Tension in the Cosmos will make for a difficult week but look for a high in the S&P on Tuesday, ...
Strategies of a UK Trader
08/16/2012 1:44 pm EST
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.|pagebreak|
Generally, my focus is on finding the opportunities where the commercial market disciplines are attracted to the market, where they find advantageous prices to trade. So auction markets really gave me a framework to apply. It was logical. It made sense. The concept of trading twice in reference to value really hit home for me.
And you know, it really puts the three fundamental elements of the market's auction together; whereas, the majority of traders will focus on just price and maybe time on the traditional charts; market profile, volume profile, and the auction markets theory concepts apply a multi-dimensional view to the market for me. And I was able to see the market almost in 3-D rather than just 2-D.
So one of the things we focus a hell of a lot on is the acceptance and rejection when we are trading market profile. So myself, I noticed the benefits of this; understanding that the markets constantly go through different phases, trading balance and imbalance.
It was an eye-opener for me to find that the market is spending the majority of its time balanced and trading value. It put a story behind that. It helped me understand why as well and not just the fact that it happens but also why it happens.
And the reason being is generally because the markets—any market is—the purpose of the market is to facilitate trade, and all markets facilitate trades most efficiently when they are balanced and trading value because you have that two-sided trade where the longer time-framed participants are attracted to the market, as well as, the shorter time-framed participants.
Generally, that's what we find the market doing consistently. But market profile and volume profile gave us a brilliant framework to take advantage of those opportunities.
Tim: Let me ask you about what that looks like on a chart. You mentioned commercial participants. I'm assuming you're talking about institutions and hedge fund managers.
Tim: But how do you actually see that happening on a chart?
Kam: Well basically, I also use auto flow as well. So it's not just market profile. Market profile and volume profile. Auction market's very principles provide the framework for doing business; whereas, I still need to make the decision as to whether I take the trades or not at those specific levels.
So my day-to-day routine would involve dong pre-market analysis. A lot of my homework is done before I start trading the next day. For example for the DAX, tomorrow morning I will be doing my pre-market analysis tonight and looking at areas where buyers and sellers maybe looking to do business the next day based upon low-volume areas and high-volume areas.
The key thing that I'm looking for on the graphic is low-volume nodes and high-volume nodes. So specifically, low-volume nodes are areas where prices were rejected so it's key market-generated information. We're not making it up. The market is actually giving this information to us.
Prior areas of rejection, generally, we watch those areas for rejection as the market trades are a gain and also prior areas of acceptance. These are the high-volume areas. There's a lot of volume transacted at a particular price on a prior day or prior session. We watch that level the next day, as well, to see whether that level is accepted again or whether this time around it's rejected.
So these high-volume, low-volume areas are key acceptance-rejection areas as generated by the market. That's basically what I'm looking at to decide whether I'm going to take the trades there.
So the market profile graphic, traditionally, consists of what we call "time twice opportunities" which are letters plotted against every price over a specific bracket. The traditional way to plot these is over 30-minute brackets. So every 30-minute bracket has the market auctions higher and lower. You see a print at a particular price, but you will only see one print at that particular price for that 30-minute bracket.
Now over the years, I've transitioned more so to using volume profile which is—I call it almost evolution of a market profile-auction trader. You generally find that the software these days, the technology that's available, has advantages. It's a lot more powerful than when market profile was first introduced. So now we have the ability to plot volume at price.
So I'm constantly looking at volume at price and how it's building. So volume at price is showing me acceptance and rejection in real time, but it's also showing me historical acceptance and rejection areas as well.
Tim: Is there specific software that is well-suited or focuses on volume profile, market profile type of charting?
Kam: Yeah, definitely. I would say most of the software out there that traditionally plotted market profile would be able to now give you volume profile as well. That's been available for a number of years now. So I would—yeah, there's a lot of software.
I use MarketDelta, but there's also another version of that software which is Investor RT. I use MarketDelta because it also gives me the ability to see inside the bars when I'm trading, and I use a lot of Order Flow analysis to decide whether I take trades or even leave trades alone. So I have to make the decision as a discretionary trader whether I will take the opportunity and take that trade or whether I will decide to leave it alone.
It's basically—the model is very simple. The system, the method that I am trading is very simple in the fact that all I'm doing is looking at the market profile graphic—the volume profile graphic, deciding where I want to do business and that's generally where the longer time should be looking to enter the market.|pagebreak|Tim: If I could—excellent. Let me just—I like to repeat back often time just to make sure that I understand this. So for instance—we're going to say an example. If a stock or an index is approaching 100, let's just use a round number, as it approached the 100 you see volume dropping off.
On that bar that it does maybe touch or come close to 100, it's very little volume and then comes down from there. Is that a good example of using volume profile or am I over simplifying it too much?
Kam: Yes, that would be a good idea to look for the opportunity. So we would use the volume profile to identify the opportunity.
I basically breakdown my method into five steps; Step 1 is understanding the market place and what the market disciplines are trying to do; Step 2 is identifying the opportunity; Step 3 is identifying the risk reward in that opportunity; and then Step 4 is then looking at the Order Flow at price to define whether the buyers or sellers are aggressive enough to make that market move off of that level; and then Step 5 is the trade management part. So those are the five steps that I follow.
So market profile really gives me Step 1. It just helps me understand where to do business. It doesn't give me the full method. It doesn't give me the whole process. So I still will need to figure out my risk reward in that opportunity.
Generally my risk reward opportunities I'm looking at a 2 to 1 absolute minimum; but with the kind of levels we are looking at even on an inter-day trade basis, the risk can be very small compared to the potential reward because you're using order for that price and not using closing bars for increase. I'm looking at all the flat price.
So I'm looking to see who is the aggressor. Generally, the Order Flow can be read in many different ways but one of the ways I utilize the MarketDelta software is to look at who is the aggressor here. Where is the imbalance in the Order Flow? So we all know that there is no such thing as more buyers than sellers or more sellers than buyers so what I need to do is figure out what is about to move the market.
Generally what moves the market is the imbalances in the Order Flow so if there are a lot of sellers in the bid for example, going in that market and hitting the bid aggressively, generally the market is lower. If there are a lot of buyers lifting the offers, the resting offers in the market, generally the market moves higher.
Now the software that I use, MarketDelta Footprint, allows for me to see exactly how much volume is being transacted on the bid and the offer so I can compare the bid volume based on the offer and I can also get a feel where the imbalances occurring; whether the buyers are becoming more aggressive or the sellers are becoming more aggressive.
So in a nutshell basically, I have a method here that helps me identify where the longer-timeframe participants should be doing business, but then I can also confirm that with real-time Order Flow.
Tim: I like the idea of combining Order Flow, of course, with market profile giving you the idea here's where you need to look. Order profiles saying this is where—the opportunity lies here.
It sounds like you've got time because you're using 30-minute charts or 30-minute bars. You've got time to capitalize on it. When you see that happening, you've still got time to get in and kind of step into that wave of the other "aggressive traders" as you call them or aggressors.
Kam: Yeah, absolutely. The beauty with of using Order Flow for entry is traditionally if you use price bars-a lot of the time if we're just looking at price action and closing bars, we often think the opportunity is gone and we cannot actually get in.
For example if I'm looking at a trade on the DAX, and I am looking at an opportunity that's potentially a hundred to 150 ticks; I'm not too worried about getting into the trade ten to 20 ticks later on.
I often talk about there's not really such a thing as getting in too early or too late into a trade. It's just about getting it at the right time. The right time for me is when the buyer-if I want to get into the market and get long, I want to get in and get long when the buyers are becoming aggressive. And that I can clearly see by looking at Order Flow price.
And if I wanted to get short or if I want to get in and find my trade when the sellers are becoming aggressive. That way I stand the greatest chance for that market moving in my direction as soon as I get into the trade. Whereas, if I'm just using closing bars and I don't have that price transparency, a lot of the times I'll find I will be able to get into a trade and the trade will actually go counter or against me.
I've seen many traders do this, and I've been there in the past myself. You find you get into a trade that looks like buying and all of a sudden as soon as you pull the trigger, it goes offside. And in terms of timing my trade as an inter day trader to reduce risk, I want to time my trades in such a way that I can get in when the Order Flow is just about to pick up.
And by looking at Order Flow at price at each and every single tick, I can see when that is taking place. I can see when is the best time to take the trade and when is the best time to leave it alone. |pagebreak|Tim: So is it a matter of you're seeing faster buying at spec prices as the prices move, but also bigger order-larger orders?
Kam: Exactly. It's a combination of the two. I usually breakdown all the flow trading into three steps and that is you get the head job so you have an idea that the market may essentially rest at that level.
So for example, you may see the market actually up ticking so it's pushing higher lifting you the offers, lifting the offers; but as the market lifts the offers you see more and more trade picking up hitting the bid. So this is what we'll call a "negative delta".
So the delta is basically the-it's the net buying for that particular bar. That's building and shifting continuously in today for each and every single bar. So as the bar is forming in real-time you may actually notice that the market is approaching a resistance level, and you're expecting longer timeframe sellers, and all of a sudden the sellers start hitting the bids aggressively, but the market is still up ticking.
So that would be like a heads up. So at that point in time I would then move to my trading platform, ready to pull the trigger, but I'm not actually going to take the trade. And then I move to the second step of Order Flow.
My second step is confirmation. So I would look at a specific price, and I would look for a certain amount or aggressive selling or buying if I'm looking for longs. So let's just say we're looking at resistance level. We're looking to get short.
If I see, for example, 150 sellers hitting the bid on the DAX, and I've only seen 20 buyers lift the offer at a specific price; now that's quite significant because the buyers are not willing to lift the offers, but the sellers are willing to hit the bids at a key resistance level. Now, I'm still not going to take the trade.
There will be certain situations where I'll be a little bit more aggressive and I'll take the trade at that particular price, but one of the most important concepts that I like to use in my trading is follow through. And if I see 150 hit the bid, for example, and only 20 lift the offer, and then all of a sudden the next down tick I see 70 hit the bid and only ten lift the offer, then all of a sudden they're down ticks again.
So I would usually wait for a little bit of follow through of maybe two or three ticks. That's what it takes. And then as soon as I see that bid follow through, I'd pull the trigger. I'd get into the trade. Does that make sense?
Tim: Yeah, it does. And I like the fact that you can be more aggressive if you want to, but also you can wait for a little more confirmation.
Tim: How many times a day do you see enough aggressors coming in on either side to make for good trading opportunities?
Kam: Every market reversal you see inter day takes place because it's just the supplies and demands moving the market, right? So if there's more supply in terms of more sellers hitting the bid aggressively, sequentially the prices, the market moves down.
If there's more buyers lifting the offer, sequentially higher prices, the market moves up. That's what moves the market. So it's inevitable that you'll find it each and every single day at key reversals. So if you see a big move, you can pretty much be guaranteed that you would see something in the Order Flow to make that move happen.
Now there will be some instances where there will be a move, especially in the lower volume markets, but a market, such as the EX a very liquid market, the E-Mini S & P, the Dow Jones US stocks, you'll very rarely see the market move directionally without aggressive buyers either lifting the offer to move it directionally higher or aggressive sellers hitting the bid to move it lower.
Now in lower volume markets there are some cases in which I've seen the market-you will constantly see the market pushing higher by the sellers stalking the bid, but this is where I use the concept of watching the up ticks and the down ticks.
I have a specific indicator which is a volume breakdown indicator. It looks at the volume in each and every single bar. Now I can set up that indicator to look at volume at price and look at the amount of volume traded on the ask or the bid or I can also break down that indicator to look at the up ticks and down ticks.
So what I use is a combination. I use a combination of an indicator that is set up to look at up ticks so it's basically a trade that takes place subsequent to an up tick. If a buyer lifts the offer subsequent to an up tick, basically this indicator picks it up.
So I'm looking for directional Order Flow. So I want to see if sellers are hitting the bid as the market is attempting to move lower. I want to see the buyers lifting the offer as the market is attempting to move higher. I have a set of indicators that help me see that visually.
Tim: All right, Kam. So this is all fantastic. I appreciate you sharing with us. I want to ask you about that risk reward ratio and where you kind of set profit targets and stop losses.
But first is this a place where you're looking for a place to scale in and scale out? Are you pretty much in right when you see the opportunity, with everything?
Kam: I'm always all in and then I scale out of my positions. The way I look at it, for example, I'm not a big trader. I will trade, for example, in the DAX I trade for contracts.
The liquidity in that market generally allows me to trade big. I have moved up to around eight contracts before, but trading four contracts on that market I can—I have a daily target. I can look—I'm pretty open about my daily targets. I look for around a few—2,000 Euros which is approximately $3,000 per day, but I can get that on most days with just four contracts.
If I get the right trade at the right time, that can be achieved in one trade. So my size is not that big, but it doesn't matter about the size. I would say what I found, personally, works best for me—I'm not saying it's the only way you can make money and it's the only way you should do it. I do know traders that scale in and then scale out. There are traders that are all in, all out.
But personally I found myself, from my own experience, that scaling out works best for me because I understand that even though I may be going for the bigger trade, I stand a higher probability of only getting my first few targets.|pagebreak|
So out of ten trades only say five or four out of those trades may actually get to my last my profit target. But it's still-the amount that I can actually gain, the expectancy from hitting my third and fourth target is so high that it makes it worthwhile. It has a big impact on my bottom line, my profit over time.
Also, because I'm looking at auction market theory principals and market profile, I'm sort of picking out the trades that give me the greatest chance of becoming bigger trades. However, my first or second target is usually just ten ticks away from my first target.
My second target was usually 30 to 40 ticks but let me just give you an example. On the DAX I would use a ten tick stock. Because I'm using Order Flow, even though I may be playing off a bigger timeframe level because I'm using Order Flow price for my entry, I can generally be quite aggressive with my risk.
I don't have to put a lot of risk on the table, but my potential reward is magnified because I'm looking at an opportunity from a bigger timeframe, and I'm expecting longer timeframe plays off that particular level.
Tim: All right. So it's not a support and resistance level, it's pretty much an arbitrary ten ticks because you see-you've got confidence in that trade because you see the Order Flow coming in to back you up?
Kam: Exactly. Exactly. So the thing is if I get taken out, I know I've got a great chance of getting my ten ticks. If I get taken out, I break even.
Most of the time I'm going to be at break even after my first target is hit. Because I'm getting in with the flood of buying or the flood of selling as the Order Flows are picking up, and that's how I'm timing my trades. I basically have been able to find a way that I can get into trades with the least amount of risk but also reduced my risk very quickly as well.
So the majority of the time-I say the majority of the time because there will be some situations where the market will call for me to lead my stock away from break even, but majority of the time I will find myself at a no-risk situation after my first target is filled.
And just to give you an example, on the DAX which is the market I love to trade on a day-to-day basis. I can go for a trade, use a ten tick stop with four contracts. Now, that's 40 ticks risk over four contracts. But my first target will be ten ticks, sometimes 20 depending on the volatility in the market place, and my second target is usually 30 to 40 ticks and sometimes 60 ticks depending on the volatility of gain.
My first and second target will give me 40 to 70 ticks the majority of the time. So I know my first and second targets are going to look after my risk. I'm quite comfortable going in all in and having those last two runners in that position with no risk on that table and riding those out.
And my third contract on average would give me 70 ticks-anything from 50 to 70 ticks. My fourth contract could give me more than 80 ticks, 100 ticks and on the better trades being able to ride that out for about 200 ticks on an inter day basis.
So it's worthwhile having the last two units in and scaling those out later. The thing is, it becomes so much easier to do when you know you're also at no risk situation as well. So that's basically the way I scale out of my positions.
Tim: And if you see that Order Flow start to reverse on you, if you see the volume start to drop, you see a lot of people coming in to sell; will that change your mind then and you'll get out before it hits those targets?
Kam: Absolutely. The thing is once my trade is what I call "on side," once it's on side and I am at a no-risk situation, I don't really need to touch the position. I've put my targets in place.
I work with what I call "destination trades," and all my pre-market analysis involves not only highlighting world business, but if those trades actually are triggered and I'm actually going to get involved in those trades, where do I expect that market to go to?
So I already know well before I get into a trade where I'm expecting that market to go to before I get into it. So my risk reward is already clear in my mind's eye. It's easy for me to-it's easier for me knowing that-with that in my mind's eye that I have belief and confidence that that trade will go in my favor and it's a worthwhile risk taken.
But my stops, generally, because they're at no risk the majority of the time, I don't have to make the decision to get out of a trade once it goes on side. However, I will be willing to cut my position short or even scratch a position if I can see Order Flow evidence to get out of that trade before my stock is getting hit.
For example, just the other day, it was yesterday I actually-the first trade of the day I actually took a trade but I had a ten tick stop in-and the first trade of the day was a support level which I was looking for buyers to be leaning on. I saw the Order Flow, it missed my first target by one tick so it was nine ticks in my favor, and then it started to go off side, and I got out of that trade.
I lost the four ticks over four contracts which is just 16 ticks. Now the next trade I made back ten ticks which is only my first target. The next trade after that I made 208 ticks scaling out on four contracts. So I still finished up for the day, and you can minimize your risks massively by looking at Order Flow as well.
So it's not just-even if you do decide to leave your stops where they are, that's totally fine. But I have now been able to work myself to a level where I can read the Order Flow and quite easily see that the Order Flow is against me, and I should be getting out of that trade.
Now the great thing is if I get out of the trade and it picks up again, and I've made the decision to get out of that trade prematurely, for example, I can always get back in again. So that's my perspective. I have no reason not to cut the trade if I have a reason to. If the Order Flow gives me a reason to cut that trade, I will get out of the trade knowing that I can always get back in again if the evidence is there. |pagebreak|Tim: Absolutely. The market is always open for you to place another trade, I've always said that myself. I know that watching Order Flow is a skill that is learned. It takes time. You have to get a feel for the markets.
How long did it take for you to get confident looking at Order Flow and understanding it so that it's not just a bunch of colors and numbers running by, but it's actually-it gives you a window into the market? There's a transition that happens at some point in a trader's evolution I think. How long did that take for you?
Kam: Yeah, definitely. I called my thoughts the art of adaptive trading. Firstly, because I think trading is more of an art form than a science. Markets are constantly changing; and therefore, the conditions within which people have to make decisions is constantly changing.
So as a day trader especially, it's important to adapt to that ever-changing market place and recognize the different phases and adapt to the information that is being presented in real-time. I often come into the market with a hypothesis, a vision in mind, of the different kinds of swings that I'm looking for. But I still have to shift to the-what I say is more of an intuitive mindset.
So I like to think I'm doing a lot of my pre-market analysis, my homework, beforehand and using more of the left side of the brain, the more intellectual side of the brain, the more scientific, logical thinking side of the brain. When the market opens up, you have to shift to more of a whole brain approach where you're using both the left side and the right side of the brain.
The right side of the brain is more intuitive, more adaptive and it's more in the now. You're looking at what's happening in the present moment. So I use that metaphor and that way of thinking to observe what's happening in real-time to trade Order Flow.
I have an idea in mind. I have visions in mind of what I want to trade. That really does help so you're not just getting sucked into the tick-by-tick action and the Order Flow at price, every little swing of the day. So I-it's very easy to do that.
Tim: How long did it take you to get to that point though? There must have been a point where you struggled at first and then you realized you got it, you understood it. You saw the Order Flow. Did it take a year or six months? What was it for you?
Kam: It's a constant evolution. I would say I'm constantly still improving that, but I would say it probably took me about a year to look at Order Flow and get a real good feel for it.
Before I started looking MarketDelta Footprints, I was using Time and Sales and looking at the Order Book. The Order Book-looking at order flow activity, et cetera, used to work a lot better about three or four years ago. Now, it's-I think MarketDelta came about at the right time.
It started to-it took me some time. I couldn't put a specific time on that, maybe about a year. Generally, I'd say six months to a year it could take just to get a good feel for it but with some good training, spending-it depends on how much time you spend in the market I suppose, but myself, to put a time on it-it's been a constant evolution.
I've always gotten better at trading Order Flow and reading what I'm looking at so I would say it's an ongoing process. It's still happening. It's not complete. It's still not finished. So it's-I'm just getting better at reading Order Flow and trading it.
I would say it was probably about a year before I started to use more Order Flow price. Before I started to focus more on Order Flow at price, I was using more Order Flow per bar. So looking at, for example, closing delta-so I was using Order Flow but not at each price.
I was using Order Flow from a bar to bar perspective to start off with. I think that really helped me to sort of transition into using Order Flow for entries, et cetera. So in a way I sort of stepped into it step-by-step. I started to grow towards using Order Flow at price, from using Order Flow at bar, so Order Flow at bar is basically like closing delta.
You're looking at the net buying or selling. Basically market order is hitting the bid or lifting the offer from a bar to bar perspective; however, that works to a certain extent, but I think it's a natural evolution for an Order Flow trader to start looking at the bars-looking inside the bars, that's what we like to call it, looking inside the bars and what's actually taking place at each price.
I think with screen time that sort of naturally started to take place, and I started to see clues. I started to see things happening again and again and again.
Tim: Do you recommend just putting up a depth of market chart-of overflow and just watching it, watching price go by and volume go by? Is that the best way to get up to speed quickly?
Kam: Absolutely. As with everything, experience is the best way to grow your understanding. So I think it's the best way.
You need to get the Order Flow up, look at the set ups you would normally look at, and just watch the Order Flow, watch what happens again and again and again. With screen time you start to see things that just takes place again and again and again in that market.
For example, on the E-Mini S & P the specific amounts of volume that I see moves that market consistently. Again, it just keeps repeating itself. Every time I see twice as much volume lifting the offer over that volume that's hitting the bid, tends to lead to a reversal. These kinds of clues you start to pick up.
Every single market is different. For example; the DAX, crude oil, the Russell, they move in very similar kind of volume. Very often you see a hundred or so hitting the bid or lifting the offer and there's very little volume on the sides.|pagebreak|
Also, what I've noticed in the more volatile markets is that you'll constantly see stops being triggered, and you'll see zeroes on the bid-zero trades on the bid, but you'll see volume sequentially higher prices being lifted on the offer. That's usually a sign of stocks that's been sitting there either being short-stocks have been sitting over-above pricing higher, below pricing low, and you'll see those stocks get triggered and the market just breaks out.
We see this on the Order Flow as well. I think screen time-I couldn't put an exact time limit on it. I think it really depends on how much time you spend on it. Each and every single individual is different.
But I would say before I-it really started to hit home for me and started to make sense before I started to see some patterns in the Order Flow, it was a good year, you know, looking at the Footprints day in and day out. It does take time. It's a bit of an art form.
Kam: It's not a science. It's not every time you see this, this will happen. It's not 1 + 1 = 2. It's more like 1 + 1 = 7. It is an art form.
Tim: No question. Well, I think if we've gotten our listeners here today to just look more into market profile, volume profile, get used to watching Order Flow and getting a sense of what's happening when certain things happen over and over again, then we've done our job here.
Kam, you've been very patient with all of my questions. You've got a Web site here where you talk about these things in a chat room. Tell us about that.
Kam: Yeah. Basically, I started a trader coaching business back in 2005 as well. Generally it's teaching traders discretion methods of trading, using auction market theory, advanced market profile and Order Flow analysis technique. So it's basically teaching guys the way I trade.
We work with many professional traders from top firms, hedge funds, as well as, independent retail traders. I've worked with a lot of the guys even at the prop firm that I traded for, basically the offices in London as well with the other traders. I used to get involved in helping a lot of traders and it sort of just grew into its own business really. It took on a life of its own really.
We have a trading room. We run seminars every now and again, webinars. The Web site is L2ST.CO.UK. We focus a lot on not just the technical stuff, also provide peak performance coaching, helping traders get the best out of themselves and help them meet their objectives.
A lot of what we do is helping traders put business plans together, getting the right performance, going through the trading phases, et cetera. It's a structured process.
My style of trading and what I teach is very different to the more commonly found systematic methods out there, and I help traders focus on many different aspects of their trading; what you quite often wouldn't find or what a lot of traders would generally ignore.
The major focus of myself and the traders that I help is creating discipline and good habits in and also outside of trading, so it's a must for success in this business. Following a daily routine with structured process where success is essential and sometimes that's more important than the actual way you trade. So although I do teach the technicals and teach order volume profiling techniques, Order Flow Analysis, et cetera, there's also a lot that goes alongside with that.
I'm also a certified master NLP practitioner so I use neuro-linguistic programming techniques to help traders, as well as, a lot of techniques in sports psychology. So it's training traders and teaching traders, helping them become better at what they do.
I like to train my traders as athletes. So I treat them as athletes. As a trader, I feel myself I am an athlete and need to treat myself as such. I think it's really important to have that balance in different areas of life, such as; mentally, physically, as well as emotionally, and spiritually as well. So having that balance for full engagement is absolutely essential.
It's not just the technical stuff; it's the whole package basically. It's the mindset stuff as well. I've been doing that for quite some time. We have a trading room, some seminars, et cetera, as well.
Tim: All right. Well Kam, we'll link to those in the notes for today's interview. Kam, thank you very much for your time today. I really appreciate you sharing some of the strategies about market profile and how you find good trades. Thanks for your time.
Kam: Yeah, no problem. Tim, it's been a pleasure.
Find Kam's Web site at: www.l2st.co.uk.
Related Articles on STRATEGIES
August has been the worst DJIA, S&P 500 and NASDAQ month of the year since 1988, cautions Jeffre...
Value stocks — with low price-to-book values or low p/e multiples — often trade at barga...
Will the stock market affect the outcome of the election? And which is better for the stock market &...