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How I Made 30k Trading SPX Friday by Reading the Order Book
The first thing I look at is price action. The rule I follow is: trade what you see, not what you can't see. Don't predict the market and trade level to level; the rest is noise. In Picture 1, you can see that we tested SPX 6150, came back down to test 6100, and broke down to test the 6080 area. If you look at the chart, you can see we left a gap at 6070; that's the area where buyers stepped in last time. We hadn't tested that area since the market rejected 6150. We came down, and this morning we were back in range for 6100-6125. Once we broke through that, the main levels that were left were the 6070-6050 gap. So In Order For price to trade into the next zone we needed to trade under 6100. All the levels drawn are on 1 hour chart and i trade on 10 min So, how did I read the order book combined with price action to determine where the activity was? I look at delta, gamma, theta decay, OI (open interest), and volume to determine where the activity is. The Script Isn't mine i follow someone else who shares this data some people follow tools that provide gamma but this is more real time you can see it on the chain so i prefer this rather then a gamma tool. Let's break it down. As shown in Picture 2, we can see 6100 was a balance zone. The Orange Number you see are gamma We can see buyers on the call side and sellers on the put side; both agree to that area as a fair value price. But we had started to see more activity below once we broke through that 6100 this morning. If bulls wanted to reclaim that area, then we needed to close above it. I use 10-minute candles when I trade, as you can see from the first picture. As long as the 10-minute candle is respecting price and closing below 6100, that's my confirmation that buyers were not interested, and sellers had control. Another way I got my confirmation was, if you see the blue circle on the 6105 area, that shows black rather than orange numbers. That is considered a dead zone, so it won't act as a magnet. That's why we couldn't go higher than the 6100s and close above. So, I took the puts, and my first take-profit was 6075. You can see the activity in the third picture; we can see activity in the orange zone and some dead zone below 6075. But later in the day, once we got to the 6075 area, we had a bounce. Then we stayed in that area and built more volume to create more activity in the dead zone below 6075 to finally test 6050. After that, I was done for the day, and I didn't trade anymore. https://preview.redd.it/x6t7p8pa0qke1.png?width=1818&format=png&auto=webp&s=a049d7833e1b8046172af2491d3d362a18150b9d https://preview.redd.it/ao9p2tpb0qke1.png?width=1111&format=png&auto=webp&s=6bb35d828f99e7f862ced673bd9bd860a29eed57 https://preview.redd.it/ka2xj0tc0qke1.png?width=1111&format=png&auto=webp&s=1ff0314f3600efe076fabada1c919eb6bba85226 https://preview.redd.it/wdoqtfme0qke1.png?width=1080&format=png&auto=webp&s=0b7640ba9f4eab25ab0fe30c4de5832877f3123c4
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