Learn to Trade

How Do Successful Traders Maximize Opportunity Flow?

By Rob on July 29, 2016

Reading Time: 4 minutes

For any traders who aren’t familiar with the concept of opportunity flow, please fear not, because this isn’t some complex market force, or yet another financial metric to which you should now pay attention. Opportunity flow is actually rather simple, and in practice, is a concept that should help traders make the most of every viable trading opportunity that comes their way. And, because that’s something every trader wants to do, it would seem that by any measure, opportunity flow is a trader’s friend!

Now, as you might expect, the pros and more experienced traders tend to have a knack for it, while retail traders may still miss a quality trade here and there, or, for any number of reasons, let one get the better of them.

Here’s the good news, though: Maximizing opportunity flow doesn’t require real technical mastery, or the development of any trading skills that you don’t already have. Instead, all it takes is the acceptance of certain “truths” about the markets, and an understanding of oneself and their natural tendencies. So without any further ado, here’s what opportunity flow means for traders, and more importantly, how to keep it swinging in your favour.

What Is Opportunity Flow, Anyway?

Opportunity flow is built around the premise that the occurrence and distribution of legitimate trades in the markets are both completely random, just like their outcomes (wins, losses, or breakeven). With that, opportunities can occur sparsely (or not at all), or occur several at a time, and so, too, can eventual winning and losing trades. It is this premise that makes it essential for traders to obey their strategy (if profitable overall) and trade each and every set-up that fulfils their precise rules for entry in order to maximize profitability and enable opportunity flow to work in their favour. To miss a qualifying trade that has a profitable outcome, for example, and then to take a legitimate trade set-up that ultimately has a loss-making outcome, is said to take the trader “out of” the opportunity flow of the markets.

How to Make Sure Opportunity Flow Works for You

I love to tell traders that waiting for opportunities that fulfil their rules for entry is a lot like waiting for a bus. (And that makes a fine visualization exercise, by the way.) Sometimes you wait just a few moments and several busses arrive all at once, while sometimes, you could be waiting for what seems like ages and no busses turn up at all. I just commented recently during a Market Insider Webinar (login required), in fact, that it felt like the latter was happening here in the early- to mid-summer months.

For traders at any time of year, though, it’s important to stay prepared and committed to trading your strategy even if opportunities do become fewer and farther between. Here are some worthwhile trading goals to pursue—all related to plan compliance—that will help ensure that you’re always on the proper side of opportunity flow:

Never Miss a Viable Trade Set-up

Nothing sways you to the wrong side of opportunity flow quicker than missed trades, largely because you never know how long it may take to get another opportunity. Even pros will tell you that nothing burns them up more than a missed trade…not even a losing one!

Missed trades can also lead to a host of problems like “revenge trading” and overtrading. In either case, the trader looks to compensate (and do so quickly) for what are perceived as “lost” profits, but here’s the problem with that: Some or even all of the set-ups taken in haste, or especially in the name of revenge, may lack quality or fail to meet the conditions set forth by their trading strategy. Which brings us to the next point…

Don’t Waste Capital on Sub-par Opportunities

Opportunity flow helps emphasize that each valid trade set-up is precious and deserves your full attention and resources. As a result, don’t tie up valuable account capital—or emotional capital, which includes your efforts and energy—trading sub-par opportunities. Such scenarios can leave you distracted, or worse yet, can compromise your confidence and ability to act decisively when opportunity truly comes knocking. You can’t trade with opportunity flow, afterall, if you’re trading invalid opportunities in the first place!

Have the Courage to Take Valid Set-ups in Succession

One of the challenges in keeping up with opportunity flow is when an especially rare trade scenario unfolds and valid opportunities are presented one right after another. Admittedly, it takes some confidence, composure, and a cool hand to take set-ups in succession, and even more so when coming on the heels of a loss-making outcome, when confidence may become a bit shaken.

These are the times when it pays the most to think about the concept of opportunity flow, and remember that trade set-ups are unpredictable and randomly occurring. As such, you’re not automatically reading the charts wrong if you do, in fact, discover two or more set-ups in close proximity. The real mistake, as it turns out, would be to let any valid trade set-ups elude you because of doubt, as that would put you, as we said, on the improper side of opportunity flow.

The key, as it would seem, is to recognize that good trades cannot be judged solely on their financial outcome, because even loss-making trades are deemed “good” by your trading strategy (assuming they satisfy all the proper conditions). Moreover, qualifying trades must be taken in accordance with the concept of opportunity flow, so if ever second thoughts begin creeping in and you’re considering passing on a qualifying trade because of, 1) a prior losing trade, and/or 2) another set-up(s) occurring simultaneously, you certainly should take time to re-set and reconsider, in part because opportunity flow says so, and especially because your strategy does, too.