Order Flow SMart MOney?

S7 - Style - When To Edit Your System technicals
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Hey D.M. this is a big one:

First, I was watching some webinar about order flows, and the presenter said that Big Traders (Smart Money) conduct their big trades at Major Technical COnfluence Areas because that’s where they’ll find Deeper Liquidity, due to all the Blocks of Orders at those levels. According to him, the Smart Money gets better prices at those Liquidity pools, and supposedly it’s an incentive for them to get better order execution. Because if they make trades at any point in the chart, they can get stuck in losing positions or pay alot of commission.

Second, I know that Deviation levels use implied volatility, but besides us Apex users, who looks at those Levels and decides to Buy/Sell? in other words, how do Dev levels compare to Pivot points and Fibs (which I know you don’t like)?

Now, I tried to find a book or a resource that can explain better where does Smart Money make their big orders and What’s the reason behind it. I’m hoping you can answer if all the above is true, or perhaps recommend a book or something that helps explain more on Big Traders reasonings.

I’m just trying to get a better understanding of the Big Players that move the markets. I mean, we can’t deny that Big moves happen on certain areas, it’s right on every chart. So if I can develop a better understanding of how and why, perhaps It can compliment my APEX trading.

I know you’ve read lots and lots of books, so I’m gonna use you like my Search engine. LoL, don’t feel bad out it, just how it is. :stuck_out_tongue:

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Part 1)

Smart money is simply money making a decision based on charts fundamentals statistics etc…

Dumb money is simply putting money in through auto retirement contribution regardless of whats happening in the market

There are more orders at areas of confluence - ie 50 day Moving average and 100 period moving average intersect at a major resistance level which is also a fib level and happens to be a gann and the golden ratio level as well etc… Short point of it all is multiple types of traders using different methods such as moving averages, support/resistance, fib, golden, gan all have signals coming up at the same time.

This simply means more orders larger orders mean good places to either A accumulate… or B distribute as more orders mean they can do larger sizes without affecting the market as much against them and should help keep bid/ask spreads low on these large orders as well.

This should have no impact on their commissions.

They would not be stuck in a losing position (unless they where dumb and traded a really illiquid market) … they would just be causing their position to move against themselves by not exiting where there are orders stacked up. They can still exit and it may still be in a profit they just may be giving up some of their profit.

Part 2

My levels don’t work because a billion traders are looking at historic data. My levels work because they are basedon the option premium pricing part known as IV Implied Volatility - aka expected movement - The weighting used in my formula is the summation of all traders expectations of movement on any given day in the market. So we don’t need the levels to know. I just invert the option pricing and implied volatility and plot the levels to make it easy to save you from doing the statistics.

Smart money knows what a deviation is, they know implied volatility, they use this to their advantage each day.

You can lay these on top of fib levels, and pivot points if you want to make your chart more confusing with the goal of having confluence. but nearly any trader telling me a fib based trader - i can look at the chart and i have a deviation level right there. (just listen to friday shows when i and tommy and or Steve are talking - they are talking fibs on entries - and im like oh that’s nice i have a deviation there also) - basically every single time - and soooo much easier. Its not that i have a thing against pivots and fibs - i just see no added consistent value and they just add more stuff to the chart making things more complex without any seeable statistical edge. Basically why make things complicated when you don’t have to.

Pivot points and fibs work because so many people watch them that the concensus makes them work. Deviations works because it is how far all market participants are saying the market will move by putting their money where their mouth is in the options themselves.

Part 3

Regarding resources… honestly no book will help you with this. This is a volume thing. Watch the volume spike trading system i teach. Under deviations menu - deviation trading system. When massive volume spikes happen especially near deviations even more so at + or -1 or a 1 high to low deviation move - then they are dumping exiting etc… You could understand all the things in the worls about “big/smart money” but the fact is their models always change. You don’t know if they are getting in or getting out. Seasonality, statistics, fundamentals, news, etc… affects all this its not just a set of technical confluence that affects their decision. Also their book overall (how many options they have what type of options and the delta, gamma, theta, etc… also what other offsetting positions they may have… There is so much you can’t know about their decision no matter how much you know about their confluence that the best thing you can do is learn how to read the volume on the chart. The only book on volume that i would recommend is “the Art of timing the trade” and Timing the Trade by Tommy Obrien

Timing the Trade: How Price and Volume Move Markets: Tom O’Brien: 9780976352907: Amazon.com: Books http://www.amazon.com/Timing-Trade-Price-Volume-Markets/dp/0976352907

The Art Of Timing The Trade, Your Ultimate Trading Mastery System: Tom O’Brien: 9780976352914: Amazon.com: Books http://www.amazon.com/Timing-Ultimate-Trading-Mastery-System/dp/0976352915

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Wow, I take it back, no search engine could answer that precisely. You gave exactly what I was looking for. Thanks. I use your Volume Spike strategy and love it. but Now I have a better understanding as to what exactly Deviations and those spikes are. It does help with something I was looking for with Apex. Such as avoiding Losing apex that go in the direction of the Volume Spike. I noticed a lot of those. but thanks, gives me hope. :slight_smile:

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Glad to help :slight_smile: