Tulip mania. Any time there is an economic bubble that seems ready to burst — the Tulips get trotted out. It was March 1637 at the height of the Dutch Golden Age. Contract prices for the recently introduced Tulip reached meteoric heights and then the bottom fell out.
At one point, a single bulb went for more than ten times the annual income of a craftsman. These crazy times would quickly cause serious problems for the Dutch economy. All because the supply and demand basics of a tulip weren’t fully understood at that point in time.
In today’s market, when price is on a tear and leaving any given instrument’s intrinsic value — you have a chance to profit. With Order Flow Sequence Tracking, it’s like knowing exactly how to profit from the tulip boom — as well as its bust.
Tulip-like market conditions you want to see
The timing was absolutely perfect. Holland’s trade merchants were running voyages in and out of the East Indies with margins of around 400%. At the same time, the tulip was rising as a popular status symbol. It was different from any other flower known to Europe, with a saturated petal color that no other plant had.
And so the stage was set: Plenty of dough floating around and a rare flower to spend it on. A perfect supply and demand storm.
When price reaches extremes, or big news comes out, supply and demand gets tested. The bigger the swing, the more important it is to know exactly where the floor or ceiling is — and all of the levels in between. Not knowing this could mean that you’ll fall for a temporary hesitation in price’s move and get in on the wrong side of a swing.
Unfortunately, those dealing with the tulip craze had no idea where price was headed — or why. Thanks to Order Flow Sequence Tracking Intelligence — along with Supply and Demand — you do.
Why trades fail to recognize supply and demand conditions
According to British journalist Charles Mackay, one Semper Augustus bulb was going for 12 acres of land. Fittingly, he covered this in his book ‘Extraordinary Popular Delusions and the Madness of Crowds’.
When supply and demand is challenged to similar degrees, opportunity is created for traders on both sides. For millions of retail traders, the usual plan is to look left and attempt to spot prior support and resistance levels.
This often results in trades that end up in ‘no man’s land’ which price doesn’t respect, and barrels right through. If the tear is strong enough — forget about using a lagging indicator. Those usually fall for any hesitation in price.
To stand a chance, you need to know exactly what the institutions are doing — and what support and resistance levels you can count on.
Spotting burst conditions can lead you to a Dutch trader’s profit
Tulip traders were making and losing a ton of money at an astonishing rate during the boom. A decent trader could earn up to 60,000 florins in one month — or about $61K (adjusted) — and the government couldn’t do a thing about it.
Then the shoe dropped. A buyer stood a seller up when it was time to pay up — and within days the tulip bulbs were worth a hundredth of the peak value.
Unlike the buyer left holding the bag, you can spot the end of the bubble before millions of retail traders. Real-time supply and demand takes historical boom/bust price activity and flags the support/resistance zones for you directly to your chart. These give you levels to monitor for reversal locations.
Note the ES chart above. When price bails for a new level, notice how it respects the zones marking previous activity. When it finally bottoms out, you have a zone waiting for you — marking the ultimate support point.
An outstanding element when watching price barrel towards a new level: the ability to see what zones have in fact been tested/verified. This puts you in a position to prioritize what you’ll ultimately start with for a location opportunity.
Confirming the burst before making your entry
Booms and busts catch millions of traders off guard every minute. Trying to profit from them can be risky business — especially if you’re leaning on homemade support and resistance levels — or worse, a lagging indicator.
When watching price approach a zone, you have the added benefit of Order Flow Sequence Tracking to confirm your entry. Once a zone is identified, change your view to include Order Flow Sequence Tracking so that you can see the real-time buy/sell positions as they are assumed.
When the prevailing positions start to back off in the form of tapering volume on that side of the candle — you’ll have the confirmation you need to plan an entry.
Profit from booms, busts and everything in between
It was Ogier de Busbecq who first introduced the tulip to Europe. As ambassador for the Holy Roman Emperor to the Sultan of Turkey, he sent the first bulbs and seeds to Vienna in 1554. Who would have guessed the craze this simple gesture would incite?
Unlike the better part of Europe, you can spot tulip booms and profit, both as price takes off, and when it comes back down to earth. Simply keep an eye on the Value Zone and watch for breeches. If price rockets through — in Dutch tulip fashion — watch for it to hit a Supply and Demand zone.
Plot your entries at these points of reversal, and then monitor Order Flow Sequence Tracking for signs of fatigue. When you have tapering activity — and an S&D zone — you’re ready to enter.
Confidently profit from both the boom and bust of profit while others anguish.
Noft Traders offers a Funded Trader Program. To learn more, visit their informational page at NOFT-Traders.com.