In an exclusive Benzinga Pro webinar hosted by Ryan Faloona, professional trader Chris Capre, who began his trading career studying philosophy and instructing yoga, joined to give his tips for day trading.
While instructing one day he had a realization that although he enjoyed his line of work, this was not going to pay the bills and began investing in stocks and mutual funds. During one of his private sessions with his client, he was given a book that was written about an individual beginning a career in trading. This sparked his interest to begin Forex trading. When he used his first platform he said it just clicked. From there he received a job offer from a brokerage in New York and thus began his professional trading career.
In this webinar, Capre talks about how looking for patterns in charts are your ultimate weapon when analyzing order flow and price action, and how he uses Benzinga Pro daily as his main platform for day trading and fast-breaking news. Capre offers loads of real-life examples in the webinar.
Understanding Order Flow:
Capre lists four models of information that many traders use for decision making:
While he uses many of these approaches, he says the bottom line is that you have to convert the information received into an actual order. Until the order is placed it isn’t an “actualized order flow.” His main point is “order flow is the driver of all price actions.” The most important thing when analyzing order flow is to “learn how to read the tea leaves in the chart,” because if the order flow is creating price action, he needed to learn how to read that. He continues this point by saying when trading charts, you’re essentially trading direction and that’s why it’s so important to understand those order flows to see where chart direction is headed.
He says that many people use indicators to help guide them in identifying price action. However, he believes that indicator usage is outdated and is phasing out. According to Chris, indicators have a lagged reaction to price action. Learning to read price action in real-time gives you an advantage by allowing you to see momentum in that price action, versus being notified late by an indicator.
He says that this is very helpful when looking at impulsive and corrective moves. These types of moves can be beneficial to traders because they give us a map of what’s going on in the order flow. Basically, the patterns of how traders buy and sell are always repeating, so identifying these patterns gives you that advantage.
Impulsive / Corrective Moves and Price Action
Capre says there are three variables behind every impulsive/corrective move.
If a majority of bars/candles in this move are one color:
This indicates that through time the bulls are dominating the order flow because they’re continually making the majority of candles bullish or bearish. The greater the imbalance on the buyer and seller side the faster the market moves, making this an impulsive move.
If a majority of candles are very large:
If the candles are large then that means it’s pushing further in price through dominance in the order flow. Large candles over time and overprice indicate that the order flow is pushing more favorably in that direction.
If a majority of closes are going to be high for a bullish move and low to bearish moves:
This tells us that within that candle and for that specific time period there is little profit-taking. If no wick is present that means they’re expecting It to take momentum.
Overall, Capre says that trading is a game of information, and like with anything, you’ll never have all the information available. Learning to react to patterns is important and you’ll begin to, in a sense, automatically see transactions as they’re happening and identify patterns of price action easily.
How to Spot Corrective Moves:
Capre says this is simple, all you have to do is invert the key indicators of impulsive moves, and you can identify corrective moves. Corrective moves can help us identify countertrend players. Capre says that if the structure is small this implies a lesser trend of countertrend players and vice versa. If the structure is large, there are more countertrend players present. Understanding countertrends are also important because they can let you know what’s going on in the order flow behind the corrective structure.
Where and How Corrective Structure Form Matters:
- A structure at the highs indicates a good sign if in a bullish environment.
- Small corrective structures that are at the top of an impulsive move indicates a bullish continuation. If the structure is large this reduces the probability of continuation.
Overall, Capre emphasizes that practice makes perfect. When starting out it may be helpful to use simulated trading to perfect your pattern spotting.
How Capre Uses Benzinga Pro:
Capre is a big fan of Benzinga Pro for his day trading needs. He says it’s a great tool for day trading and analytics because of how fast news on particular stocks come to him, and how easy it is to view the analytics and catalysts. The main reasons why he uses Benzinga Pro and always has it up in the background on his computer include:
1. For positive news catalysts, quick news, and quick company searches.
2. He swears by it for day trading pre-market analysis.
He especially loves the Movers panel and uses it for stocks between $3-50. He also uses it to identify percent change in volume versus average volume, and premarket volume in relation to average volume. This lets him know if there’s institutional interest involved.
Benzinga Pro is the perfect platform to use whether you’re a beginning trader or an expert. Many of the guests brought on our webinars didn’t even start their trading career studying finance or interested in the stock market, and Capre represents the perfect example of a successful trader who utilizes the Benzinga platform to match his trading strategy and needs. You can start your free trial of Benzinga Pro today!