Saturday, 11 March 2017

Trading Order Flow - the Series Part 3

Its pretty obvious that the criteria we are searching for as a trader is when to enter and when to exit. Obvious! But what traders don't seem to deduce from that fact is that the "when", to have a high probability of success, depends on the "where".

What does the "where" mean? It means finding trade locations where it is most likely that a trade can be entered and that it goes in the direction we propose that it goes.

OK, where are those places? For me, those places are where there was volume before that caused the behavior that I want to rely on. That means I am looking at extremes, VAHs, VALs, POCs, LVNs, HVNs. I also take into account where VALUE is moving.

The process is simple. Before tarting to trade I look at the previous day and the left hand side of the bar chart and mark the places where I COULD trade. When price gets to one of those places I look at the current context and order flow and put on a trade if I judge that the trade is viable . For it to be viable, I need to be able to see when the trade is wrong quite quickly and there has to be enough room in front of the trade to make a big enough of a profit. What those numbers are depends on style - whether you are a scalper who needs a high win rate or a trader who needs the ratio between their risk and reward potential to be a high enough R number.

The pic of the charts in the previous post gives me all that information.

No comments:

Post a Comment