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com

ORDER FLOW TRADING COURSE

Lesson 5: Who Are The Market Participants

by : MICHAEL VALTOS
FOUNDER – ORDERFLOWS.COM

My trading method and teaching are based on order flow strategies that I’ve
developed over many years of trading various futures markets. I do not use any
moving averages, oscillators or bands to back my trading decisions, nor do I
combine them with order flow trading and teaching. Furthermore, I don’t use or
teach any of the pre-set Order Flow trading methods circulating for free over the
Internet. Rather, I trade my own method that is the culmination of my 20 years of
trading futures on an institutional level.
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DISCLAIMER
• This presentation is for educational and informational purposes only and
should not be considered a solicitation to buy or sell a futures contract or
make any other type of investment decision. Futures trading contains
substantial risk and is not for every investor. An investor could potentially
lose all or more than the initial investment. Risk capital is money that can
be lost without jeopardizing ones financial security or life style. Only risk
capital should be used for trading and only those with sufficient risk capital
should consider trading. Past performance is not necessarily indicative of
future results.

• CFTC Rules 4.41 - Hypothetical or Simulated performance results have

certain limitations, unlike an actual performance record, simulated results
do not represent actual trading. Also, since the trades have not been
executed, the results may have under-or-over compensated for the impact,
if any, of certain market factors, such as lack of liquidity. Simulated trading
programs in general are also subject to the fact that they are designed with
the benefit of hindsight. No representation is being made that any account
will or is likely to achieve profit or losses similar to those shown.

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UNDERSTANDING MARKET PARTICIPANTS

• The futures market is made up of different
types of participants.
• 2 basic market participants: Retail and
Institutional.
• An institutional trader is a generic term that
covers many different types of traders, but the
common denominator of institutional traders is
that they have big money to throw into the
market.
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MARKET PARTICIPANTS
• Retail traders are the traders trading for their
own accounts.
• Basically anyone not trading for institution.
• Even if you are trading your own account with
$1 million in it, you are still considered a retail
account. You don’t become an “institutional
account” just because you have a lot of money
in the account.

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS
Institutional traders come in many forms:
Real money
Commercial traders
Hedgefunds & CTAs
Banks

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MARKET PARTICIPANTS
Why it is important to know what the institutions
are doing in the market? Because institutional
traders are the traders that can:
• Make a market move out of congestion.
• Stop a move dead in its tracks.
• Turn a market.

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS
Real money can be defined as traders such as
Sovereign Wealth Funds, like foreign government
investment arms.

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MARKET PARTICIPANTS
Commercial traders are trading firms such as Cargill,
Vittol, Chevron, etc. While most of their trading is for
hedging purposes there is a portion of their trading that
is speculation. These participants have information
about the markets that are not available to the trading
public. These traders have the ships in the ocean moving
the commodities. The wells pumping oil. They know the
supply chain. These firms have been in business for a
long time because they know what they are doing. You
don’t stay in business making poor trading decisions.

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MARKET PARTICIPANTS
• Hedge funds and CTA’s. These traders have gotten a
lot of press in the last decade because they are
viewed as market bullies pushing marketing to price
extremes. Some traders view them similar in the way
they view the mafia.
• Most funds tends to be trend followers, but have
become more sophisticated and can trade in the same
way commercial participants trades as many traders
have moved from commercials to hedge funds over
the last decade.

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MARKET PARTICIPANTS
• “Funds” often jump in to the market around
the same times and go in the same direction.
When they get out, it is often like a fire in the
room, everyone runs for the exits at the same
time.
• This causes markets to become overbought
and oversold as markets become over
extended.

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MARKET PARTICIPANTS
Banks are also major participants. Over the last
few years prop trading has declined with the
advent of new regulations, but banks still have to
hedge positions on a daily basis. Even though
banks say they don’t do prop trading, they do,
but it is disguised in different forms. Swaps desk
make markets and the desk will run positions.

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MARKET PARTICIPANTS
There is no Holy Grail to trading the markets. The
best a trader can do is look for clues left by the
institutional traders. Look for areas where the
buying or selling has dried up. Look for areas
where there is big stopping volume. Look for
areas where they are piling into the market.

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MARKET PARTICIPANTS
• When institutional traders buy or sell they can
often stimulate the market which causes a
surge in volume which can set the stage for a
price move.
• When institutional traders back away from the
market the support or resistance they provided
is no longer there.

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MARKET PARTICIPANTS
• There is NO secret to trading. Successful
trading has always been about understanding
the convictions, the strength and weakness of
buyers and sellers, especially the ones with the
money to move the market.
• Once you understand what the institutional
traders are doing in the market, you can
successfully trade with them. Trade with the
traders who are moving price.
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MARKET PARTICIPANTS
• Institutional traders are always trying to hide
what they are doing in the market. They use all
sorts of different types of order entries to
minimize the market impact when they get in
or out of a position.
• What they cannot hide is the fact that they
traded. It shows up in the volume.
• Volume provides the intensity of a price move.

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS

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MARKET PARTICIPANTS
In the next lesson I will explain the different types
of trading being done in the market by the
market participants and how to interpret what
the heck they are doing.

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THANK YOU
by : MICHAEL VALTOS
FOUNDER – ORDERFLOWS.COM

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