Hey Sharks,
Sure thing. I'll try not to blabble as this is a forex forum.
Futures go through a centralized exchange so it enables you to get accurate data on the volumes and number of buy/sell contracts going through at real time (similar to level 2 on stocks). This is visible on what's called a Depth-Of-Market (DOM) - aka, the ladder. I've attached an image I grabbed from google. The numbers in the blue column are the buyers, the numbers in the red column are the sellers.
View attachment 1177239
If anyone reading this doesn't understand order flow: you need to have a buyer in order to sell and vice versa - that's how price moves. If all the sellers at one price dry up, obviously the price will jump up one tick to the next price given that there's a higher supply of buyers than there is sellers. Sounds simple but it happens very quickly in real time. Here's a great video that explains it - especially from 9.10 in.
The way it works is by watching the tape and seeing when excess buyers / sellers come in at a given area (for example, support/resistance) and jumping in the market in anticipation for a few ticks (or using the ladder to time your entry for a swing trade).
Futures contracts are expensive so most tape readers just aim for a few ticks. For example, S&P500 (ticker: ES), is $12.50 per tick. So you can imagine that 4 contracts is $50 per tick and you may get out at 6 ticks = $300. Do that 4 times a day = $1,200 per day. Simple in theory and doesn't sound too bad... until you see it jump 10 ticks against you in a couple of seconds..
I got into it because it looked interesting and even though I ended up being profitable in the end, I did lose a lot of money learning - I'm not afraid t admit that. I would only recommend going into this form of trading if you're able to be awake during high volatility hours, enjoy glaring at a screen, can think quickly.. and have a large amount of equity.
Hope that all makes sense.
