Ensure That A Clear Price Action Signal is Setting Up

Before you trade, it is advised to have a methodology that you are comfortable with for mapping the market and determining potential price projections.

If you do not already have a methodology for mapping the market, consider using Ludwig Levels on a larger size bar chart along with the Sceeto's order flow algorithms.

Using these tools will allow you to determine upward and downward market direction, major and minor support/resistance, conclusionary order flow, and the strength of trends.

Price Action and Order Flow Should Be Congruent

Important Order Flow Nuance - If the market is in a tradable uptrend, then Demand-Based order flow should cause price to go up, while bouts of Supply-Based order flow should create Bear Traps.

It is this logical response of Price to Order Flow events that we refer to as ‘Congruent’.

Our ability to determine whether Price Action and Order flow is congruent is a key factor in our ability to logically deploy bots.

If the market is in an uptrend and Demand-Based order flow trap the Bulls, or if Supply-Based order flow events invoke downward price moves, the uptrend is suspect and should not be traded to the long side until, and only if, evidence of Conclusionary Selling is confirmed by upwards price movement.

If in an uptrend, a The Tick of Death (TOD) High creates a downward lunge with an Upward Book Pressure Spike breach, the uptrend is suspect.

- For more information on these concepts see, “The Tick of Death [TOD] Is Now Your Trading Buddy” and “Breach Points” - But don’t jump ahead just yet ;-).

I have found it helpful to have multiple charts for the same instrument using varying sizes range bars from very small to very large.

The larger the bar, the cleaner the picture.

However, small bars can give more precise entries and order flow tells more precisely as to when 'the bottom fell-out', or when 'they got trapped'.

- More details are explained in the chapters, “Multiple Time-Frame Analysis”. 

Also, using multiple range bar charts for one instrument will more help you identify when price action and order flow are congruent across a substantive trend as this cannot be determined on a smaller bar size.

It is during these substantive trends that I have found both more frequent opportunities to deploy bots, and also the  basis to push an existing trade’s targets out further.  

Throughout the remaining chapters, I will point out instances of both congruency and incongruency, between Price Action and Order Flow.

Once your eye us trained to observer each of these modes, you will have a clearer idea of when potential bull and bear traps are set.

Knowing of these potential traps before they occur, will allow you to deploy a trading bot configured to take advantage of these traps.

If the trap is sprung, your bot will pounce within a millisecond.  

If the trap is not sprung, your bot will simply orbit the market until it turns itself off, or you turn it off.

When to Stand Down (Which is much of the time)

Stand down when the market is in chop and / or, the market is providing false signals.

If buying comes in and price moves up but immediately reverses, and then selling comes in and price moves down a bit but then moves up a bit, but only takes out a recent high then goes back again, the market is telling you that there is no clear direction.

Having no clear direction is an important tell.  If the market does not know what it is doing, then we as analysts do not know what the market is doing.

During these occasions, it is best to stand down and wait for clear signals of market direction.

In a nutshell:

if the market is not doing anything, don't bother to deploy Sceetos.

If the market is moving up, consider deploying Long Sceetos.

If the market is going down, consider deploying Short Sceeos.