Options money flow can be used as a strategic tool in your trading arsenal, but you have to have some experience with it to fully appreciate the power of it. If you are new to the game of order flow, the best thing to do is to just sit back, watch what’s happening, and get familiar with the fundamentals.

Don’t always assume large orders coming through the system are fool proof trades that you should take. Remember, we really don’t know what the intentions are behind these orders. More than likely, traders could be hedging against their overall exposure to the market.

Look for overall or individual market / stock sentiment. If the market is bullish extreme, steer clear of aggressive call-buying. If the market is bearish extreme, steer clear of aggressive put-buying.

Smart money likes to come into weakness. When retail trades are selling, these guys are coming in and buying. Utilize charts and spot equities that are breaking down. Look at historical flow and see if there were any key purchases made in the past.

Options money flow during earnings season is useless. Stocks will be extremely unpredictable at this time and any logic we try to derive from money flow will be warped.

Look for new names catching money flow. Smart money will start buying into these new names for a number of reasons but always check the historical data and keep an eye on it.
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