP
Sentiment: Short
0,8660 Buy stops
0,8810 Buy stops
0,8790 - 0,8810 Offers
0,8643 Current
0,8600 Sell stops
0,8588 Bids
0,8540-55 Bids
0,8500 Sell stops
The importance of buy and sell stops
It’s a well-known fact that stop orders offer liquidity – a large amount of buy and/or sell orders
around a certain price. This fact is important because larger market participants need liquidity
in order to enter big orders. In other words, large market participants need liquidity when
entering their trades in order to reduce the amount of slippage they incur.
Put simply, stop order clusters are where large traders are likely looking to enter or exit the
market, and they do so with ease due to the available liquidity at these levels. Stop order
levels are effectively a two-way street where larger traders enter or exit the market, and their
course of action depends on whether the market is trending or ranging.
OANDA’s Open Order Indicator allows traders to clearly see stop loss clusters ahead of time
and prepare accordingly. In order to do this, they may look for large clusters of buy stop order
bars above current market price as well as large clusters of sell stop order bars below current
market price.
Once these levels have been identified, smart traders check the state of the market before
acting. If the market is trending up, they may anticipate buy stops above the market will
continue to push the price upwards. Basically, these stops are temporary points that will likely
be pushed through as the trend continues. The reverse is true of sell stops. Sell stops below
the market will continue to support the downtrend as the price presses through.
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
The power of the order book
With OANDA’s MT4 Open Order Indicator, retail investors can build an order book that is
just as effective as those used by institutional traders, and the importance of the information
revealed should not be underestimated. Knowing how to construct the order book allows
traders to organise Indicator data in an orderly and effective way.
However it is not advisable to trade the order book on its own. Instead, retail traders should
first select the currency pairs most suitable for their strategy. For example, a trend-following
strategy will first require the trader to select currencies in an established trend. Only once the
market type is aligned with the strategy does the order book become useful. Instead of using
pure technical indicators or discretionary inputs to select entries, the order book can assist in
highlighting:
• Levels where there are large numbers of buy orders (bids) – These make for potentially
good long entry points if the trend is up or potential support if the trend is down
• Levels where there are large numbers of sell orders (offers) – These make for potentially
good short entry points if the trend is down or potential resistance if the trend is up
• Levels where there are a large number of stop orders – These make for equally good buy
or sell levels if they are in line with the trend
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Identifying key levels with OANDA’s
MT4 Open Order Indicator
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