Newer traders usually are faced with similar information early in their learning curve. Much of it revolves around traditional sources of information: charts, fundamentals and news reports. People are conditioned to believe that these sources of information are accurate, reliable and actionable. They base their trading decisions on such information and often wonder why they cannot find consistency in their trading. There is another piece of the information puzzle that is not as easily accessed or is not so easily utilized and that is order flow. This is especially true for forex and futures markets.
Equities traders rely on their time and sales and Level II quote information to make judgements about the order flow of their stock. At one time, these methods offered a lot of transparency because the market makers and larger players were still learning the game. Thanks to ever advancing technology, the intentions of these players are very well hidden and the only a computer can spot order book changes that offer any meaningful information. These traders are now stuck with the same information everyone else has and must hope for a trend to persist long enough to make their effort worthwhile.
The futures and currency markets have been typically less transparent unless you were on the floor of an exchange or at a global investment bank. The futures exchanges do offer order flow information to the public but it is usually in a raw format that most will not know how to make sense of. There are data feeds available and things like the weekly COT report.
So how is a small retail trader supposed to be able to compete with information that is so limited? It is all in the way the information is interpreted. This is accomplished through order flow software like the one that our SMB futures and forex traders utilize to validate their trades. What new traders don’t realize is that changes in supply and demand expressed in terms of order flow offer much more valuable information in terms of the markets intent. Combine this information with traditional technical tools such as pivot points, or support and resistance, and suddenly you have a way to determine when the market is more likely to turn, or break through a particular level.
Most retail traders believe all the information they need to make decisions is readily available within their platform or charts. They believe everything you need to know is right in front of you on a candlestick chart. And this is why many cannot grow as traders. The most valuable information is what is going on inside the candles. And gaining the ability to access this information is not cheap and does require instruction because it is not intuitive. The question that most traders face is: Do they really want to be a professional in this business? Professionals grow because they adapt and grow and do whatever it takes.
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Marc Principato, CMT
*No Relevant Positions