Understanding Toxic Orderflow Toxic orderflow refers to aggressive trading activity that pushes prices sharply in one direction. On a trading chart, it appears as tall yellow or pink spikes in the "Toxic Orderflow" section such as the one around 03:00. These spikes indicate significant market impact, often driven by large institutional orders or potentially manipulative activity. Using Toxic Orderflow for Mid-Price Expectation and Volatility Selling The mid-price represents the balance between buyers and sellers. When toxic orderflow occurs, the price often moves too far from this equilibrium. Identifying these spikes helps estimate where the price may stabilize once market pressure subsides. This insight is useful for selling volatility. If the market is likely to return to a more stable state. Trading the Open of a High Toxic Orderflow Candle Identify a Toxic Spike – Look for a significant spike in the "Toxic Orderflow" section. Match It to a Candlestick – Find the corresponding candlestick on the price chart. Note the Open Price – The open price of that candle serves as a key reference point. Expecting a 50% Retracement If the price drops from 90,000 to 88,000 due to toxic orderflow, it often retraces to around 89,000. This can also be interpreted as a 50% retracement of the candlestick’s range. Why This Works Market makers (dealers) absorb toxic orderflow, but if the volume is too large, it temporarily distorts prices. As the market stabilizes, three key factors drive the retracement: Dealer Absorption – Dealers work to balance the market after absorbing large orders. Slippage Correction – Sharp price movements often lead to slippage, which corrects as liquidity returns. Order Book Skew – Toxic spikes create temporary imbalances that normalize over time. Execution By identifying toxic spikes and noting the open price of the corresponding candle, traders can anticipate a 50% retracement as the market corrects. This approach helps in timing volatility trades and capturing price stabilization opportunities.