Institutional Order Flow means the direction in the flow of orders of large financial institutions. These usually are measured in Net Long and Net Short positions, which means there is never 100% of the financial institutions who are long or short. Instead, there are always some of them who would be Long and others Shorts but the sum of all the large Financial Institutions would result in Net Long or Net Short.
When Institutions are Net Long, we would have a Bullish Trend and when Institutions are Net Short, we would have a Bearish Trend.
and the fact that there the fluctuations between Net Longs and Net Short orders in the markets cause fluctuations in Liquidity in the Market and as a consequence price movements.
But when Institutions are pausing or not giving enough Buy Orders (to increase their Net Longs or Decrease their Net Shorts) or Sell Orders (to increase their Net Shorts or decrease their Net Shorts), the price goes into a correction phase which we call “Reaccumulation” in a Bullish Market or “Redistribution” in a Bear Market.
So, in a downward trend Redistribution in the Bear Flag Pattern allows institutions to further open short positions and trick smaller funds and retail traders into thinking the market may have reached a turning point making and closing their positions. This allows the Market Maker to be on the other side of those positions.
The inverse applies for Reaccumulation in the Bull Flag Pattern, this occurs in an uptrend, building on long positions while manipulating retail into selling thinking they have reached the top of the trend.
However, one important thing to consider is that Bull and Bear Flag Patterns, work only when they are in line with the direction of the Institutional Order Flow, which in simple words is the direction of the trend on the higher timeframe.
Next, I will go more in-depth in this article on how to find highly accurate and high-probability entries for Bull Flag and Bear Flag Patterns.
But for now, let’s see how we can identify the Bull flag and bear flag patterns on the chart.
