In today's video, we will talk about the Flip indicator. It gives us a visual representation of the pulling and stacking activity and how it can influence price movement.
Generally speaking, the Flip indicator will be on the side of market moves, but our interest resides when there's a divergence. For example, we can have a cluster of blue bars, but the price does not move accordingly. 'They' are trying but getting nowhere.
Also, being on the side of the market, the Flip indicator is a great confirmation tool after entry, and for trade management. Do bear in mind that pulling and stacking are very short term, so it makes more sense to have the flip indicator on a lower timeframe on vista.
For more, watch the video...
Notes:
Hi all,
Today we are going to talk about the Flip indicator.
It shows us the pulling and stacking activity similar to the snapshot meters. By default, we are looking at the first 5 levels, but we can change it in the settings, which we will look at, later on.
Looking at the blue side here, which would be considered bullish (and the red side considered bearish), it does not necessarily mean bids are stacking. It’s a mix between bids stacking and offers pulling. We might have more blue, but not so much because bids are stacking, but maybe because offers are pulling. What we are doing is adding the stacked bids and pulled offers, adding the stacked offers and the pulled bids, and then subtracting one from the other.
But, let’s now look at a couple of examples.
We will trade mainly from what the indicator is telling us, but at the same time, it needs to be put into context.
In our first example, we were trading in a range, right below a previous resistance area. On this last move higher, we can see that the flip indicator was blue, and as we discussed earlier, that indicates we have a mix between bids stacking and offers pulling.
We placed a sell order, right below the range high, giving us a good position.
Our reasoning was that, despite bids being stacked and offers pulled, buyers were not able to keep lifting the offer. Sellers were still refreshing their orders. We were at the range high, so we could get back down to the range low.
Our first target is executed at the range low, we move our stop to breakeven. Prices trade at our second target, the bid never pulls and buyers lift the offer. We moved our target 1 tick higher, so it could get executed if prices came back to retest it. The order is executed, and we move the stop to 34.25, where no one traded previously.
Prices came down, to 31.75. We can see how sellers were hitting the bid at 32 even and the bid kept refreshing. Buyers lift the offer, and looking at the indicator, the reading continued to be the same, despite the cluster of blue bars, giving us a bullish reading, prices did not move higher that much and the offers start to stack while bids start to pull.
We moved our third target to 32 even, so it could get executed if prices came back to retest it, which it does. We moved our stop to 33.50, and here is something we’ve missed. As we pulled back, we had a mix of offers stacking and bids pulling, right, we get this cluster of red bars, giving us a bearish reading, but notice how prices did not extend much lower this time, we were not able to push lower than 31.75. This was indicative that we might get some sort of reversal point here, which proved to be correct, as our stop loss is executed, and prices moved higher, breaking upward the previous range high.
Let’s look at one last trade.
We had just made a new session high, we started to chop around, and as we pulled back we could see bids stacking, which was a bullish sign here. We pushed higher, and we saw bids stacking at 37 even when we placed a buy order, which was immediately executed.
We could see offers being stacked and bids being pulled, but prices barely pushed lower, and we had two circles indicating high volume being traded here.
Our first target is executed, we pushed our stop loss to breakeven and also pushed our second target 1 tick lower since the offers were being refreshed, and we wanted to see if we could get that order executed.
As the market continued to push higher, taking that big offer at 40 even, we pushed our stop loss to 38 even, and as we looked at the indicator, we were still seeing buyers continue to stack their bids, and as offers lifted our third and fourth targets got executed, closing this way our position.
In summary, the Flip indicator is an awesome tool to help us see how the stack and pull can influence price movement.
Although the indicator will follow the price most of the time, we do prefer to use it as a divergence indicator, when the price does not follow it, and it’s within our context.
Also, bear in mind that the indicator can look very different depending on the market and the time you are trading. We will get better readings from thinner markets than thicker ones and during regular market hours than overnight hours.
The volatility of the market is also very important. The higher the volatility, the less important the pull and stack activity is. Very similar to what happens to support and resistance areas, which are easily blown away. During these periods, we will need to rely on other trading techniques. It’s up to you to know your market or markets of choice and know how they behave.
And lastly, don’t forget to adjust the Vista chart time interval accordingly. Test different ones, and see which one can give you better readings.
In the examples we’ve given, we are using a 5-second interval for the ES. Again, it’s up to you to test and see what you feel most comfortable with.