Home > Lessons from the trading floor > News and Order Flow

News and Order Flow

I have always told traders that they need to know what is going on around them in terms of news and information that can impact the markets. Traders can have an opinion as to what a news item may impact the price action of a stock. That is ok, until you get married to your opinion and get stubborn. As a trader the Order Flow will be THE most important variable that will make you money or take money away from you.

It has been very clear since last Friday’s horrible employment numbers and the rallied that occurred, followed by a continuation move on Monday despite plenty of traders opinion that we should head down to test recent lows, that the order flow will always trump opinions. What this is telling you is order flow will dictate where the market is going to go, sometimes negatives news is already discounted in the market, so we actually see a rally after negative news are announced. You need to go with the order flow, despite what the news or your interpretation of the news is.

Another example of this was last nigh when various companies reported lower guidance for 4Q earnings as well as 2009 earnings estimates, TXN NSM FDX, were some of them. However from the very start of the day, SMH the semiconductor index showed positive order flow with strength and volume started from early in the morning. Both TXN and NSM traded higher for the day, despite starting the pre-market with large losses. The sector was so strong that it carried with it many stocks in the NASDAQ including CSCO and INTC that most traders were able to enter into longs following the positive flow in the sector.

This is the sort of order flow that an intra-day trader needs to jump on. We need to learn to stay away from mixed signals and lack of clear order flow, and wait for the moment we have an edge in.


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