Most of us middle-age guys have been there. Out on the dance floor having fun with our best honey. Then, we happen to look around and realize that our best moves seem to be out of step with the music…and everyone else.
We decide that discretion is the better part of valor and make a quiet retreat to our table. The worst case scenario is that we suffer just a slight bruise to our pride and maybe a good-natured poke or two from our honey.
Unfortunately, when it comes to trading in our futures accounts, being out of step with the rhythm of the market and the volume of the music can bruise a lot more than our pride. It can crush the value of our trading accounts.
Now, not all of us can learn to dance like Kevin Bacon did in Footloose, but we can learn to keep our futures trades dancing in perfect time with the market’s tune so our portfolios never miss a beat.
What Is The “Rhythm” Of The Market?
On the dance floor, the rhythm of the music flows with the beat and the volume. The intensity of the tunes is determined by the professional DJ that makes the adjustments to the soundboard and controls the volume.
The volume rises to increase the intensity of activity and falls when the mood becomes more subdued and the action slows.
The volume of the futures markets works the same way. The difference is that the volume is the trading volume and it is what controls the beat (or movement) of the dancers (traders).
In the futures markets, the volumes are set by the flow of professional and institutional money rather than the DJ at a sound board.
Why Pay Attention To The Volume Of The Music?
Out on the dance floor, the volume of the music alerts the expert dancer to what to expect next. Louder music and a faster beat means the intensity is increasing and the excitement is building.
In the futures market, technology allows traders to view the volume of the institutional money flow as if they are the DJ controlling it. Using this visual soundboard can show them building opportunities being created by the institutional DJs.
Good DJs control when the intensity is building and when it is waning. They will adjust their selections and volume to manage the emotions of the dancers. Institutional order flow does the same thing in the futures markets.
Traders can use technology to position their trades around peaks and valleys in interest so they move with the beat at all times.
How Can We Tell When The Volume Is About To Change?
Really good dancers know to keep an eye on the DJ and observe their actions. When the hands are moving on the control panel, they are adjusting the volume and they position for change.
Experienced futures traders know to keep a close eye on the volumes as well… the order volumes. When the volume is high, the institutional money is on the dance floor and the beat goes on.
As the institutional DJs begin to lower the volume, the momentum slows and the action starts to move the other way. This chart shows how the sound board display might look to the DJ or audio engineer.
So, You Don’t Think Your Orders Can Dance? Think Again!
Let’s take our view of the DJ’s sound board above and display it as the order execution volume chart that it really is. But, let’s add in the price chart of the market that goes with it.
When you are viewing this chart, notice the way the price moves so smoothly with the order volume?
Even If You Never Learn To Dance, Teach Your Trading Account How!
You don’t need to be able to Dance To The Music when you are out at the club in order to make your futures trades stay in time to the volume of the market. You just have to learn to use technology to keep your trades in step with the rhythm of the market.
When your orders are positioned to dance along with the volume set by the institutional money DJs, your trades can become as smooth as the best dance moves around. Quite a change from where we started out, isn’t it?
Like me, you may never be able to impress anyone by busting great moves on the dance floor. But, isn’t it better to be able to bust out profitable trades in your futures account? Then your trading account will look like this at the end of the day!
If you are not using the latest technology to follow the volume of institutional money flow in the market, maybe it is time you did. If you want to learn more about how this works, our NOFT program teaches you how in a step-by-step approach.
Noft Traders offers a Funded Trader Program. To learn more, visit their informational page at NOFT-Traders.com.