Day Trading Software helps you trade with the “Smart Money.”
The right day trading software can make the difference as to whether you succeed or fail in trading.
Day trading is very competitive, so you absolutely must have an edge in order to succeed.
SECRET:Â Some trading software will show you the BIG orders – what the professional traders are doing (the smart money).
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Day Trading software is very important because youâ€™re in a competition. Hi, this is Doctor Barry Burns with Top Dog Trading and today I want to show you one feature to look for in day trading software and if you already have it, fantastic. If you donâ€™t, well you might want to consider switching platforms to get this because youâ€™ll be at a competitive disadvantage against those who do have this day trading software in this very competitive market.
So here it is, and I donâ€™t sell this by the way. So Iâ€™m not selling you anything here today. Just inviting you to go out and look for it. Iâ€™ll tell you a couple of platforms that already have it. And it’s called the Block Trade Indicator on your charts. So that up here is we got of course our market, and then weâ€™ve got the modifying stochastic here.
Now in the bottom panel, I have these histogram lines as you can see. This is volume down here. Now you may ask, “Wait a minute, how come there are not volume bars underneath each one of the price bars?”
Thatâ€™s because these volume bars are measuring only the smart money. So we are not looking for the dumb money, we want to trade with the smart money, obviously. So this is one way that we do it. Now let me tell you that a lot of people will talk about this, how to track down the whales and trade with the institutions and all of that.
HOW THE RIGHT DAY TRADING SOFTWARE HELPS YOU FIND THE “WHALES.”
First of all letâ€™s put aside some misunderstandings there. That is not as easy as most people say it is. And the reason it isnâ€™t is because the whales, the institutions, the hedge funds, all these big you know pension plans. They know that we are trying to track them and they donâ€™t want to be tracked.
So they are constantly hiding their orders, bringing them in through various markets, various exchanges, different size, in different times through accumulation techniques and so forth. They’reÂ making it hard for you to track them. So I am not going to focus on them, what Iâ€™m going to do is focus on, again what I call the smart money.
We can pull up a time and sales window. Thatâ€™s what’s over here on the right. Alright this is Tradestation. Tradestation does have this stuff I’m talking about. This day trading software is Ninjatrader by the way. Now those are the two platforms that I use.
USING THE TIME AND SALES WINDOW FOR DAY TRADING
In the time and sales window, what you see is obviously the four columns here. Time, type you could put bid, ask, buy, sell. I only am interested in the actual commitment of money. Iâ€™m not interested in the bids and the asks. I take that out, I filter that, and I only put in the trades. Now we want to see the actual trades where people are placing their money, because people gain the market with bids and asks.
You canâ€™t really trust those anymore. So want to see where they have actually committed their money with actual trades. Actual buying, actual selling. Then in 3rd column, of course you see price and in the 4h column this is the key now. Youâ€™ll see the size of each order. So this each row is an order. An independent order.
THE TRADE SIZE THAT MAKES THE DIFFERENCE
Now I filtered again out all of the orders that less than 20 contracts. This is the NasdaqÂ 100 futures. So now, how do you determine what size? I want to only see when people who are trading relative size are trading. When are they coming in? And that will plot the volume on the bottom of my chart. Now how do you determine what size?
What I want to do is track all the big institutions, identify them and break them out. They’re hiding their tracks. They’re covering their footprints. So what I want to ask myself is this very simple question. An average amateur trader someone who is losing money unfortunately. How much are they trading? Whatâ€™s the kind of size are they trading? Now they might trade one contract, maybe 2, 3, maybe 4, perhaps. 20? Not so likely. Not so likely.
So we’re not only capturing the institutions here, we’re just capturing people who are trading big enough accounts with big enough size, that the odds are, they’re probably making money at this point in their lives.
Alright, now is that always a 100% true? Of course not, of course not. Everything we do in trading is about a probability scenario. None of it is a certainty. So we are just looking at the odds, whatâ€™s the rule, not the exception. Thereâ€™s always going to be exceptions to every rule.
HOW TO USE THIS DAY TRADING SOFTWARE TO MAKE MONEY
And the way we make money is not with any one of these things. This one thing alone will not make you money. But it’s another piece of evidence to put together to build a case for taking a trade, to get the preponderance of the evidence. Iâ€™ll show you exactly how we do that.
Now you can do this on time and sales, and most day trading software does have a time and sales window that you can pull up and see this. Some of you can filter out the smaller size trades, some of you canâ€™t. Youâ€™ll have to talk to your day trading software support teamÂ about that.
TRANSFERRING SIGNIFICANT TIME AND SALES TO AÂ CHART
What I like is, I like to then transfer that over to the chart. If you canâ€™t transfer it over to the chart, another thing that you could do is you could simply create audio alerts. So that when an order of a certain size, magnitude goes through the market, you get an audio alert. And that way you donâ€™t have to be eyeballing to windows back-and-forth.
So here we go, okay. And now it will also show you the relative size, so here we get some larger orders coming in. and where do they come in? They come in right at the bottom of the market. Thatâ€™s one of the common things youâ€™ll note.
HOW TO READ BLOCK TRADES ON YOUR CHARTS
Look for these in 2 places.
- Cycle highs and cycle lows.
- Break outs.
BLOCK TRADES AND CYCLE HIGHS AND LOWS
Now, and then letâ€™s talk over here. Here we get a cycle high. Oops. There we go. And okay we get little professional volume coming in here at the cycle high.
Then we get accumulation pattern in here and this is one of our trades. We call that the second retrace in the trend trade. You know I have my wave counts up there, thatâ€™s automated in my customized day trading software.
So, and where is it coming in? Itâ€™s coming in right at the cycle low here. Here is your cycle low. Then we’re retracing to support, and we are putting in a wave low. Second retrace in the trend wave 4, and this is a super high confirmation then.
Then weâ€™re saying okay weâ€™ve got several things. Weâ€™ve got the price pattern, second retrace in the trend. Trend is up. Weâ€™ve got support, thatâ€™s the 15 EMA by the way. The black line. Weâ€™ve got a cycle low. Weâ€™ve got professional volume. See again preponderance of the evidence, and we also have a nice 2 bar candle stick pattern there. And thereâ€™s a few other things.
2. BLOCK TRADES AT BREAKOUTS
Break outs through support resistance. So for those of you who are breakout traders and you are getting lot of false break outs, adding this to your charting software can dramatically help increase the number of real breakouts you get and help you avoid false breakouts.
If a breakout isnâ€™t accompanied by professional traders, it’s probably not going to fall out through for 2 reasons:
- The smart money is not trading it. So it’s probably not a smart idea. And it’s not a good trade.
- The professional volume in itself helps to create that momentum to sustain the movement. So we get the big movements down here.
I do have day trading software for that by the way. If you are interested in that. And then again notice the relative size. Thatâ€™s important as well just because one professional or some other professional trader comes in and trades, doesnâ€™t necessarily mean it’s going to be a winner.
Hey professional traders have losers too. Right, I lose sometimes, not all my trades are winners. So again this is not going to be a 100%. But look for preponderance of the evidence. Wait a minute, we are getting quite a few professionals coming in, and now we got a lot of them coming in. a lot of big trades coming in.
By the way if youâ€™re interested in the cycle indicator, I can give that to you, just send me an email. At Barry@TopDogTrading.com, and Iâ€™ll tell you how to get that. Have got a webinar that we offer and teach you how to trade as well as give you the indicator.
Now one last thing I want to point out as I said I like to always be very, very transparent and very open and clear about these things. And I’ve been around this industry for too long to not make you aware of all of the pluses and minuses of things.
So look at this place right here. Now that is another one of our trade setups, thatâ€™s the first retrace in the trend. Beautiful pattern, perfect setup for what we look for. However youâ€™ll notice that there’s no professional trade volume coming in. well how could it go up without professional trade volume? Well it can, well it can. So it’s just like I said, this one thing is not enough to trade with. It’s not always right, it’s not always wrong, but it does add to the probability of success with the confluence of other things.
So can the market go up and continue? Can you get a good trade set up even if thereâ€™s no professional traders on board? Absolutely. And thereâ€™s a couple reason for that.
WHEN IT DOESN’T “WORK,” HERE’S WHY
Professional traders are not always trading the same signals we are. But here is another one, guess what. Remember over here. They already got it. Over this, they are already there. They got in early. And we have ways of taking you know, the end of trends as well. Trend reversal trade as we call them.
So this would be the next opportunity after the trend reversal trade. Trend reversal trade is the best reward risk ratio trade there is. But it doesnâ€™t have the highest win loss ratio. So first retrace in the trend getting in a little later. Waiting for the trend to be actually confirmed. You’re getting a higher probability trade, but you are getting a worse price. Because you are waiting longer for that confirmation. Less risky but also the reward is not as great.
This is the final one. This would be the last one we take in the direction of the trend, and again high probability but see look how much price action you have already missed. So thatâ€™s it.
WHERE TO GET THE DAY TRADING SOFTWARE TOOLS
Ask your day trading software provider if they provide time and sales windows.
Also ask if you can filter that, you got to be able to filter it, and put audio alerts on it. And also if they provide block trades, block trade indicator that can be put in your chart and if they donâ€™t, here is one more tip.
If they donâ€™t provide it, go into the forums of whatever day trading software that you use. Thereâ€™s often user forums there and quite often people will create indicators and offer them to the community for free. You can type in the search box during the forum, it’s usually free.
Type in the search box for block trades or things like this and do a search on it or just post to the forum, and ask people, hey does anybody know if this has been created for this charting platform. Iâ€™m interested in it.
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