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How to Swim in the Futures Market

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1How to Swim in the Futures Market Empty How to Swim in the Futures Market Wed Nov 02, 2016 7:48 pm

Brocko

Brocko

You stand in the ocean. The waves pound your back. The force staggers you. But it is fun. The water rushes out. The current is powerful. It pulls you outward. A trough has been created by the heavy current. But you feel safe. Your feet are firmly planted on the bottom. Suddenly, a much larger wave hits your back. It knocks you from your feet. Your footing is gone!The water from the previous wave flows out; holding you in its powerful grip. It won’t let go! It is dragging you out to sea. IT’S A RIP CURRENT!

Will this be where you meet your maker

  • If you know how to swim out — no.
    If not? Then you’ll be another rip current casualty.
  • And the same holds true in your favorite Futures market...


As if they are caught in a rip current, powerful institutional forces are dragging your futures trades away from you. You don’t see these forces; but you can feel them. You know they are there and you feel powerless to escape their grip. Surely, you think, there must be a way to escape this fate! You are right. There is. You can learn to see the unstoppable forces that create a rip current. And there is a way to see those same currents building in the futures market. When you can see these powerful currents, you can escape them. Then you can save your trades from the institutional currents. Even better, you can start to swim WITH them.

Why should you care what the institutions are doing
A narrow break in the sand produces a rip current when the water flows out. Large block orders in a narrow range creates the same current in the market. As the institutional money flows in or out, it carries everything in its path with it.Their money creates the current flow. Your small orders that are in the way are grabbed by this powerful institutional current. You then watch helplessly as the unstoppable force of order flow drags your orders out to sea. The institutions then become the sharks that feed upon your helpless orders.If you don’t know where the institutional current is going, you will be constantly swimming against it. And you just can’t win that contest. Those who continue to try will drown.Their portfolios will simply become lunch for the institutional sharks. The sharks that are waiting for every order the rip current delivers to them.

A way you can win WITH the institutions
How does that happen? You go with the flow — the institutional order flow.You look for where the powerful institutional currents are taking the market. Then you just go with the flow. You start to swim withthe sharks; instead of fighting hopelessly against them.To do this, you must learn to see the currents they create and where they are flowing. The flow of institutional money creates these currents. Order flow sequence tracking allows you to identify them.

How do you see institutional rip currents
Beach areas with known rip currents are often easy to spot. The local authorities will usually put up clear signs. These signs will warn of the potential danger. They also sometimes provide instruction on how to escape a rip current.Swimmers are expected to heed these warnings. After all, their lives might be at stake.

Have you seen the futures market version of these? We have! It’s called order flow tracking.
Unfortunately for traders, the futures market doesn’t post warning signs. You are expected to know the risks involved and how to protect yourself. You had better know how to swim in the current if you don’t want to drown.Sometimes these risks are easy to see. Sometimes they are not. Experienced swimmers and seasoned traders know what to look for. If you don’t, you may not see the warning signs. But, just because YOU don’t see them, doesn’t mean they aren’t there.To the inexperienced eye, the picture below looks perfectly normal. A nice piece of isolated beach for taking a leisurely swim. However, a seasoned swimmer would immediately see the hidden danger of a rip current.

If not, maybe the water and the futures markets aren’t safe for you yet
The first picture is quite representative of a public beach. Highly visible signs warn of potential unseen danger. The second picture is much more like the futures market. The same real danger is present. You are just expected to spot it on your own.Seasoned swimmers don’t drown; seasoned traders don’t go broke. The secret they share? They know how to spot a dangerous current and what to do about it.Order flow sequence tracking allows traders to spot the institutional rip currents like an experienced swimmer reads the ocean.
We will never eliminate the rip currents in the ocean or the futures market. We can, however, learn how to navigate them safely. To do so, we need to understand order flow tracking technology.

It sure does. It works so well that entire programs, like our Institutional Edge System technology, have been built around it. This technology allows you to literally rip the cover off the market order flow. Then you can view and analyze the currents hidden inside.In other words, it lets you see the unmarked rip currents. Swimmers drown in rip currents because they fight against them. Traders drown in order flow currents for the same reason.When traders look at a candlestick chart using order flow sequence tracking technology, they can actually look inside each candlestick in the chart and see each trade that was executed to produce the result represented by that single stick.

When the buyers are in control
Traders looking inside each stick will see more valuable information. The trades are broken down into two columns. The left-hand column in each stick shows trades executed at the bid price. The right-hand column shows trades executed at the ask price. This allows a trader to determine whether the buyers or sellers are acting more aggressively.
In the stick shown above, you can see that far more orders were executed at the ask price than the bid price. The aggressive buyers were driving the market during this time. The order flow was with the buyers. This would push the price higher.

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If the sellers rule the moment
The stick below shows an example where the order flow volume was being dominated by aggressive sellers. The imbalance displayed here tilts to aggressive sellers compared to buyers. In this instance the price pressure is going to be to the downside of the market.

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Do the institutions use order flow tracking? Not really. They are the ones creating it. The institutions are trading based on pure market value. They are moving large sums of money. To do so, they have to trade aggressively. But, don’t think the institutional sharks didn’t see your orders on the lunch menu. Institutional order flow creates the current that moves tasty morsels like your orders onto their plates. But, that doesn’t mean just one institution.

The market moves from the combined influence of all of the institutions. And they are ALL trading on their perceptions of value. Now can you start to see why these currents are SO powerful? Take a quick look at what happened at 10:00 A.M. and 2:00 P.M. on October 8, 2015 in the gold market.

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Order flow sequence tracking technology would have shown you the aggressive buy demand building as those orders were entered. Do you think any institutions were caught off-guard by these moves? Or, do you think they were the ones who caused them? Order flow sequence tracking technology would have also allowed you to see the buy demand disappear as the market peaked around 2:20 P.M.

If you had known the aggressive buy orders were disappearing, you could have gotten out before the big drop that followed. How many individual traders watched helplessly as their orders were dragged out to sea and served as lunch to the institutional sharks? This is why understanding and effectively using order flow sequence tracking is so important. Would you have seen this coming with your current trading technology? Or would your trades have been the main course for the institutional sharks? You could have seen it coming if you had — and knew how to use — the right order flow sequence tracking technology!

But, how does this help the little guy
Experienced swimmers and experienced traders do not fear rip currents. They know how to swim WITH them until they safely exit to their plan. Good traders know how to swim with the flow as well. The first rule of trading is — don’t lose money. Understanding order flow sequence tracking will help get you there. It shows you where the potential danger exists. The second rule of trading is — know the risk.

When you can spot the rip currents of order flow, the risk of OTHERS becomes YOUR opportunity. Good traders profit by feeding on the trades of the less educated. The institutions are the big sharks. The good traders just learn to swim along with them. Unnoticed and out of the way. Like little futures market remoras. These are small examples of the power of order flow sequence tracking. This technology can allow you to spot the rip currents in the market and profit — rather than drown — in them.

The experienced swimmer can spot a rip current and turn a dangerous situation into a safe one. Order flow sequence tracking allows good traders to turn dangerous risk into profitable opportunity. It shows us how to spot the powerful money flow in the futures market. It shows us how to swim with it instead of fighting againstit. The swimmer fighting against a rip current tires and drowns. Traders fighting against order flow are swept out to sea and devoured by the institutional sharks.

Would you rather feed the institutional sharks or let them feed you
What you see here is just the tip of the iceberg in terms of order flow sequence tracking. Hopefully, you now see the gap in your trading approach it can fill. The institutional rip currents are always there. The institutional sharks are always looking for their next meal. It’s time for your portfolio to start swimming with the institutional sharks instead of being eaten by them! It’s lunch time in the futures market. Would you rather become a diner or be served as the main course?

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