Trading Support at Jigsaw

Published on: April 15, 2021

At Jigsaw, we are somewhat unusual in that we don’t just offer support for our tools – but we are here to help with trading issues too. We don’t charge for this and so far, the volume has been very manageable and we’ve got as much from doing it as the people asking the questions.

We can’t answer all questions there and then and often we’ll have to fall back on our connections in the industry that have specific experience. So in this blog post, we’ll give a quick guide on how to make the most from a call to discuss trading issues. 

Right now, the call will be with our CEO, Peter Davies. The way this works is that the more you put in, the more you get out. So if it’s a call where you say “just tell me everything” – we can’t do much for you because you have to move forward from where you are now. If we don’t know where you are now, it’s hard to help.

So to give an example of typical calls that work out well:

• You are doing the drills but not seeing anything that makes you go “aha”.
• You want to add order flow to your trading but not sure where to start.
• You are a bit overwhelmed and have so much in your head, you don’t know where to go next.
• You have hit a plateau after improving for a while.

What you need to bring to the call:

• Your trading history, what you tried, what you liked, what worked for a while. If you just say “I tried everything, what do I do next?” – we’ll send you away to get the detail down.
• The results of trying the drills – if you didn’t do the drills, we’ll send you away to do them 1st. Then we can have a peer discussion.
• What you feel the issue is – we might not agree – but your perspective is golden.
• What time you have to trade, your age, your career/educational background, your hobbies, who you have to talk to about trading and other stuff that may seem a bit random.

What will happen:

• We’ll have a chat and possibly suggest some next steps.
• We’ll have a chat and Peter will need to discuss your issues with someone smarter to find what you need. We’ll then talk again.
• We’ll have a chat and suggest a job at McDonald’s might be better.

OK – we never did that last one but we have met people in impossible situations. We are not here to burst people’s bubbles or make existing situations worse by removing hope BUT – if you are 3 weeks away from running out of money and MUST make money RIGHT NOW – we’ll politely back out.  

We’ll be honest but if it looks like too much honesty might crush what remains of a diminished spirit, we’ll steer you on the safe and slow side and leave it to you to decide that diving head-first into trading might not be the answer to those issues.

This last stuff sounds a bit gloomy and it’s perhaps 5% of the calls we take – it’s not fun but it is a part of the industry we are in. People sometimes turn to it in desperation. It’s mentioned here simply because we’d like to do less of those and mentioning it might help. If in doubt though – just get on a call. Click here to book. Customers or very nearly customers only, please. Time is precious.

On our side – it gives us that finger on the pulse that’s essential to understanding the retail trader dilemma, so thank you for our continued education.

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Order Flow itself is simply information. Just like charts, it can be used in a number of ways, some good and some bad. But let's first break down order flow into it's components so we all agree what we are talking about:

Order Executions/Tape Reading - This aspect is the real flow of orders. It's the information we see in Time & Sales, Footprint Charts, Cumulative Delta. It is looking at market orders, either as they execute or historically. I guess this is the "true order flow". Every trade is a buy and a sell. We look at market orders because we consider them to be more aggressive. When someone trades with a market orders, they are giving up a price to get an instant fill. Limit orders on the other hand just lazily sit there waiting for a market order to hit them. Often these are market makers with no directional conviction. So we see market orders as being more significant.

But we don't use these in isolation.

Volume Profile/Positions - The tape reading part helps us assess various things like momentum, traders getting stuck, balance of trade BUT the volume profile helps us understand where people are positioned and likely to get stopped out. I sometimes call this "Order Flew". It's important to know when trades will be "washed out" - for example - if we have a volume cluster on the S&P500 Futures and the market moves up 100 points and back down to it, it's unlikely short term traders on either side that were positioned there will still be there. But recent, nearby volume helps us assess areas of positions.

Market Depth - The bids and offers, the lazy passive orders waiting to be hit. This is part of the story but in terms of overall importance, I'd put it at around 20% at most. For example - if you return to the high of the day on any market, the offers will be quite large directly above the high. It means nothing at all. It's just a quirk of the market. It does not help you tell if a price will hold. On the other hand, if you see large depth and as we approach it, we see more added to the depth in front of that price, it means others are front running that depth and that is a useful bit of information.

This is the key - it is all just information. Just like price charts are information. When people look at Order Flow, they consider it to be a technique more than a set of information. They look for things like iceberg orders and decide to make a one rule trading system to fade every iceberg, For these people - yes, order flow trading is overrated because they are trying to ignore everything else going on in the markets and construct a trading system a chimp could execute.

For those looking to improve a decent trading approach, the best thing to focus on in Order Flow is momentum. Once you can read momentum you can:

• Avoid getting into positions when momentum is against you.
• Confirm trades are working after entry when momentum goes your way.
• Exit trades in profit when momentum fades.

That's perhaps the easiest way to use order flow because momentum is easier to read. It's about the market continuing to do what it's already doing. On the other hand, reading a turn in the market with order flow takes a higher level of skill and a little longer to learn.

Order flow can't put lipstick on a pig. It won't help you 'improve' something that doesn't work anyway, which is why whenever someone calls me, the first thing I ask is what they are currently doing and we discuss whether they need a reset or whether it will actually help.

When Jigsaw started back in 2011 - we were one of the first in the space and certainly had the best education. It was always going to attract the underbelly of the trading education/tools world and now we see stuff out there that is so complex but so impressive and futuristic that new traders are drawn to it like moths to a flame.

So here's my advice when looking at Order Flow

• Order Flow can't improve something that doesn't work.
• Order Flow can be used on it's own, without charts to enter and exit the market but you also have to be able to recognize different market states that need different/altered setups. There is nothing magical about this.
• Don't start jumping at shadows and take 50 trades an hour in your first week looking at Order Flow, be selective. It can be exciting to see cause and effect play out in front of you for the first time but don't overtrade.
• Do drills to learn how to read it before you trade it.
• Markets can only go up and down. Don't overcomplicate it. If you have too many Order Flow tools on your screen - you will not be able to make consistent decisions. Less is more.
• Take time to choose a market with a pace you like. Interest rates might send you to sleep, the DAX might give you a heart attack.

It is hard to see how a set of information could be overrated. It is true that some methods of presenting this information are better than others. It is also true that some people simply get on better with different tools (e.g. Footprint vs DOM).

There's a middle ground between complexity and simplicity that will leave you making consistent decisions where you improve over time. For those people, Order Flow will be way underrated because they will be the one's getting the most out of it.

Those that jump in with both feet on day one and those that have 100 different tools up, for those, it's a painful experience.

Keep it simple and manageable. Start with momentum reading and build from there. You will never look back.