We have lots of conversations with traders in our PATHWAY about how to “stalk” trades….forcing the auction to come to them.
There are 2 keys ideas at work here:
- Not every price is actionable…there are better prices to be active
- Not every time is actionable….there are better times to be active.
To give you an idea of what that looks like….watch this video I shared with our team early in the session. This was during an “inside” day or non-convicted auction that had binary events in play later in the session….
To further illustrate…..I also posted this screenshot in SLACK to illustrate the expectation based on the developing “bell curve” that suggested we need to trade down toward the naked VPOC at 3690 to repair the imbalance….
Here’s the expanded market profile graphic after the close. Note the push into (and back above) the 3690 price and back to 3710 by the close. The “imbalance” in the profile was repaired. The bell curve was completed and sellers were exhausted. With the developing value above at 3710, we had a good first target to achieve with acceptance back above 3690 and tight risk below.
When you look to be active in markets….consider how you can exert some control over the auction by dictating the conditions that favor you. Not every price is as good as another. When the auction is thick or imbalanced….feel the freedom to let it express and get away from the noise where the targets and price action is cleaner.
Here are skills you need to have to be able to “stalk” effectively:
- Be able to read the auction inventory and know the “likely” destinations based on how the auction is currently trading. Remember….the bell curve is your friend!
- Know which prices you want to be active at….in advance of reaching them.
- Know when you want to be active. Remember most institutional activity is in the first and last hour of the session. Lunch time (12-2PM EST) can be particularly tricky.
- Have an idea of how you plan to express the trade, should the “likely” behavior become realized.
- Have the patience and confidence to wait for the auction to come to you.
- Rinse and repeat.
If any of these are not in your toolkit…..consider one of our development pathways.