Trading Floor Tool: 3D Flow Tutorial

Introduction

The 3D Flow Tool is a powerful tool designed to analyze the performance of repeat options contracts. It identifies signals of high activity in the options market, providing valuable insights for traders.

Filtering Out Noise

To provide a more manageable and actionable list of signals, the tool applies custom filters on the backend, resulting in only 30-40 signals per day. This is a significant reduction from the 20,800 entries in the Live Options Flow Tool, making it easier for new users and retail traders to navigate.

What is the Tool?

The 3D Flow Tool is an advanced tool that looks at repeat options contracts and applies filters to remove noise. It's not just simple repeat flow, but rather intelligent extraction of repeat options flow contracts.

Weekly Top Signals

The top signals are based on the total number of orders. Each row represents one order, and the volume or size of that trade is considered. The more orders for the same contract, the more confident the tool is that people are expecting a directional move towards the strike price.

Signal Details

For each signal, the following information is available:

• Price chart
• Horizontal line representing the strike price of the contract
• Total number of orders
• Total volume
• Total premiums
• Open interest
• Difference between the stock and strike price (e.g., 455.3 to 456)

How Signals are Updated

Signals are updated about every hour or so whenever new signals come in. If a new signal has a total order greater than 24, it will move to the top, and other signals will shift down.

In-the-Money Signals

When a signal goes in the money, the target has been hit, and it is suggested to exit the trade and take profits. The signal is then removed from the list.

Sound Alerts

To not have to keep the tool open all day, sound alerts can be enabled for new signals that meet certain filters (e.g., short-term expiration date and one million plus premiums).

Main Table

The main table is the primary area to focus on to get high-quality signals. It provides information on each signal, including the time, symbol, contract details, total number of orders, total volume, total premiums, open interest, and difference between the stock and strike price.

Understanding Trading Flow Signals and Filters

Filtering Out Signals

Trading Flow signals come from different contacts, about 40-45 per day. It's not feasible to analyze all signals individually, so filters are used to narrow down the list. Two powerful filters are Consistent Winners and One Million Plus Premiums.

Consistent Winners Filter

This filter shows symbols with a historical hit rate of more than 50%. This is the first criteria to consider when choosing a signal. As long as the contract doesn't have 25+ orders, this is a good filter to use. The tool has a 60-70% historical hit rate, so even random signals have a 60% chance of hitting the target.

Additional Notes on Consistent Winners

When trading signals, it's essential to add at least 2-4 weeks of extra time to the expiration date. This is because smart traders accumulate positions and roll them over to the next week or later, rather than closing them. As a retail trader, you might not know this and could lose money.

One Million Plus Premiums Filter

This filter shows contracts with a large number of orders and a high premium. The more orders and the higher the premium, the better the chance the stock will hit the target. If a contract has 1 million+ premiums, it's a good sign that many smart people have put their money behind the stock. This is additional confluence for your trade, but not a guarantee.

Filtering Out Signals with the 25+ Orders Filter

If a signal has 25+ orders, it's best to avoid it. This is because too many orders can indicate a crowded trade, which may not be as profitable. Stick to signals with fewer orders to avoid getting caught in a crowd.

By using these filters, you can narrow down the list of signals and make more informed trading decisions. Remember to always add extra time to your contracts and consider the behavior of smart traders.

Historical Accuracy of 25+ Orders

Historically, contracts with 25+ orders have a hit rate of more than 80%. The platform uses AI and has a filter with a long-term historical accuracy of above 80%. Analysis over the last 4-6 months showed that when a 25+ order is seen, there is a high chance it will end up going towards the stock price or the strike. Adding 2-3 weeks of extra expiration to the contract increases the chances of the order hitting the target.

Examples of 25+ Orders

• Facebook: 25+ orders signaled a move towards $335, and the stock price eventually reached $1020
• Tesla: 25+ orders signaled a move towards $900, and the stock price eventually reached $1000
• Coin: 25+ orders signaled a move towards $300, and the stock price eventually reached $340

Conclusion

The historical accuracy of 25+ orders is above 80%. Adding 2-3 weeks of extra expiration to the contract increases the chances of the order hitting the target. The smart money that is behind these contracts can be analyzed through the platform's dashboard, which provides statistics on how the smart money is dealing with the contract.

How to Analyze Smart Money

The platform's dashboard provides statistics on how the smart money is dealing with the contract. The dashboard includes information on the number of orders, the price of the contract, and the direction of the trade (buy or sell). The dashboard also provides charts to help analyze the trade. The platform's AI filters the information to provide a more accurate picture of the smart money's activity.

Additional Tips

• Always do additional due diligence before entering a trade
• Use the platform's filters to identify potential trades
• Consider adding 2-3 weeks of extra expiration to the contract to increase the chances of the order hitting the target

Fundamental Concepts of the Trading Flow

• A trading flow is a graph that displays the flow of buy and sell orders for a specific contract at a given price level.
• The trading flow can be used to identify market trends and sentiment, and to predict potential price movements.
• The graph is divided into two main sections: the buy orders and the sell orders.
• The buy orders are represented by the green bars, and the sell orders are represented by the red bars.

Interpreting the Trading Flow

• A large green bar indicates a high volume of buy orders, while a large red bar indicates a high volume of sell orders.
• When the green bar is higher than the red bar, it indicates that more people are buying the contract than selling it, which can be a bullish signal.
• When the red bar is higher than the green bar, it indicates that more people are selling the contract than buying it, which can be a bearish signal.
• The trading flow can be sorted by the premium spent to show the total amount of money being spent on buy and sell orders.

Smart Money

• The trading flow can be used to identify "smart money" – the collective trading decisions of experienced and successful traders.
• Smart money can be identified by looking for large green bars and small red bars, indicating that many people are buying the contract while few are selling.
• When smart money is accumulating, it can be a bullish signal, indicating that the contract is likely to increase in value.

Due Diligence

• It is important to perform due diligence on any trading signal or decision, including the trading flow.
• Due diligence can include researching the underlying fundamentals of the contract, analyzing technical indicators, and reviewing market trends.
• By performing due diligence, traders can increase their chances of success and reduce their risk.

Resistance and Support Levels

• The trading flow can be used to identify resistance and support levels, which can help traders make informed trading decisions.
• Resistance levels are areas where prices have historically been unable to break through, while support levels are areas where prices have historically been able to bounce back from.
• By identifying resistance and support levels, traders can anticipate potential price movements and make more informed trading decisions.

Additional Tools and Resources

• The trading flow is just one of many tools and resources available to traders.
• Other tools and resources include anchored feedbacks, projections, technical analysis, and trend lines.
• By combining the trading flow with other tools and resources, traders can gain a more comprehensive understanding of the market and make more informed trading decisions.