Using flow data to make profit - Strategy in Testing (UPDATE)

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MasterSteve

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It has been some time since I’ve last posted in here and I wanted to post an update on how my trading has been. This year, I’ve gotten multiple 5 figure gains and 5 figure losses from a starting balance of $1000. My big losses are mainly due an overall lack of risk management and usually happen in a short amount of time. Since those wild ups and downs, I’ve focused on smaller accounts and honing my trading strategies. I’ve been testing out different ways to trade to mitigate my risk and have spent a lot of time testing various strategies. I think I’ve finally found one that is working for me, and I’m going to share it and my positions going forward on this page.

This strategy uses flow to find where “smart money” is and uses some confirmations and intuition to enter into plays. Smart Money is defined by Investopedia as “capital controlled by institutional investors, market mavens, central banks, funds and other financial professions”. I often use a more broad definition of smart money as any money or position that seems to know something. If someone makes a big end of week bet on a stock, odds are they know something and end profitable. I’ve been using smart money as an indicator to make trades for over 6 months now. I’ve used several flow services in the past, but never the actual professional market data like I do now. I’ve never been able to watch and scan the market as efficiently and effectively as I have more recently.

How it works:

I use several professional market data services. I can search for and see any stock/exchange transaction at any given time. I spend a couple of hours a day scanning the market for unusual flow and check out what I think are the best opportunities to watch. I’ve been tracking what I think are the best plays as they come in for the last couple weeks. Then I’ll note them on an excel I’ve shared with Ben and see where they go. The way the risk management part of this strategy works is separating an account into a bunch of smaller plays, so the risk is lessened for any one trade.

To be able to run all of the plays, we used a starting paper account value of $3500. Since September 16th the account value has gone up by $2,385 to $5,885! Update at the bottom! (10/2/2019) My win rate for all current and past plays using this strategy is 69.09%. A link to the excel sheet where I’ve kept track of them is here.


I’m currently still in the testing/tracking phase. I’ve put real money behind some of the plays, growing my account 20% over a week, but am still working on finding accurate plays. I’d like to see where the account goes in a month and on a longer timeframe and what I can get my win rate to be.

I’m going to start noting the stocks as I see them on a day to day basis on a weekly thread. I’ll post the position I think will maximize profit and as soon as I can to the time I start watching it. These are mostly swing trades, and I don’t expect them all to be winners. But if I can average the occasional loss with gains that add up over time, I think I can make something out of this strategy. In the coming weeks, I’ll release some more posts about how this works, why more people don’t use this, and how it can be an effective way to trade.

This strategy is still in the works and relies on making some high-risk investments to achieve a higher than average return. Careful consideration before making these any of these plays is recommended.

👉 Check this post for a list of flow recommendations.

Edit 10/01/2019:
I'm stopping updating the plays on the excel doc today. I expect some of the last plays will keep going, but I'll track those and the new plays on a separate google doc for the month. End of the two week update. My win rate is 67.27%. Max profit of $2,817 to an account total of $6,317!

UPDATE 10/2/2019:
The point of this trial period is to test the accuracy of the strategy I'm currently using. First I'm trying to track the max profit of the plays in order to get some data on quantity and quality of the positions. Then I'll work on a strategy to maximize the profit. Out of curiosity, this afternoon I went through and updated the positions if they reached a new maximum profit. The results were surprising. Several positions went over 100% in profit, with the biggest being 1500%! The new maximum profit for the two week period is $10,425, bringing the account value up to $13,925! I've updated the google doc to show where it gained. I expect that the value will keep increasing, but I won't be looking for it anymore. I'm moving on to the plays in my other post, Flow for October. We're still early in the trial period, and we'll see where we end up after a full month. Of course, this is the maximum profit you would be able to get, and in reality would be less. But the trial is going better than I expected. Stay tuned.
 
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MasterSteve

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On the excel sheet, all of the highlighted rows are positions that I am no longer watching. Occasionally after I would exit a trade I would go back and update any potential profit that happened, because the point of the excel was to see how profitable this could be. But for the most part, when I exited, I stopped watching. If there is any interest, I can keep logging the trades I make in a public excel sheet so all can see where my profit and win ratio is at. If not, I'll just keep posting the positions on here and keep track of those metrics privately.
 
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skynetgen

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What services you using for flow? I tried the flow approach a few times but for most part I could not really discern direction. Ended up just confusing my TA. The other part is also there is so much flow every day. I would spent all my time just chasing the alerts.
 
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codydog

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I'm curious - when you see a 'flow' trade, how do you know its not a hedge, someone exiting or someone testing a system?

I've seen a comment, often, in various tos lounges when folks get exercised and they say x or y is an idiot, look what they did..hahha, then I see x or y trade desk salaries are mid 6 to low 7 figures. So,I'm a bit lost why anyone giggles at what they do.
 
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MasterSteve

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What services you using for flow? I tried the flow approach a few times but for most part I could not really discern direction. Ended up just confusing my TA. The other part is also there is so much flow every day. I would spent all my time just chasing the alerts.
I use flow algo and CBOE, but mostly CBOE because it gives me greater control over what I look at.
@codydog
There definitely is a learning curve to figuring out whats going on. I'm still working on it myself. Another difficulty is being able to discern between the millions of plays happening every day, which ones will benefit you the most. I'll put out a post later this week discussing some of the strategies and barriers of entry to this method. I can't tell you that I know everything thats going on in the market. But there are thousands of stocks you can play on and a million opportunities to play. Just need to have the patience to wait for the right set up, and the risk management for in case you get it wrong.
 
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mastaandy

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@MasterSteve is there a way to tell when institutions close their trades?
 
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samks_30

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@MasterSteve Do you use a paid subscription from CBOE? will it be possible to share more details on what data/files you look at on CBOE? Thanks!
 
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MasterSteve

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@MasterSteve is there a way to tell when institutions close their trades?
Yes, it is possible to see when institutions close their trades, usually in the amount of money behind the order.
 
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MBF

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I was just coming on here to search for flow. I have my T&S detached and on the side. It is hard to concentrate and know exactly what you're looking for in terms of flow. I wish there were a better way to see flow on TOS. In mho, it kind of doesn't matter whether its a hedge or not. It's still directional.
Anyway, here is the flow for AAPL today before take off.

 
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MBF

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I found this, but ... I didn't "find" it, still looking.

 
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MBF

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an old WallStreetJesus post. It looks like TOS but not sure where it is hiding in indicator land.
 
MBF

MBF

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@skynetgen I actually JUST found something on the TOS platform called Trade Flash. It is where you would add a watchlist or a quick chart. I am now looking into it! Had no idea it was there. There are all kinds of new things on TOS lately.
 
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MasterSteve

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@MasterSteve Do you use a paid subscription from CBOE? will it be possible to share more details on what data/files you look at on CBOE? Thanks!
I do use a paid subscription from CBOE. What kind of things are you looking for?
 
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MasterSteve

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I was just coming on here to search for flow. I have my T&S detached and on the side. It is hard to concentrate and know exactly what you're looking for in terms of flow. I wish there were a better way to see flow on TOS. In mho, it kind of doesn't matter whether its a hedge or not. It's still directional.
Anyway, here is the flow for AAPL today before take off.

It is hard when its just time and sales and definitely gets easier when you know what you want to find. I would say it does matter if its a hedge, because if its not a hedge it could seem like a play in the opposite direction. The market is interesting. Sometimes even huge bets in a certain direction don't even mean its going to go in that direction. The more I watch the more I learn and am intrigued by flow.
 
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MBF

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It is hard when its just time and sales and definitely gets easier when you know what you want to find. I would say it does matter if its a hedge, because if its not a hedge it could seem like a play in the opposite direction. The market is interesting. Sometimes even huge bets in a certain direction don't even mean its going to go in that direction. The more I watch the more I learn and am intrigued by flow.
I see your point.
I’m still very new, a year of dogged studying, now I’m just running into walls and ahas. Learning a strat, failing miserably at staying focused and overwhelmed. Enjoying it though.
 
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skynetgen

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I do use a paid subscription from CBOE. What kind of things are you looking for?
Isnt it like $300 per month or something? Have you tried used marketchameleon if so whats your opinion on their flow data?
 
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MasterSteve

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Isnt it like $300 per month or something? Have you tried used marketchameleon if so whats your opinion on their flow data?
Yes, and thats around the lowest cost you'd pay for it. It is expensive in comparison to some of the other flow services out there, but for the type of strategy that this is, it is definitely worth it. I'm hoping that I can use it to perfect this strategy and keep running it, while providing useful data to this site so you guys don't need to get it if you don't want to. I haven't used marketchameleon before but I'll check it out for a couple days and let you know what I think!
 

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