148: The order book—what traders must know about supply and demand w/ John Grady

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John Grady is an independent futures trader from Florida, who primarily trades Treasury bonds. His trading is purely discretionary, based upon his read of order flow. Essentially, he’s a scalper.

Until recently, I’d never really taken the time to understand the order book and make sense of order flow. Sure, I understood the order book at it’s most basic level, but really, not much beyond that point.

Having now learned more about the subject, I feel as though it’s something I should’ve learned long ago. And regardless of whether you decide to use the order book as a part of your trading, it’s my opinion, that it’s at least valuable to understand.

And that’s the reason why I asked John come on the podcast, to share some of his insight and experience with you…

Topics of discussion:

  • The (basic) terminology you must understand to make sense of an order book, the value of an order book, and what an order book shows that others don’t see.
  • How John trades order flow; his reasons for trading certain markets, using order flow to gauge entries and exits, managing stops, when to use which order types.
  • With a lot of numbers changing rapidly, how does a trader make sense of the order book? Plus, a few tips ‘n tricks for how to build skill in reading order flow.
  • The impact of HFT; things which scalpers can no longer get away with, staying alert to spoofing in the order book—and how it can occasionally be detected.

A snapshot of John’s screen, displaying three order books.

Links and resources mentioned:

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