It is important to have a trading methodology, a system that can experience growth and potential as you gain more experience. You don’t want your trading progress, or trading potential “capped” because of a poor choice of trading systems or methodology. Human beings and the human mind is built to grow, learn and expand.
When I first started trading I wanted the quick systems, the quick indicators, the quick forex robots. I was scared of gaining ever more knowledge of the how the forex market and all markets work and why they move. I didn’t care about learning a trading methodology and developing a trading system that could grow in profitability and have limitless potential. I didn’t care about that because I was just looking for the quick moving average crossover, divergence, or pattern that was going to make me rich.
Many trading systems hit a “cap.” There is limited potential in your trading with other forms of analysis, like technical indicators, chart patterns, and price action trading. There is nothing wrong with them, but they do have limits to their potential.
As those trader cycles either failed miserably, broke even or only showed a small profit, eventually I learned order flow trading. As I learned about it more and more, eventually it occurred to me that it truly does not have any limits. It is limitless. It has unlimited potential. It can be applied across a wide range of systems to make them better, sometimes drastically better as long as the person is willing to learn order flow.
What Can Order Flow Trading Do?
As you develop the order flow mindset and learn the order flow principles, and learn the true reasons why the markets move all sorts of ways to tweak your current system or develop a whole new order flow system develop.
A person who already has a trading system may be looking for bigger profits by increasing the win rate of their trades without sacrificing too much reward risk ratio. Order flow trading can do that.
The typical trader experience is that if you go for increasing winrate you will start sacrificing in the reward ratio department. As your win rate keeps increasing your reward risk ratio keeps getting lower and lower. And that happens with all trading systems, including order flow, but order flow trading is much more resilient and flexible, especially when you learn about news, market sentiment, market sensitivity and global macro.
Another trader may have a trading system and look to increase trading profits by just increasing the reward risk ratio, while keeping the win rate steady. Order flow trading can do that as well.
The typical trader experience is that if you start trying to catch bigger trades, thus bigger reward risk ratio, your win rate will start to go down, sometimes drastically. That happens with all trading systems, including order flow, but again order flow trading is much more resilient and flexible, and your win rate will not go down as much. The reason it will not go down as much is because your analysis and research can actually measure when order flow can be generated and thus move price.
While the other traders are just relying on attempting to catch bigger moves or increasing win rate using non order flow tools such as adding more technical indicators, tweaking them, stronger support and resistance, key moving averages, divergence, multiple time frame analysis, bigger chart patterns, bigger and clearer price patterns, etc.
Trader Analysis Rat Race
It is a very interesting rat race that many traders are in. I was in it for two years. Trying all sorts of fancy and elaborate things to escape. Some of them sounded more logical such as chart patterns, price patterns, round numbers, multiple time frame analysis. They sound and read more logical than some forex robot or fancy ichimoku. Which is why many traders go to price action trading after they are done with technical indicator overload. It is more logical. You had technical indicator overload which wasn’t working, so you start removing technical indicators and trading “naked.”
But there is the next step – removing the chart completely. Learning how to trade without charts. Of course I still use charts. They make life easier. But if I had to I could trade without them.
The Best Trades
Some of my best trades as well as historical greatest trades occurred based on information outside of the chart. Why? Because the charts can be deceiving at times. There are times when everyone following the charts are loaded up in the wrong direction, but a trigger happens outside of the charts that causes disaster for all the pure chartists. Their stops get hit, massive liquidations. Fundamental value and sentiment changes. Macro funds are clamoring for the exits. Other macro funds are clamoring to initiate fresh positions. Massive order flow as a result.
Go For The Jugular
Part of having a trading methodology, approach, and mindset that has unlimited growth and potential means knowing when to go for the jugular at various points in your trading career. What does going for the jugular mean? It means knowing when a particular currency pair or financial instrument is setting up an extremely high probability and high reward risk ratio opportunity. Extremely high probability as to the point of almost being obnoxiously high. A trade that some people may find objectionable because you made “too much money too quickly.” These are the trades, where, assuming you can perceive them, you risk a larger amount that you normally would.
So if you normally risk 1-2% per trade, then because you are going for the jugular you may risk 4-10% on that trade.
All those things can be achieved with order flow trading. In fact, that is what order flow trading is perfect for. It is what it was designed for. Limitless potential because you are analyzing the very foundations of every market – order flow and liquidity. You are analyzing the various market participants that can generate order flow. You are analyzing various scenarios that can occur that can move the market.