Kam Dhadwar – Trade Execution & Trade Management

I get asked a lot about what I look for when executing trades and how to limit my risk. You need to understand the Market Structure and potentially setting up. You need to have a vision of what the market may or may not do in the future. Before you enter the market, you need to know where the market may go. Ari Kiev said, You must trade in the gap between where you are and where you want to be. You can use your perception of real-time activity to build confidence in the idea if you have a basic foundation in place. Individual trade is the most important thing to have in place because of this.

When it comes to doing business and getting into a trade, I watch Price and how it moves around my levels and areas of doing business. I watch the volume trading on the Bid and Ask.

It’s not enough to just watch and read the information, you have to feel it as well. This can be developed despite taking time and experience to learn. You will often hear me say that this feels like its topping, or its bottoming, or hitting bids well. That is how I get into the rhythm and feel of the market. Gaining Belief and Confidence in a trading idea is what trading price and order flow is all about. It’s important to use your feelings while trading. I look to get into a trade and stay with it as long as it looks good and the premise stays the same. I will get out if I develop a sense of doubt. If I really know what I am doing and the opportunity is that I have great confidence in, I should stay in the trade. You can always get back in if you make the wrong call.

Ensuring that you don’t just watch the order flow to make decisions is the secret to reading order flow and trading with it. You need to understand where price was trading in reference to the market structure and the opportunity that you are observing. Some novice traders will get sucked into looking for size on the tape and footprints, looking at Delta and making decisions on their own. This information is useful, but it is useless. Size trade is meaningless as there is a buyer for every seller and a seller for every buyer. 200 sellers hitting the Bid filled 200 contracts from Buyers on the Bid, so they canceled each other out. It is always zero sum. One decent trade is not enough to move the market. A competitive marketplace with many big players often trading against each other.

What is useful? I believe you should ask the right questions.

Who is becoming more aggressive? Is it the buyers lifting sellers offers, the sellers hitting buyers bids, the sellers absorbing the buyer lifting or the buyers absorbing the sellers hitting?

What did the market achieve after those orders were traded? Is aggressive behavior the same for those that appeared it, or did it just dry up? Why did it dry up?

What are the prices that are being rejected? Where and at what prices is acceptance occurring?

Developing a feel for the market is about having the right kind of thought process. The right questions influence the thought process. The market will give you the right answers if you hold the right questions.