​Easy there, cowboy. that's a no. A big, fat NO.

Take a second to think about how crazy that sounds. No two traders are identical, and neither are their trading methods. So what might look like a buy to you might not look like a buy to someone else.

When used correctly, flow serves as an (often vital) input into an existing decision-making process. We hope you take the information we provide and bring it back to your underlying methodology. If you’re a chart guy, slap a chart up and see what it looks like. If it grooves with your normal risk parameters and looks like a trade, you make the call. Tape readers bring it back to the tape, but the principle same applies: you always have to double-check and make sure that you’re going into a trade you agree with, and more often than not, flow, in a vacuum, is not enough to justify pulling the trigger.

Now that we've settled that question, let's talk about a valuable way to use flow that very often goes unappreciated: gauging sentiment. Not only does this use of Wiseguy order flow provide traders with a huge edge, it also allows traders to incorporate flow into nearly any trading style.

Divergence is probably the most important piece of guidance that this information provides. It goes a little like this: if the market and prices show weakness, but the order flow is bullish, that divergence tells you that the pros are buying into weakness. Even though the market shows bearish sentiment, it’s also telling the trained eye that they should be doing the opposite.

When there is strong divergence, it can often signal an upcoming turning point.

During strong divergence, traders look to position themselves to take advantage of a bounce or a trend reversal to the upside/downside. The stronger the divergence between order flow and prices, the stronger the probabilities are pointing towards a reversal.

To list out all the elements of ‘bullish’ order flow would be inefficient. So here’s the gist: if the order flow shows traders that the pros are buying into weakness, they would also like to see bullish flow in some of the higher beta names and/or ETFs. It should go without saying, but more buying than selling in ETFs will drive market prices higher. But, of course, you won’t see this same effect when smart money plays in select small, mid-cap, or specific sector-related names.
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Understand that you’re not going to walk in and have an eye for reading order flow immediately. But this is what the Steamroom is for. Not only do we offer color and non-stop commentary on all the flow in real-time as it hits the tape, but we also teach members what to look for and why. So, for example, if we see $VXX put buying, Jesus will share immediate comments like “$VXX put sweepers, may be positioning for a squeeze higher here.”

Questions or suggestions?

Please reach out if you have any further questions or suggestions.