Do you think you’re learning the right way to trade the futures markets?

Posted by on Oct 5, 2016 in Blog

Do you think you’re learning the right way to trade the futures markets?

I’ve got some news that might surprise you: You’re most likely learning it wrong. I’ve found that most people are taught the wrong way to trade. However, it’s important that you understand it’s not your fault that you’re learning to trade the wrong way.

Most people learn from unqualified sources. And I will prove it to you. In fact, I’m a firm believer in proof. If I could give you some advice it would be this: Don’t let someone teach you about trading the futures markets unless they can prove that they’re qualified to do it.

How do you know when someone is qualified to teach you how to trade? In my opinion, they’re only qualified if they’ve actually done it themselves, successfully. What difference does it make if they wrote a book or came up with a trading system, yet have never made real money trading the markets?

Unfortunately, that’s what happens all too often in the futures industry; there a lot of unqualified people teaching trading ideas, and most of them have never made any real trading profits. And again, if they aren’t profitable traders, how are they going to make you profitable?

My name is Michael Valtos and I am the founder of Orderflows.com and for the last 20 years I have been trading Futures for the biggest trading firms in the world. I spent 8 years at JP Morgan’s Futures and Options desk where our tiny desk of 6 traders based in Singapore averaged over 3 million contracts a month in volume.  To break it down that works out to 150,000 lots a day over an average trading month of 20 days.  Admittedly a good portion of our month volume was due to spreads, but it is still a lot of volume that most traders can only fantasize about. Prior to JP Morgan I spent 4 years at Cargill. If you don’t know what or who Cargill is, Google it. You will learn it is the largest privately held company in the United States, if it was a publicly listed company it would rank about 12th or 13th in terms of revenues. Cargill accounts for roughly 25% of all of the USA’s grain exports.  They are such big players in the financial and commodity markets that in 2003 they spun off a portion financial arm into a hedge fund called Black River Asset Management and it instantly started with $10 billion dollars under management. But I digress.

I’m not telling you this to impress you, but rather to impress upon you the fact that I’m the real thing. I have spent my entire career successfully trading at the institutional level for a prolonged period of time. I wasn’t a summer intern or a short term hire. My trading ability is what made me a success at these firms. That is how I paid my bills, put a roof over my head, food on my table and how I was able to retire at the age of 43.

Unfortunately, that’s not true for most people who teach trading methods and techniques. Most of them have never traded successfully in their lives, and make their money simply selling products to others who genuinely want to learn how to trade. Very few make money actually trading for a living. That’s why they’re not the best people to teach you to trade. To teach someone to be a successful trader, it helps to be one yourself. I have that important track record, I have that important training and experience in the market and I can use it to help you on the road to trading success.

The Order flow footprint chart display of market activity and data organization covers it all for the trader – time, price, volume, overall market activity, as well as the specific activity of aggressive buyers and aggressive sellers.

 

 

Once you understand how to read order flow and its nuances, some of which admittedly are subtle, your market understanding and trading prowess will be taken to new levels. The order flow enables you to see who is doing what and to whom. You will also be able to recognize when the market is about to pause or go sideways, as well as when it is on the brink of moving or breaking out. You will not get this advantage with any other trading methodology, period.

Order flow provides you with tradable setups and insights before the fact, giving you the time to profit from the market-generated information. Therefore, there is no need to add every technical analysis tool your current software offers when using order flow. And finally, those players in the market –the locals, market makers and the large institutions, which can turn the market the fastest, read and understand order flow and use it to their advantage. Isn’t it time you do also.

 

If you do not recognize this potential market changing activity from its initiation, what the big players are doing or who is in control of the market, you can miss the next move or get caught on the wrong side of the market. Order flow reveals the major players’ activity, and therefore, their commitments in the market place. Because large players cannot execute size orders instantly at favorable prices, the order flow reveals their entry into the market and gives you time to trade accordingly. This telegraphed information gives you almost the same advantages possessed by the initiating player. This is a powerful advantage over most technical signals that are almost always two bars late.

The ease of use with order flow stands out as the primary reason to start using order flow. You can really eliminate most of the screens and the numerous considerations necessary to evaluate and calculate prior to entering a trade. Think of the infinite number of permutations possible technically to analyze the market. What to use and what not to use? How does this impact your confidence and emotions while trading?

Trading deals with the correct interpretation of reality and its effect on the future. Your internal bias leads you to select those studies and/or analyses that support your current opinion/perception of the market. You then assign a probability to that perceived expectation. Now the rule of large numbers is imposed on your trading decision and you are presented with a process that cannot have a certain solution except over a large number of events and time. This can only lead to two outcomes: 1) A frustrated departure from the trading arena by most novices or 2) Acceptance of a less-than-perfect methodology with a rate of return far below the trader’s expectations from his analysis and back-testing.

Order flow minimizes and can even eliminate many of these frustrations and dilemmas. The order flow footprint chart is a method of collecting and organizing bid and offer volume data. It is not some formula touted as the latest, greatest way to wring millions out of the market. It is simply a way of organizing the data and looking at the market objectively.

Order flow is not a system. It is an objective approach to the market that yields a methodology that is both valid and reliable statistically. It is based on raw data that is not manipulated, therefore reflecting reality. It is what it is, and not a manipulation or forced fit imposed by formulas a trader has selected.

 

Order flow shows you what has happened and identifies the bias of that collected information. This snap shot of reality is power, in and of itself. Just think about the differences between dealing with what is, versus what might be.

 

Order flow is based on price together with bid volume and offer volume –pieces of information that you never thought of looking at or interpret and it all comes together singularly in the order flow footprint chart.

The market’s bias, its participants and operating time frame become easy to see and act upon. The order flow rules for trading are hard and not subject to interpretation. There is an elegance and efficiency in the order flow approach to the market not found anywhere else. Combine this inside knowledge with the actual structure of the market and you have an approach that is simplicity itself. You can execute at the market’s edges. You can reliably forecast the market’s direction.

When mastered, you will enter a trading world where you can be right over 70% of the time. Think about that number – 70% correct as opposed to the 35 – 40% rate that most technical approaches yield.

The participants are the final market component that order flow reveals. If you know how the various market participant’s trade, what interests them and where they are likely to enter the market, you will know how to vary your strategies to anticipate and accommodate their forays. A locally controlled market requires a different approach than one driven commercially. A local’s market is a ‘fade’ market with limited opportunity, while commercially driven activity yields a ‘go with’ market with increased opportunity. The wrong strategy for either market leads to losses. The correct reading of market conditions and who is in control of the market minimizes your losses and increases your profits – a hard combination to beat over time.

Once mastered, order flow is the best way to view the market and its activity developed to date. Order flow is based on the law of supply and demand. It is not a theory or idea. Early complaints from new traders is that order flow was too complicated, only suitable for large institutions or that it took too long to understand.

That is why I created Orderflows.com to cut down the learning curve and give a trader the understanding about the rules and trading strategies that I developed trading for over 20 years.

The number of rules and the forms analysis of order flow have been greatly reduced, resulting in a methodology that now lives up to its original billing. Order flow remains the approach of choice for those influential players you trade against – the locals, the market makers and large institutions. Their impact is most easily seen through the order flow. Once you master order flow, trading will become that experience you envisioned when you first contemplated entering the trading arena.

 

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