Don't Trade Blindly

Tip 3: Don’t Trade Blindly

This tip may sound obvious, and the concept applies to any trading strategy, even without options flow. However, it’s essential when trading options flow.

Having visibility to institutional investors' options flow is a very powerful leading indicator, but that doesn't mean you can trade it blindly.

Options flow is only one piece of the puzzle. For the highest chance of success, traders should look for multiple data points in agreement supporting a trade idea.

For example, which of the below trades are more likely to be profitable?

• Trade 1: strong bullish options flow, mixed news sentiment, very little dark pool activity, bearish technical indicators on multiple time frames
• Trade 2: strong bearish options flow, negative news sentiment, moderate dark pool activity with a few late sells, and bearish technical indicators on multiple time frames

Trade 2, of course! Why pick a trade with a mix of bearish and bullish signals when you can choose one with multiple data points all in agreement?

When trading with options flow, it’s important to consider technical analysis, dark pool activity, and news sentiment.