Everything you've learned about trading is wrong...

In this episode of the Order Flow series, I'm going to recap and review all the past lessons about order flow trading. I'm going to go into the best day trading strategy to use. If you're just starting out. I'm going to go over to stop relying so much on candlestick charts and to start relying more on the order flow and the volume data. I'm going to go over three very key tools to use that I use on a daily basis to make buy and sell decisions off of and then I'm going to talk about support and resistance and how we can use support and resistance the right way. That way we put ourselves in the shoes to think like like institutional traders or smart money and stop trading like a retail trader. If you think about it, if 95% of retail traders lose, we can't trade or think like them. We have to think about other traders who are succeeding in the market. That way we can be more patient and trade like smart money or institutional traders. I firmly believe a major concept to a lot of traders struggles is they're using volume the completely wrong way and I want to dive deep into how I use it the right way and to put ourselves in the shoes and follow the footprints or the footsteps of other large big pocket traders. By doing this, we're going to be able to get great confirmations and I want to talk about how I get really good risk to reward ratios. A lot of my trades are 5 to 1, 10 to 1 risk to reward ratios and I want to talk about what I look for to actually click the buy or sell button. And I want to talk about what I do to exit the trade when my target hits. If you're new to the series, this is the final episode to the series which is going to review and recap all the past seven episodes. I would recommend clicking the links in the description below if you want to go back to a specific video that's going to dive deep into the information that I'm going to go over in this lesson. But without further ado, let's get right into it. So once I started to view the market in terms of an auction, that's when a lot changed in my trading. Just think about this for a second. The stock market is very relatable to any other auction. Real estate, cars, watches. You have other buyers and sellers transacting in that auction. Whether you own a home or you're looking to buy a home, whether you're looking to own a stock or sell a stock, you have other buyers and sellers Transacting. And in real estate, you have buyers who are willing to bid, you have sellers who are willing to offer a price for their house for sale. And imagine you own a stock and you're offering to sell your stock at $1,000, or maybe you're a buyer of that stock and you're only willing to pay $900. So when you view the stock market and you review candlestick charts as an auction, that the candles were portrayed from how prices are being transacted from other buyers and sellers. Similarly to real estate, cars, watches, this is when the edge and the information the market's providing you, you will start to look at it a little different then be able to form better, high quality setups. In fact, back in the 80s, back in the 90s, before technology was a big thing, the stock market before you had all these candlestick charts and all the computers and all this technology, you would have thousands of other traders in the pits, in an open outcry system, literally raising their hand or shouting that they're willing to buy or sell. Just like you would see in a housing auction if you ever gone to a foreclosure auction in real estate, you will see other people raising their hand to bid for that house, or you'd see other people willing to sell that house and you would have have other traders just like back in the pits, yelling, shouting, raising their hand, bidding, selling, buying, getting rid of a position, loading up. And this was before technology was a thing. Technology had made just candlestick charts and other information that we see on the screens, basically new information that us traders can use to our advantage. We have to use it the right way. And the right way is putting ourselves back in the shoes of a trader. Back in the 80s, back in the 90s, before computers were a thing. And reading how the orders or how other traders, if you see a guy in the pit sweating, you see him freaking out, you see him really nervous, you know that guy probably is in pain. And you could use that information to profit off of this other trader. And in the stock market and behind the screens, we have to use this information to our advantage to make money. Now think about this in terms of an auction. Let's just say we are willing to sell our house for $400,000. I own the house, I am willing to sell it for $400,000. Put a ask up there, I'm willing to sell 400. The only way I will sell my house for $400,000 is if a buyer says, hey Carmine, I'm pay $400,000. I don't want to lowball you. I don't want to bid for that house. I am willing to pay exactly what you're offering to sell that house for. And now we have a completed transaction. Now, let's just say the market comes up to $400,000 and I'm selling it for 400. My house is on the market for three, four months and no one is willing to pay $400,000 for my house. Well, as a seller, if I'm looking to get out of the house and sell it, I am forced to to lower my prices because no one was willing to pay $400,000 for my house. And because I'm forced now to lower my prices, this is going to react in the market in terms of prices coming down because no buyer was willing to buy for $400,000 of what I was offering. So you see how we can relate the stock market and how candles actually move to orders, facilitating trade and how candles represent how other participants are feeling about prices. Now think about this from a stock persp perspective. Let's just say you're willing to buy Apple and you're willing to pay $300 for it. Now, in a three month period, Apple stayed in this $300 range where in three months, this is where from 300 to 290 to 295. Then all of a sudden Apple increases its price. It goes up. And as it's going up, you have buyers are willing to pay 310, 320, 330, 340, all the way up to 400. And now you have buyers willing to pay who were once willing to pay at 300 are now willing to pay at $400. So when you view the market as an auction and you view the candles as just a way to portray the auction, this is when a lot changes. It is not looking at all these fancy indicators on your charts and saying, hey, just because the RSI says we're oversold, I'm going to get long. Or hey, just because rejecting this trend line and the RSI is about mid, I'm going to get short. This is not how the market moves. Think of it as a funnel. In the funnel we have water pouring in. And as the water is pouring in, we could have indicators, moving averages, rsi, whatever. We could have ict, Smart Money Concepts, Fibonacci. We have any algorithmic type of trading, regardless of what strategy or what instrument or whatever you use, regardless, at the bottom of the funnel for the water to flow through and the water to come down an order has to be placed, whether it's an algo, whether it's somebody trading off of ict, whether if it's other people buying off of indicators. Regardless, at the bottom of the funnel water is going through it. And in this case water is a buy or sell order. And our job to view the market, especially if you're short term trading, is reading these buy and sell orders. Because no matter what strategy, an order has to be placed. And being able to read this will give us the most organic, natural and non artificial way to trade and to view the market. Now on top of this, let's say the market's rallying up into a level of resistance or a level of supply. Wouldn't you want to know who is in control of price? The market's rallying up into a resistance level, Wouldn't it make sense to know if buyers or sellers are in control? If we're looking to short the market at a resistance level, wouldn't you want to know if sellers are in control? The majority of the losing trades come from if you're shorting the market and buyers are in control or if you're buying the market and sellers are in control. So us being able to know who is in control of price will help us take better setups and will help us avoid taking setups that we know beforehand has a higher probability of being a losing trade. So as the market's rallying into this level of resistance, this level of supply, I want to know is the seller strong up here at this pink box of supply where buyers strong at this pink level of supply, sellers are strong. I'm going to short it. If buyers are strong, I am not going to short it. I'm going to avoid taking this setup by viewing a candlestick chart. I cannot tell who is strictly and solely in control. Now I know a lot of people that are in ICT and these smart money concepts are going to say a candlestick chart tells me everything and I know who's in control via a candlestick chart. But I can tell you based off how I trade, based off of everybody else that I know on Wall street that everybody else has success with. Candlestick chart. And I could say this with certain does not tell you who is actually in control. A candlestick chart only tells you where price was and where price currently is. Now you can view candlesticks moving and maybe wicks and certain aspects of that by saying who's in control. But trul, the only way to know 100% certainty of who is in control and who is Moving price is by reading the order flow. And the best way to do this is by looking at volume by price, not volume by time. And a good, a good tool to do this with is a footprint chart. Now, this right here is a, is a picture and a screenshot of the footprint chart as the market is rallying into this level of supply. Now, without zooming into this, you're really not going to see much, but I want you all to compare a candlestick chart, which we could see right here, to a footprint chart. They look identical. The issue or the benefit here is that the candlestick chart, we don't know what's going on behind this red candle right here as it drops. We don't know what's going on behind this green candle as it's rallying into this level of supply. But when we look at a footprint chart, we can see the charts are identical. But now we can view information behind the candlestick charts in terms of reading the volume and understanding who is in control. Our sellers strong, our sellers weak, our buyers strong, or our buyers. We week now briefly, a footprint chart. And in the order flow series, I basically dive deep into all this information. I'm touching the surface of all the major points in this video. If you got to go back and Reference any other 7 other episodes of the order flow series, I would recommend doing so. I've linked the series in the description of this video. That way you could go and start at episode one and then end at this episode seven or eight. Eight is going to be the review. Now, inside of a candlestick chart again, doesn't give us the truest information. We can see all of the volume being transacted. We could see the high, we could see the low. Just like we can on a candle. We could see a open, we could see the close. But on top of this, diving deep, we could see on the right side of a footprint chart. Just by looking at the right side, we can see all of the aggressive buy orders coming in. And if we were to look at just the left side, we could see all of the aggressive sellers stepping in. So on the left side of a footprint, we see sellers, and on the right side we see buyers. Behind every candlestick chart is going to be transactions. Both of these charts are identical. Footprint charts enable me to, to see what's going on behind the candlesticks. That way I could spot how strong or weak buyers are where there's a large buyer, where there's a large seller, where there's absorption. And I could use this information to My advantage. How do I use this to my advantage? The number one most important concept to my trading is spotting absorption or spotting trapped traders. This is, I don't want to call it my holy grail, but this is what I look for on a daily basis. If I look for a lot of aggressive participants entering the market at a certain price but no follow through, it's a sign of a possible reversal. So very key here. Aggressive participants, a lot of them entering the market, but no follow through. So you see it breaking above a resistance level, right? We just broke above. And as it's breaking above, there's a lot of volume here, but there's no follow through. This is a sign the market may possibly reverse and sell off much lower. I could use this advantage in terms of an auction. In terms of an auction, if you see a lot of buyers pouring into the market but the market's not going up higher, that means the supply is greater than the demand. If the supply or the passive selling is greater than the demand or the aggressive buying, the market has only one option, and that will be to move down. And I could use this to my advantage to play a reversal. If the market has a lot of strong selling, so we're breaking under a support level, we're selling off, we're selling off. Support level breaks. And as we break this, there's a lot of strong selling. But when the selling's coming in, the market's kind of creeping up. It's moving up, it's moving up, it's trying to move up. This is a sign that a buyer is present in the market. And it's a good indication of a reversal to the upside, where I may look to take the market long despite all the selling. A lot of traders see selling and they try to sell the market. When I see selling, I'm first looking to buy the market, or if a lot of traders see buying volume, I am first to look to sell the market. Because when everybody else is buying, I want to be selling. To validate what I just said here. This is a trade that I took a $21,000 profit. And I really dive deep into this on episode number seven of this order flow series. This was a nine to one risk to reward ratio, a $21,000 profit. I risked about $2000 for this trade. I took the market long as it was selling off to the downside, and I took profits along the way to the upside. Now what we're going to see here is as the market's selling off, we see all of this Red on the footprint. And again, I really dive deep of this on episode number two of this order flow series of my custom footprint chart. Here we could see a lot of selling as the market is selling off and moving much lower. Now again, like I just said earlier, when I see a lot of selling but no downside follow through, this is a good indication that I am looking for to play a reversal in the market. Here we could see a negative delta of -7,35, another negative delta of -1171. On top of this, the cumulative delta bars down here are the highest amount of selling as the market is breaking the low of day. So we're seeing the market test new lows at the low of day with the highest amount of selling. Theoretically, the market should continue to sell off. Guess what? It does not continue to sell off. This chart right here looks extremely bearish, right? Nothing here looks bullish. Could you see anything off of this chart to take the market long right here? Honestly, let me know in the comments. Anything off of this chart? Could you take the market long right here? And I would say majority of the traders, over 50% of them probably would say no. But being able to read the order flow, seeing all of this aggressive selling and no follow through, and then seeing the buying come in after and seeing how strong the market gravitated upward and then all the buying, the blue coming in, the blue coming in, this is a reversal signal for me to take the market long. And when I see this selling, I am first looking to become a buyer. And this is how I was able to capitalize on that. Here's another $21,000 profit. This is a different trade. This was about a $5,000 risk, a 4 to 1 risk to reward ratio. Similarly, I am looking to spot large buying or large selling by reading the volume. This is a heat map. This is episode number three of this order flow series. As the market is rallying up, we could see a positive delta or on the depth of market year 4000 or a large green bubble which indicates large aggressive buying at 5812. This is something that I'm watching now because there's large buyers present in the market. If there's a large buyer in the market, put yourself in the shoes of that large buyer. You'd want to see the defend prices, defend him and he doesn't bring the market much lower because of that. Here we could see the market sell off into him. The delta gets smaller, which means he is getting filled and the market's trying to move down. But it's not moving down. So he got smaller. And now this large green bubble which we could see right here. Access support, multiple other attempts. This is on the heat map and this is how I was able to take the market long here. Saying there's a large buyer defending price. He's supporting the market. And now I'm looking to capitalize on an upside move. This is me following the footsteps of a large buyer and capitalizing on the order flow activity. This is what I don't want to call smart money does because that's kind of a term that's a lot of traders use in this trading community and I don't really like it. Also institutional type of trading, smart money trading, let's just call them patient traders, right? Patient versus impatient traders. Warren Buffett talks about this. That the stock market is a device from transferring money from the impatient. Let's call impatient retail traders and let's call patient traders more smart money or institutional or traders just with large potential pockets. Retail traders are struggling. They're not as profitable. Smart money is basically making money from retail traders and they are extremely profitable in order to have success in the markets. I don't want to think so much as a retail trader. If 95% of retail traders are going to fail, then we can't do what 95% of traders are doing. We have to think and trade like patient traders, like smart money. Because smart money is using the liquidity from retail to buy or sell. Because when they know other traders are selling, they are buying. Or when they know other traders, retail traders are buying. Majority of the patient traders or institution smart money are selling traders. Majority of retail. Impatient traders do not understand how dynamic the auction process of the market is. Retail and big money are the auction. Big money has a need to stay ahead of retail for their orders to be filled. They have to buy when they want retail to sell and they have to sell when they want retail to buy. The support level breaks you short the support level you are selling into. Other traders buy orders for the market to reverse. You stop out for a loss and other patient traders to gain and profit off of your pain and your mishaps in the market. Here's an example of the market selling off below a low into a level of demand. You are selling right majority of retail. If you don't know what happens next, you just see a downtrend. You see lower lows and lower highs. You're selling into an area of demand where this is a massive trap or an area where traders who are stopping out or getting Short provide liquidity for other smart money to be buying, especially in a level of demand. Supply and demand is the core to my strategy. And this is where I'm first looking to buy at a level of demand or short at a level of supply. If a majority of retail traders are selling into a level of demand where there are smart money traders or patient traders trading around, this is a good opportunity for liquidity to be picked up, for smart money to buy, retail to sell. And this is how we could capitalize on our upside reversal if we put ourselves in the position of smart money and if we don't put ourselves in the position of a normal struggling retail trader. Now, how does retail trade support and resistance is the most common trading strategy. I would say it's in every technical analysis trading book. My 80 year old grandmother could could draw a normal support resistance level, a higher low and simply trade off of or buy just resistance broke or short just because support broke. Easiest thing to do. It's what all the traders do now retail, since majority of them, let's call it lose or struggle, simply are buying when they should be selling. How many times have you entered a position and you said, hey, I usually am wrong. Let me just do the opposite. When I want to buy something, let me just sell it. Or when I want to sell something, let me just buy it. How many times have you gotten so frustrated that you're like, let me just do the opposite of what I normally do because that probably will make me money because I'm struggling. How many times have you stopped out of a position for a loss and then the market eventually moves in your favor? This is because you are are stopping out where you should be buying or you're stopping out where you should be entering. And majority of the time this becomes above a resistance level or below a support level. Now we have to make this very clear. And in episode number five of this order flow series, I dive deep into support and resistance and what makes a good support resistance level. Here we could see a clear resistance level of five different touches, five different points where the market had resisted. This general range up here. Now what makes this a good resistance level? It's reading the order flow and understanding that resistance forms because of the orders coming into the market. The orders influence why resistance forms. Resistance doesn't influence why the orders are there. So because point number one formed and because the market rejected this level was because there was a lot of buying activity but no upside follow through. And we could see this by a lot of green or a lot of Blue, positive delta or positive aggressive buying. If there's more passive selling than there is aggressive buying, market has to move down. And that's what forms point number one of this resistance level. Same thing. Point number two, all this blue, all this aggressive buying, the market sells off. Point number three, all this aggressive buying. And now the red steps in and the selling comes in and the market drops because of that. Same thing here. Point number four, all this aggressive buying coming into the market above a resistance level. This is a trap for traders who are longing this move for smart money to be selling. You see all of this buying and people will say, hey, there's tons of blue here, there's tons of buying. I should be longing this? Well, you have to ask yourself who is on the other side of the trade. If everybody is longing this, somebody has to be selling it. For every transaction there's a buyer and a seller. So if everybody's buying this, who is passively selling this? Rejecting the market. And it's the patient, big money, smart money, institutional type of traders, if you want to call it that. Also, it's all about spotting obvious versus non obvious things. Spotting non obvious things before they become obvious. My trading strategy revolves around fading or doing the opposite of what everybody else is doing. You will not see me do what everybody else is doing on Twitter, everybody else is doing on YouTube. I like doing the opposite because I know majority of traders fail. I know where their liquidity is or I try to position myself that when I know a lot of traders are stopping out and when a lot of patient traders are loading the boat, this is where the edge comes from, where majority of retail stops out and where majority of smart money patient traders are loading the boat. This is where I look to put my entry point. And we could read this with the order flow to validate what I'm saying here. How many times have you tried to buy a breakout on high voltage volume? How many times have you bought the breakout, the market reverses on you and you stop out for a loss. If you buy every breakout, you are positioning yourself to become trapped by smart money and you are giving them your liquidity. I am always looking for reversals on breakouts and this is the concept to my high volume reversal setup that I talk about in episode six of this order flow series. Again, link in the description below for it. So here we're going to see the market break above this resistance high. And what a normal retail trader would do is hey, we have a strong breakout, a strong green candle. The volume down here is increasing. The volume is moving up, the candles are expanding. We're seeing a strong green candle breakout above the resistance or above the high. Let me take the market long is what a normal retail trader would do. This is a high volume reversal setup because if I see the market breaking above a resistance level with high volume, I am first looking to become a seller here because I am putting myself in the position to trade with other patient traders who are looking to play reversals on breakouts. Why this high volume formed here is because the market broke out on strong aggressive buying. Strong aggressive buying volume with no upside follow through is a reversal signal where I am first looking to sell the market or be a seller and play a bearish position. And this was a trade that worked out really well. As the market dumped market broke the high. We could see a volume tail. I talk about volume tails in episode 2, 3 of this order flow series. And then we could see the red come in after after and the red step in as the market's selling off, validating that buyers are trapped here, validating that longs are stopping out as the market's dumping and they are providing liquidity for other smart money traders to be doing this. Now here the market breaks under the support level. Would you take this trade short? A lot of people probably would say yes. I mean, obviously, you know, you're 20 or 20 something minutes into this video and you're probably going to say no at this point. But a lot of traders, if you haven't watched my videos, probably would take the market short. Right? We're seeing the expansion red candles selling off to the downside. We're seeing the volume increase as we're breaking the low a day as we're breaking support. Everything here looks bearish, but this is a high volume reversal setup for me. If I see a lot of volume to the downside, but no downside follow through. This is a long signal for me to play a reversal to the upside and play a bullish position. Here we can see the market break the support level. We could see the strong red bubbles, the strong red selling, strong red volume. This is a high volume reversal setup where I'm looking to reverse and play the market long on a bullish position. And similarly to the earlier example example, we could see that a lot of selling down here as the market's breaking the low, the buying then increases and then the market reverses to the upside and I look to capitalize on that. Now on top of all this, it's not as simple as just seeing red volume, blue volume or buying and selling and getting longer short. On top of all this, I have my three pillars. I really dive deep on episode number seven of the order flow series on this about the three pillars to my trading, which is the CLC rule, context, location and confirmation. When all three of these align, this is when I get a very high quality trading setup. When the three pillars align, when the context makes sense, when the volume is strong, when it's at an important location of interest, supply, demand, support, resistance, and then I get valid confirmation. This is when I get my CLC rule in effect and I get very high quality trading setups because of that. And the only way to do this is focus in the now and focus in the present moment. When I focus in the now, not focusing on a time, but focusing on what the market's presenting me right now in the present moment via the order flow, via the volume, via the tape. This is when I get all the answers that I need. And if there's no answer, that's an answer in itself. Because that's telling me to sit sideline and not take a position off of that. Because the market's not telling me right now to take a trade that buyers or sellers are present. And the last point I want to get into is let's just say the market was rallying into a level of resistance. We have resistance, we're rallying into this and it looks really strong, like I showed you all earlier, but by reading the volume and reading the order flow, we're going to see a really large seller sitting here. Wouldn't it make sense to get short as soon as we see the seller get filled? It would make sense to wait for the market to dump to get short. It would only make sense to get short when the seller is present. And the only way we can really do this is stop relying so much on a time frame chart. I don't want traders who are short term traders. This is what I do. I don't rely on a time frame chart. I don't look at a 1 minute chart and say, hey, we're bullish here, we're bearish here. I look at the volume when I see the seller present and the volume tells me right now in the now moment, the now timeframe, the present moment, that the sellers there or buyers there, I'm entering. I'm not waiting for a timeframe chart to start selling off, to get, get short. Things could be seen. This is very key here. This is something that's I firmly believe in and I firmly trade with every single day. The best setups come from ones that cannot be seen on a candlestick chart or ones that cannot be seen on a time frame based candle chart. The best setups come or the best moves or best confirmations and best locations in the market to trade around are ones that are found only by reading the volume by price or the volume and the order flow or what the tape is providing us in real time. The best setups do not come from a time frame chart. Based off my experience and what I have success with to validate this all, let's just say the market breaks this high a day and as it's breaking above the high a day, 5044-5046-5047-5048, right? We could see the time and sales here as the market's breaking out at these levels here. We see a seller present here. So wouldn't it make sense to get short when the seller is present here versus getting short when the market does dumps and starts moving lower? It would make sense to get short here, not here. Right? And this is what the now gives me. When I see this activity, I'm acting upon it. I'm not waiting for the market to move already. I want to get in before the move. That way I'm in before the move which maximizes my reward and minimizes my risk. And this is how I trade. And this is the basis to this order flow series. So this is going to conclude episode number eight of this order flow series. This was basically just a recap and a review of all previous other episodes of this. I will link every other episode and the playlist to the series in the description below. If this is your first video you're tuning in, I would recommend starting from episode number one and going to episode number seven. I would also recommend subscribing to my channel and I really appreciate if you enjoyed this series. Drop a Like on this video. Drop a like on all the other videos and comment if you have any questions. I'll go through the comments and I'll answer any questions that you may have, but I'm going to end it on that note. Peace out.