True or False: Seven Statements About Wiseguys and Flow
March 18, 2018

Every now and then we get hit with questions that really just makes us scratch our heads. But this stuff makes for great material to write about. And lets be honest, we’ve all had these same questions once or twice.

So for those of you with silly questions, before you email them in, make sure you give this list of True or False a read first!

“I need to trade options to be able to utilize Wiseguy activity.”

In short, false.

At length, it’s a huge misconception that only options traders can use the Flow. We use flow as a real-time indication of possible momentum coming into the underlying equity. And we all know that when the equity moves, so to do the options. So while options and equities traders are paying attention to the same information, it means something different to each.

On one hand, you have a big fish in the pond. On the other hand, you have a big fish in the adjacent pond and you’re hoping it brings some big fish into your pond. Flow is good for everyone.

“I can use Flow as a confirmation indicator”

This is true, but if you’re looking for something for just confirmations you might want to rethink your strategy.

Swing trading often finds its complement in the Wiseguy flow as sharks smell the blood in the water and jump in to get their piece of the pie. As a result, many traders find that there’s a substantial increase in certain types of Wiseguy activity around market tops and bottoms.

For those looking to really master the Flow, you can take this a step further and gauge how much pain is coming your way or how much you should look for in a profitable scenario. Granted this works much better when applied over a longer-term trade, but should you find yourself on the opposite side of the Flow you can identify whether it’s something you need to panic over or if it’s something you can ride out.

You’ll often find yourself avoiding impulsive decisions simply by checking against the Flow.

“Every Wiseguy Flow alert is a signal to buy or sell.”

Easy there cowboy, that’s false.

Like, really, really false.

Take a second to think about how crazy that sounds. No two traders are identical, and neither are their trading patterns. So what might look like a buy to you might not look like a buy to us. Our hope is that you’re taking the information and bringing it back to your underlying methodology. If you’re a chart guy, slap a chart up and see what it looks like. If it grooves with your normal risk parameters, and looks like a trade, you make the call. Tape guys just bring it back to the tape, but the same applies. You always have to double check, and make sure that you’re going into a trade that you agree with.

“I can use Wiseguy alerts for day trading, right?”

Bingo, that’s True.

We’ve got to sound like a broken record at this point, but the question still comes in. You can use Wiseguy action for BOTH day trading and swing trading. Hell, if you take your meds you can probably even use it to scalp.

It’s raw information. It tells you that a shark made a bet. And then it’s your turn to identify the momentum that arrives in follow up action, or turns a name off a single Wiseguy sweeper.

While we don’t advocate doing it, there are a few members in the chatroom who purely wait for Wiseguy alerts to trade. They’ve adapted their strategies to solely rely on the notifications to drive their entries and exits. That said, Flow is undoubtedly best used as an addition to your current arsenal.

“Big bets = big losses”


Losses are part of the game. At the end of the day, you’re a risk manager. As in, it’s your job to manage your risk. Which translated literally means you don’t go in blind and try to size up without understanding how your PnL will move on both winning and losing trades. And everyone takes losses.

But if you’re trading on ‘edge’ your likelihood for consistency is increased, and ultimately you’ll find yourself naturally increasing your size. Consistency is the name of the game. Work on being consistent in finding profitable opportunities and then work on being bigger in those moments. It takes time, don’t rush it.

“This is going to help me gauge market sentiment”

So True is ought to be illegal.

Wiseguy action is a great way to spot how smart money is positioning themselves aggressively in the market intra-day. Not only does is help guide you with spotting action in individual names, but keeping a mental log of the kind of action over the last half hour (or other time frame) is a great way of keeping the pulse of the market. With time you’ll find that it’ll keep you out of positions that you really didn’t want to be in.

A big crowd favorite are VXX put sweepers in a market that’s selling. It’s been a great indication that there was a powerful squeeze coming just around the corner. But the biggest issue traders have when using Wiseguy Flow for sentiment is staying patient and waiting for the opportunities to present themselves.

When the Flow is telling you to do nothing, you shouldn’t be looking to put on trades.

“You want to hold every bet through expiration.”

Expiration is a tricky topic, but this is still False.

Now, the confusion comes because of action around a strike far out in time. Traders often wonder if the shark is holding the position into expiration. Often times the answer is no, but everyone handles expiration differently. As a general rule of thumb, if the position is up a good bit and there’s plenty of time until expiration, the shark is going to trim the position and trade out of it.

If the action doesn’t really drive the options price drastically higher, but the equity moved over the strike price, AND there’s not a lot of time until expiration, they’ll take the position into expiry and exercise their options.

It’s really just a numbers game, and to each their own. But the important part is to stay within your game plan, even if that means starting to prepare for unlikely scenarios. After all, nobody really knows what the shark’s position is but the shark.

To sum it up, Wiseguy Flow is like wet clay: it’s raw info for you to build trades out of. And how you choose to use it will end up being as personal a decision as the strategy with which you trade. But regardless of how you choose to use it, if you’re using it you’re ahead of the rest of the crowd.

In knowledge there is power. Same is true in trading. Learn up.