It had been on your bucket list and seemed like such a great idea to you and your friends. Yet standing there in Pamplona, Spain, you now realize the danger is very real. Someone is going to get trampled, or worse yet – gored.
Sitting in the relative safety of their office, most retail traders come to this realization about price – only after it’s all too late. Buyers or sellers have taken over – they’re on the wrong end of a trade that’s already been trampled.
For, as exciting and profitable as it may seem, when price goes on the run – it’s deadly for most. Using stacked imbalance alerts within Order Flow Sequence Tracking can keep you from getting run over – and instead put you in a position to profit. You just need to know what to watch for – and should probably avoid wearing red.
Why most retail traders get trampled by running bars
If you’ve seen the pictures, then you know the insanity that is running with the bulls. It’s the kind of death-defying event that could only be found in a proud, glorious Spanish town. 1,200-pound bulls are tearing through the streets – leveling everything in their path. Get in their way – and you too are going to get leveled. With any luck – you’ll live to tell the tale.
Yet, every day, retail traders get leveled. They unknowingly stand directly in the path of not just one bull – but the equivalent of a thousand bulls in the form of institutional traders. When they go on a stampede, price goes on the run – and retail investors unknowingly making entries get trampled in the process.
Lack of visibility is the primary reason most retail traders get gored. They simply don’t know when institutional traders are getting ready to run. As a result, they have no idea what’s driving price, or how powerful the force really is. It’s like running with the bulls blindfolded and with earplugs in.
Signs there’s going to be a run
It’s the second rocket you need to watch for. When the clock on the church of San Cernin strikes eight in the morning – keep your head on a swivel. The bulls are coming. Hey, look at it this way – the run only lasts three or four minutes… unless one of the bulls has been isolated from his companions.
Instead of watching for rockets and charging bulls, you only need to watch the imbalances – thanks to Order Flow Sequence Tracking. These alerts tell you not only whether there’s a run underway, but what direction it’s headed.
You can spot imbalances easily, not just because they’re bold – but because they’re big. Big in that they enjoy a 300% size advantage over their counterpart on the other side. They are created when institutions assume buy or sell positions en masse. Check out the bar to the right. The blue bold imbalances on the right – those are buyers running over sellers. Check out those margins (also called deltas).
It’s no coincidence that 4 buy imbalances (captured in the imbalance summary) drove price up. Something you’d want to know if you wanted to keep a sell entry from getting gored.
Opportunities for profitable continuation entries
If you happen to be standing just outside the gate before the bulls are set loose – be prepared to sing the chant. It’s in Spanish, and you don’t need to know the words to understand what’s being said. You’ll be asking the patron saint, San Fermin, for a little help with the bull run. Not a bad idea.
No need to tap San Fermin for a hand when you have imbalance alerts handy. When you see one imbalance – it should have your attention. The bar is stomping a hoof and lowering its horns. When you see two or more – price is going to run. You can either get on board, or get the heck out of the way.
These moments can present opportunity when looking for continuation trades. Watch for big runs followed by brief pauses in the action – usually at an Institutional Trading Level or a long-term Volume Rejection Level. Once price revs back up, with more imbalances – you can get back on board.
Check out the impact the imbalances had in creating the continuation opportunity in the ES. Note the initial acceleration – followed by the pause – and then the run. With each big push the imbalances fueled the run – as the green arrows point out.
Better to run with the bulls – or institutions – that are driving price… than get trampled in the process.
Avoid getting gored by using long-term levels
Plenty of proud bullfighters have been gored, meeting their fate in front of thousands of horrified spectators. Those who have been gored by a charging market would tell you that there’s no safe way to run with price.
If you’re doing it blind, yes – it’s a great way for your account to meet its fate. This is where macro levels like Institutional Trading Levels and/or Volume Rejection Levels come into play. When price is on the run, you should mark these places as your opportunity to enter the fray with institutional cover.
Price, no matter how hard it’s charging, respects these moments because they’re grounded in long-term performance and the truth of volume. Note our ES example. Our run heads straight into another Institutional Trading Level – and stops dead in its tracks – either for a pause or a reversal.
Don’t run with the bulls unless you have institutional cover.
Experience the thrill of profits by safely running with price
Last year an American was gored in the leg, while five other runners were injured, during the Pamplona San Fermin festival. It was a horn through the thigh after one of six running bulls crashed into a group of runners. They were lucky to get out alive.
Don’t suffer a similar, uninformed fate when dealing with raging price levels. Instead, run with price as it makes its move by spotting stacked imbalances. Any time buyers or sellers outpace their counterparts by a margin of 300% it’s something to pay attention to. When they do it in successive price levels, you should be ready to make your move.
Keep an eye on imbalances with the imbalance summary at the top of each candle. When they stack, note the highlight – and be prepared to make your move. Ease into the stampede by monitoring the COT and making your move at the start of the next bar. As price accelerates, keep an eye out for any shifting directions – specifically Sequential Decline or Responsive activity – on the other side. Those are your clues that an exit is imminent.
Run with bulls and bears alike, taking your profits along the way from a place of safety – while everyone else gets gored.
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