This order flow as of late has been atrocious and I’m hoping that changes into next week as we get a new monthly candle and the final month of Q2.
It’s not that I am an “order flow” trader but the way the tape and order-flow works helps when you are trying to take short-term positions (defined as little as 1/2 hours up to 10 days in time). Really, that doesn’t matter for longer-term holds so don’t conflate these two ideas.
Take the SP500 futures for example. We traded in about a $10 range today and only finally broke down toward the last 30-minutes of trading. That’s a tight range and the order-flow (or tape) is just sludging around. I don’t want that when you trade momentum - you want a fast pace of tape/order flow.
When I was teaching futures traders this was a big thing to get across. It’s the reason that trading certain hours matters as well; you will find that the order-flow is stronger and therefore less room for the order to whip back and forth and more of a “pick a direction and go” approach.
One of the reasons, in my view, you see investors struggle (especially amateur day traders) is their lack of ability to read the order flow.
Let me give you an example from today on SMCI 0.00%↑
That stock is in the report and $800-$810 is an area of interest. Off the open I faded the entry to get long and we kept dancing around $830-$815 and just did that for the first 90 minutes, knowing as the opening drive. There’s not much you can do with that. Why? When price gets to a level/area of interest the order flow needs to “come alive” aka pick a direction and go. So, when you see it doing the opposite that tells you the order flow is just not there and you move on.
Does that mean tomorrow I won’t try to start to get a long on this if we’re in that same area? No. I will, but I need to see the order-flow (buyers in this case) come alive.
Last night I talked about CRM 0.00%↑ and explained that $215-$220 area would be a spot of interest. We got there, tested, but the order flow from buyers was weak. I actually started a long and got out because of the lack of buy side flow there.
I don’t care if you’re using futures, options directionally, buying shares or other options strategy to express a trade idea, understanding order-flow at areas of interest matters.
I am going to expand on this a bit for members tonight to end this week and use some real examples from The Report this week to talk about reading the order-flow at areas/levels of interest.
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