NOTES ON MARKET FLOW
by Leonard Novy
Market Flow is a category of analysis representing large body works that describe the structure of markets from
different points of view. In this category you can find Elliott Wave, Gann Theory, Market Profile, Wyckoff Theory,
Classical Bar Charting and Novy Principles of Market Flow, just to name a few.
Market Flows are
not Systems (non-discretionary) or Methods (discretionary).
To clarify that point, some systems and methods purposely
reside within specific Market Flows, while other systems and methods are completely unaware of any Market Flow
in which they are residing.
Most all systems and methods are designed to offer points
of entry and exit of trades, based on price levels, coinciding indicators, and timing
Methods within Market Flows (aware and unaware)
If a trader
says, "here is how I trade a 3rd Elliott Impulse Wave", and looks for certain conditions before entry, and
places stops at certain points of tolerable exit, then that trader would be strategizing and talking about
trading a system, or a method, within that market flow.
If however the
trader finds points of entry and exit based on near term market action only, then that trader may be totally
unaware of any Market Flow that he or she is working within.
that knowledge of Market Flow, a trader may not learn much about why a particular trade went successfully well,
or why it failed.
Overlapping Market Flows
At all times varying parts of
Market Flows will overlap and share the same piece of market. A breakout of a Classical Bar Charting pattern may
share the same momentum push as a specific Gate of Confirmation in Novy Principles of Market Flow. Or a probing
move in Market Profile, may share the same section of market as described by Wyckoff Theory.
Market Flows Describe Function and Momentum
Market Flows differ from
Systems and Methods in that they describe functional transitions such as climaxing and blow offs, basing or
topping, and consolidating and trending. Expectations of increasing and slowing momentum is another trademark of
Market Flows. Different Market Flows may even share the same function at the same time.
Using Market Flow As Trader Intent
There are systems and methods
good enough for many traders to use. A literal person may have to learn to be a little more creative, and a
creative person may have to learn how to temper and discipline that creativity. But using a Market Flow as a
guiding structure of trader intent, can make the life of a trader a little less stressful, and more informative.
It is always good to image a Classical Predictive Path, and that is what Market Flow brings to the table.
Through experience a trader will learn how to look ahead on that path and assess probability.
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