STRATEGIES I've been hearing from more and more traders using Market Profile and "auction market theory" to spot good opportunities in the markets. The trader I spoke with for this interview, Kam Dhadwar, uses a combination of Market Profile and reading order flow to find his daytrades in the DAX and E-Mini S&P and E-Mini Russell indexes.

Kam takes us through the five-step method he goes through before entering any trade and his three-step method for reading order flow and seeing where "aggressors" are coming into the market. Kam then uses this information to ride the wave of buying or selling.

Kam also talks about how he spots acceptance and reaction of price and balance / imbalance levels to see where the market is heading short-term. Finally we talk about how anyone can get better at reading the clues in order flow to get a confident feel for where big traders are entering and exiting their trades.

 
Play in Windows Media format

Play in RealPlayer format
Play mp3 stream

Direct link to mp3 file
 

Tim: Hello, everybody. It's Tim Bourquin. Thanks very much for joining me for another show. Today we're going to be speaking with Kam Dhadwar. A couple of our listeners had referred me to him and said, "You've got to talk to this guy about how he trades and how he finds good opportunities in the market."

So Kam is on the line with us here today. He's going to talk to us about that. We're going to get a little bit about his background, and then jump right into a couple of things that he looks for in the market. So Kam, thanks very much for joining me on the phone today.

Kam: You're welcome, Tim. I'm glad to be here.

Tim: All right. So you are over in the UK, and you're a full-time trader. Talk about briefly how you got into this in the first place.

Kam: Well firstly, I started trading part time initially. So I started a pretty young age. I'm only 32 right now. I started about ten years ago. I started part time.

I started to trade the Dow initially, trading in the evenings and the afternoons so US markets were still open until nine o'clock in the evening so us here in the UK have a good chance to stay in a job and also trade part time as well. I did that for a couple of years. I did fairly well and started to go full time about eight years ago.

I was trading full time from my own home environment, from my home office for a couple of years. Then I got invited to trade through a propriety trading firm here in the city—in London which one of my friends was the director at. I started to trade through them, trading their capital and clearing through their services and using their infrastructure and support back in 2005 primarily trading the European session—the morning of the European section in the morning of the US session.

I transitioned to a remote trade set-up in 2008 so I now trade from my own offices but also still using the propriety trading firm's infrastructure and clearing services. Over the years I've been trading stock indexes, interest rate derivatives, currencies, commodities, primarily daytrading.

I have taken swing trades, position trades during my time in this business, but my major focus is daytrading so most of my positions are closed at the end of the day. I focus on generally trading the stock indexes.

My favorite product is the DAX. That's generally what I trade day in and day out. I also focus on the E-Mini S&P and the E-Mini Russell so generally, the stock indices that I'm focusing on.

I should say my style of trading is a little bit different to the more commonly found systematic methods out there which you'll probably commonly find. It's more of a discretionary method, but that's how I got started. That's what I do now. I'm focusing primarily on trading auction markets theory concepts, market profile, volume profile with auto flow and volume profile techniques. So that's how I got involved.

Tim: Let's talk about that for a minute, the auction market techniques and market profile. I hear a lot more traders talking about that these days, but it's something that typically sounds like people don't get into until they've been trading for a little while. Talk about market profile and how you use that. What is that? How does it help you find good opportunities?

Kam: Firstly, I'll probably just tell you how I was introduced to market profile. Market profile is really something that I wasn't using so much when I was trading, myself, as an independent retail trader, but I noticed when I entered the professional environment as a prop trader that the majority of the guys that seem to be doing very well were constantly talking about something called "market profile". So that's how I first got introduced to it.

To be honest, at first I didn't quite understand it and it does take a little while to get your head around, but it's actually very simple. When you work it out and you understand it's not a system. It's not a systematic approach to trading. It is a discretion method. It's a decision support so it really does start to make sense.

Auction market is very rarely about figuring out the different market disciplines and thinking about the markets and how the commercials may be doing business and where they may be doing business. So generally, it's about getting behind the mindset of the market disciplines; working out who is in control, whether it's the commercial traders, whether it's the locals; the shorter timeframe traders that are in control of the market right now.