Trade With the High Rollers by Spotting Block Trades

It’s not the ten gallon hat. It’s not the Texas-sized smile. It’s not even the unmistakable swagger that comes with being one of the world’s most successful poker players. No, you don’t even need to lay eyes on him to know he’s there.

It’s Doyle Brunson, and he’s just walked past the velvet ropes into the high rollers’ lounge. Oh, if you could only play this guy’s hands right alongside him. Fold when he folds and roll when he rolls. Heck, you don’t need to see every hand – you just need to know when he’s going in big. If only.

By seeing block trades, you can spot these moments exactly when they occur – effectively knowing when the Doyle Brunsons of your market are going in, in the form of institutional traders. Spot these moments and make your move for profits.

Big moves that are missed by most retail traders

A big part of the myth perpetuated about professional poker players is that it’s a sport of guts and swagger. While that’s partially true, more often than not they’ll tell you that it’s a matter of math and patience. It’s not a matter of simply going after a weak player’s hand – but rather waiting and then knowing when to strike.

Knowing when to strike is something that most (if not close to all) retail traders simply don’t have any intelligence on. Like an amateur poker player, they’re often reading the market and going with their gut – or they’re waiting on a price-based signal to show them the way.

Worse yet, they have no visibility whatsoever as to the big plays being made by the high rollers at the table. It’s like playing a hand, with no visibility as to what the rest of the table is doing. The minor exception being in the market: the high rollers, namely the institutional traders, can change the game with their volume – if and when it suits them.

Much of this can be alleviated, simply by having visibility to the big hands that are being played at different price levels.

Sledgehammer positions that will crush your account

If you’ve watched the World Series of Poker, you’ll recall the final hands as they’re played in each successive rounds. The moves made are not dainty little grace notes designed to show the elegance and serenity of the game. They are sledgehammer blows designed to knock the opponent out – and they are delivered with the sheer force of millions of dollars in positions taken.

The same is true with institutional positions taken in the market. Thanks to Order Flow Sequence Tracking, you can see these big positions as they’re assumed in the form of blocked trades. Simply put, blocked trades are flagged when positions are taken with multiple contracts over a preset threshold.

Don't be blindsided by the big hands played at the table that drive price!

In the ES chart here, the blocked trade setting is at 500 – for buyers and sellers. When the threshold is broken, the tick/price level is marked on both the buy and sell side respectively. If you’re looking to avoid getting steamrolled, this perspective is an absolute must – especially when monitoring a market swing.

Trading with the big hands to pad your bankroll

Pro players will tell you that poker is a ‘long grinding game of patience and attrition’. It’s because of this tedious waiting for a hand that’s in your favor that professional players only bet 20 percent of the hands they’re dealt. Think about that – 80 percent of the time they’re simply watching – but when they go, they go big.

Understanding that the same logic applies to an institutional trader’s strategy – then you’ll really want to know when they decide to make their move. Flagging big moves when they’re made will put you on alert that there’s something afoot at the table of the market – and that you should be ready to move.

Looking at our same ES example, it’s no coincidence that after a block move to sell at a particular price level, price turned around and went the other direction. Monitoring blocked trades at pricing extremes can key you in on high-probability reversals.

At the same time, blocked trades that follow the direction of a trend – in the middle of a bar/candle – are excellent indications that the institutional traders are interested in driving a continuation.

Take block trades head-on at your peril

Among the unforgivable mistakes that will cost you at the poker table with a pro: taking a knife into a gunfight. For instance, a bankroll of $500,000 may be considered sizable to an amateur, but not to a pro who’s been on the circuit for some time. As a result, when the big pots come up, the rookies simply get steamrolled by the larger chip counts.

The same is true in the market. Your everyday retail trader’s bankroll is no match for the resources and positions being taken by institutional traders. Yet, every day, every minute, in every market – a retail trader is unknowingly trying to go head-to-head with an institutional trader and his/her resources.

Somehow seeing a block trade – or even a series of block trades – as a reason to go in the other direction, or take the institutions head-on, is an excellent way to clear out your account. You may gain more satisfaction by simply burning your bankroll on a winter evening to stay warm.

Reduce your risk by running with the high rollers

“Failure should be our teacher, not our undertaker.” As a poker icon of our century, Doyle Brunson managed to win two World Series of Poker bracelets for the main event – and ten in total. He was the first to earn $1 million in poker tournaments. Needless to say, when he made a move – you paid attention.

Don’t let the big moves slide right under your nose. Bring blocked trades directly to your chart and keep your eyes peeled when they take place. Make sure that you have the right setting so as not to be distracted by moves that aren’t really that big for your market.

When they take place – extend the price levels on your chart and keep an eye out for price to revisit that same level. When it does, be prepared to make your move. Keep an eye out for price to revisit these levels with regularity and be patient with your exit.

Trade with the high rollers and take your profits right alongside them.

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