In today’s electronic markets where over 70% of all transactions are executed by automated trading bots, it is quite helpful to know what these automated trading bots are up to in real time. Some setups that we have been highlighting over the last couple of weeks and they are the same setups that you have seen before and will see again in the future and what I think is really cool about that trader’s want consistent setups.
Traders want the same behavior over and over again. What we try to do here at sceeto is give you the toolsets to peer under the hood of the market and see what’s going on in order flow and bot behavior. I believe that order flow and bot behavior is the primary determinant of price changes so if you get comfortable you know, reading the tape, becoming a modern-day tape reader, being a twenty-first century tape reader you will see the same setups over and over again you will see the same changes in terms of supply and demand imbalances and ongoing future price discovery and I think that this can be a really good approach and healthy approach for a trader so let’s just see what happened today.
Here we have our ever loving spikes in MacDaddy. You’ll see a green spike and a price move and two red spikes and nice price move there. Here we have trading bot footprints and other order flow insights surfaced by our Order Flow Monitor that can be used by a trader to deduce whether the Buy Bots or the Sell bots have dominance in the market. This is important information as 70 percent of all trading is done by automated algorithmic trading bots.
Since these trading bots are the primary determinants of supply and demand and since changes in supply and demand are the primary determinants in changes in price, it behooves the 21st-century trader to be able to discern how to follow these bots.
Insights surfaced by sceetos Tape Meter
You can see that when either a blue or yellow dot is plotted below price then it is a good time to consider buying and when either a blue or yellow dot is plotted above the price it is a good time to consider selling. This is a view of just price in the upper pane and in the lower pane we have a white line which is retail MacDaddy or retail order flow momentum and we also have in the lower pane a green and the red line which is institutional order flow.
We know as a rule of thumb in an uptrend we want to see retail below institutional and in a downtrend we want to see retail above institutional. The reason for that is in a downtrend if retail is above institutional it means that they are more bullish and why to be bullish in a downtrend. Conversely, in an uptrend, we want to see retail below institutional which means that retail is more bearish. Our philosophy is that retail tends to be wrong and we want to trade against retail and this is how we do it.
Now we had distinct uptrend’s in the market today and during these uptrend’s there are plenty of times when retail crosses below institutional. That means retail is getting bearish even though the price is moving up and that is probably a good time to buy.
We have two distinct downtrends. But in this primary downtrend we retail move above institutional here which is a great place to get short and here which is a great place to get short and here which is a great place to get short.
Now, this view is a standard chart template. It may appear to have a lot of information it is got retail versus institutional macdaddy in the lower pane. Wind above that, MacDaddy above that also with ellipses encircling spikes in MacDaddy and above that in the price pane we have tape meter and order flow monitor.
It may appear to be a lot of information but I think that once you understand each component and how to lay that up with price and your trade entries and then combine these you will have a tremendous amount of contextual information with which to help your trading along to follow the bots you follow the primary order flow which is going to be the primary determinant in changes price so I hope that this tutorial helped out.