As I look back on my trading journey, I find it very ironic that I started off with with charts, technical analysis, price patterns, etc, because I wanted to avoid the news, economics, global macro, order flow. I thought it was information overload. I wanted the easy button, and thus chart based analysis is where I thought the easy button was at.
You are scared of the news, squawk boxes, global macro analysis because it is information overload and you are wondering how all of it could possibly apply to trading. Well the trick is that only 5-20% of all the stuff you read can apply to trading. The trick is in knowing what is important, why it is so, and when it will be important. And it is tough. You have all these questions about news, sentiment, global macro and you need them answered. I had to answer a lot of them myself and develop my own process and habits for answering those questions. Then you need to perceive different order flow generators, scenarios, market participants and how they can interact at different stages in the market. This is a big hurdle for a lot of people and they are not prepared to cross that bridge because they want to give that get rich quick easy analysis one more try, then one more try.
Eventually you quit on that and go to the chart based analysis, because it is very seductive and it looks cool too sometimes. Perhaps you read some trading articles in various websites and all those traders have screens with some moving averages on them and you think that must be the way to go. That is what I used to think.
I would see all these images of traders or trading desks with all those special lines and indicators on their charts and I thought that I had to have them on my charts as well. Big mistake that was.
And thus my fear and frankly cynicism towards the information outside of the charts led me to a long year or two of system hopping. You try out everything known under the sun. Some of them you test out for a few minutes. You may quickly throw on some new indicators and manually back test by scrolling back and staring at your charts finding the moving average signals of the past.
Other times you may test them out for a few weeks or months. Like the chart patterns and price patterns you may try them out for a few months or so.
Finding Meaning To The Markets
Everyone is looking for a reason why price is moving. Everyone rationalizes it differently. One person believes it is because of the MACD, another person cites divergence signals, another person believes it is the ichimoku, another person believes in chart patterns, another person believes in price patterns, another person believes in astrology, another person believes in W.D. Gann esoteric techniques. All sorts of ways to attempt to rationalize why the markets are moving. Order flow traders view the price movement through the prism of stops, option barriers, expectations, sentiment, positioning, news, global macro, liquidity, etc.
There isn’t anything wrong with any of the above analysis, everyone has their own way. But the uncomfortable truth is that they can’t all be right.
It is impossible for all of them to be right. Which means that a lot of the trading systems and indicators and methods are junk, and rely on luck. Although convincing many people of that can be difficult. I know, for I had to convince myself to go from the technical indicator cycle to the price action cycle and finally to the order flow cycle. It was no easy task slaying any preconceived notions about how the market should act and be.
Going To The Order Flow
Eventually, finally the lucky ones, or the ones that open their eyes to the information outside of the chart, enter the order flow trader cycle.
Because in order to reach the highest pinnacle of trading success, the highest level of trading, you figure out that you need to go back to the news, market sentiment, global macro, and information outside of the charts that you once shunned and were fearful about.
For it is the only pure way to know when you are placing really good trades and when you can go for the jugular.
And that is the irony. You start out looking at the news, sentiment, global macro then go on this huge detour away from what truly matters. Those detours, those tangents that you go on, can delay your trading progress, journey, and road to profitability and huge profitability by months and years.
Part of the reason I made this website was so that I can help people avoid the same fate as I had. I don’t want you wasting two years of your life on the things that do not move the markets and do not matter.