Flow refers to the movement of orders, transactions, and liquidity through financial markets. Order flow analysis examines buying and selling pressure, trade sizes, and timing to understand market dynamics and predict short-term price movements. Institutional flow can significantly impact prices, especially in less liquid markets or during periods of high concentration.

Understanding flow patterns helps traders identify market sentiment, institutional activity, and potential price direction changes. Different types of flow include customer flow (retail trading), institutional flow (large fund transactions), and central bank flow (monetary policy operations). Market makers and high-frequency traders closely monitor flow to adjust pricing and inventory management strategies.

Real-world example: A forex dealer observes heavy EUR selling flow from corporate clients ahead of month-end, anticipating continued Euro weakness and adjusting position sizes and pricing accordingly.