Mike Valtos – Order Flow Dynamics

I was very fortunate in my trading career, both on the CME floor and the upstairs trading floor of investment banks and trading houses in that I got to meet and work with a lot of successful traders. In these environments, poor traders did not last long, so everyone there was successful in their approach to the markets. I met traders who were pretty set in their ways and were satisfied to keep doing trading the ways they have for many years. I met traders who were more open minded and willing to adapt to current market conditions. What I realized is the traders who were more open minded and willing to adapt did better.

It is like evolution, a trader who is fixed in his ways may be successful under normal market conditions, by normal I mean, low volatility conditions. Where the market is pretty constant. But when market conditions change the trader won’t last long as what worked before no longer works. A trader who is open minded and adaptable has a higher chance of survivial as market conditions change because he is more in tune with the market.

Order flow is not about finding the one piece of information and solving the market. Order flow is about taking the pieces of market information and solving the next step in the market. You are trying to understand what is happening in the market. What you are doing is building an argument for what is happening in the market to make an informed trading decision. This runs contrary to the approach most traders take when it comes to the market which is to take a piece of data and backtest it to see if it produces a profit or loss. There is no market understanding trading that way.

The key to success is getting on the right path and learn the basics how the market works and what makes them move. Computers can take the vast amounts of data put out by the exchanges and process it into an easy to read and understand format so that once you understand what is happening in the market, precisely in the order flow, you can spot opportunities and once you are able to spot opportunities you can take the best of them.

A trader needs continual development. When you think of the term market discipline, you think “I just have to plan my trade and trade my plan.” Market discipline is much deeper than that. Market discipline is a compass, you find your direction and keep going in that direction. It is accomplish through continual exposure to and learn of the markets together with the desire to keep improving as a trader.

The more you see, the more trades you have, the better your chances for success.

Many beginning traders think all they have to do is study the markets for a short period of time and they will find the hidden secret of the market, what makes the market move. They think that they can identify something about the market that will allow them to print money. They think they can find some simple method or technique that is foolproof. Moreover, they think they will find something about the market that will never change. Markets are dynamic are constantly change. What you thought worked last week may not work this week. If the answer to the markets was so easy, everyone could trade and make a lot of money. Yet, nearly all traders lose money.

In just about every profession, it is necessary, and in most cases, required that professionals continuously refresh their skills and stay abreast of the latest research and developments in their field. Doctors spend a good part of the year attending conferences where they learn about new diseases, treatments, medicines, procedures and new equipment. Would you want you doctor to not know about the latest developments in treatment when you go to see him? In some professions which require a license to do business, failure to take continued education courses to keep up to date of the newest developments, a professional could lose their license.

Technology has made trading accessible to the masses and more importantly has helped to remove emotions from the trading thought process and made trading more objective and the process more mechanical.

What is presented in this course is to get you thinking about how markets develop and even if you come away with just a few good ideas that help you develop your own strategies into a method that fits your market approach and risk tolerance then you will see more success in your trading.