Context Is Key

Context is what explains why certain trades are not 50/50 coin flips. If you don’t understand context, it’s very unlikely you’ll build a methodology that produces consistent results. Context in trading means a lot.

If you’ve been through my course material, none of this will be new—but a refresher is never a bad thing. I’ll break it down as clearly as I can.

When I give a short presentation or a YouTube explanation, I always try to communicate the importance of context. The problem is that viewers aren’t seeing the entire day unfold—and they aren’t viewing it through the lens of someone who has watched market conditions shift for decades.

A lot of newer traders simply haven’t lived through true volatility. They didn’t even realize it could exist. A 1,000-point rally in the Dow the day after Christmas was unprecedented. No one had seen that before it happened.

That’s why there’s no replacement for experience.

Why Webinars Make Context Click

When students sit with me in webinars, context becomes obvious.

They can see how:

• trading immediately after a news release is completely different from trading on a quiet day
• busy-looking volume can still be unreadable action
• markets can go from dead → volatile → dead again in minutes
• if you don’t react during the volatility window, you might miss the best opportunity of the day

Markets must move for traders to get paid. Volatility is necessary. But volatility can also be too wild, and slow action can sometimes be easier to read. Other times it’s so slow that calling the next move is basically impossible.

So the skill is learning how to read context properly.

Why the DOM Looks Like Chaos to New Traders

When someone first opens a depth of market screen and sees the blinking numbers, the reaction is usually:

“How is this supposed to help me?”

Prices change constantly. Prints fly by. Sometimes it’s too fast for the eye to follow. Nothing makes sense.

There are two main reasons for that:

1. They don’t understand what an order book is.
2. They don’t understand context—the bigger picture.

An order book is exactly what it sounds like: a book of resting bids and offers at multiple prices. Orders are sitting there because someone is willing to buy or sell size at those prices.

The first question a trader should ask is:

“Who is placing these orders? Because it’s not me.”

Think about it. You open your platform in the morning and the DOM is already populated—bids and offers ten levels deep. They don’t “magically appear.” Someone is there every day, providing liquidity.

So ask yourself:

• Who is willing to buy at 9 right now?
• Who is willing to sell at 10 right now?
• Why would someone place size at these levels at 8:45 a.m. ET in the ES, before the stock market open?
• Why is someone suddenly bidding 4,000 contracts in the 10-year when almost nothing has traded for ten minutes?

Order flow trading is not about tracking every individual contract like you’re counting raindrops. It’s about seeing the total volume and the reaction—how transactions are affecting movement.

The Retail Trap: “I Bought Because It Looks Like Support”

Let’s say a retail ES trader decides to buy at 2550.00 because the market has been falling and he believes that level will hold and reverse.

Problem #1: he arrived at that conclusion without any confirming information.

At the very least he could wait and see:

• Do buyers step up and defend the level?
• Or does price slice through it like it isn’t there?

But he doesn’t think that way, because he’s never studied the order book. So he buys, gets filled, and waits.

A professional would ask:

“What are you waiting for?”

Retail answer:

“Price to go higher.”

Professional:

“And how does that happen?”

Retail:

“…It just does.”

That’s the disconnect.

A one-lot order means nothing. For price to rise, thousands of contracts have to lift offers and other participants have to continue bidding higher.

If that demand doesn’t appear, the market keeps dropping, his stop gets hit, and he’s left wondering why “support” didn’t work.

Professionals Move Price

To anticipate direction, you have to understand how institutions operate.

They can buy and sell fifty times during a ten-point trend. They can buy and sell fifty times inside a range. They are the ones moving price, and much of what they do is influenced by the order book.

Smaller orders—HFT programs and retail traders who actually understand order flow—are mostly reacting to the movement being created by the larger players.

That’s why the amount trading and the amount available matters.

Two Context Examples

Example 1: The Coin-Flip Market

ES grinds a few points higher after the open, then stalls near the highs where heavy volume is trading. Each time it taps the high, it drops a couple points… then floats back up again.

The pace is slow. It’s not ripping up and down eight ticks instantly. It’s just drifting tick-by-tick, back and forth, with no obvious pressure.

In that scenario, trades become coin flips.

• You might consider shorting because highs are holding… but it won’t break down.
• You might consider buying because it’s hovering near highs… but buyers can’t break out either.

So ask yourself honestly:

Do you actually have a reason to believe the next few thousand contracts will push in one direction rather than the other?

Usually, you don’t.

Example 2: Fast, One-Way Pressure

Right from the open, ES collapses. It’s moving fast toward yesterday’s low. Every small bounce is immediately smashed down five or six ticks and the selling continues.

Now the thought process changes.

Yesterday’s low is a magnet:

• sell-stops likely sit there
• breakout shorts will hit it
• trapped longs will puke positions if the level breaks

That’s how domino effects happen—sell orders triggering sell orders. It’s not guaranteed, but statistically it’s a prime area for a downside burst.

In this context, a long trade is a bad idea. It’s either short or flat.

And the difference is: you have a reason for the call.

This is why some trades are not coin flips.

The Better Question: “Why Shouldn’t I Trade?”

Most traders search for reasons to be involved.

They should be searching for reasons to not be involved.

If you look at a situation and can’t find a reason to stay out, it’s often a great trade. If you can immediately list three reasons not to take it, it probably isn’t.

The reason people overtrade is simple: it’s unnatural to sit and do nothing. Good trading goes against basic human wiring. If we’re awake, we want to be productive. If we’re “working,” we want to get paid.

But trading often requires long stretches of doing nothing.

Treasuries: Liquidity Is a Pro and a Con

Treasuries are far more liquid than stock index futures. That can be a blessing and a curse.

Pro: the order book often matters tick-to-tick, and information can be very clean.

Con: sometimes it’s so thick the market barely moves.

Also, volume at a price can be meaningful in one context and irrelevant in another.

Two Volume Examples in Treasuries

Example 1: Heavy Volume That Matters

The 10-year is ripping higher. It chews through offers and 6,000 contracts trade at the high.

Sometimes that much size stops a move—but not today. Buyers absorb it and continue pressing to new highs. That’s meaningful. Heavy volume during momentum often signals real participation.

In that context, going with the breakout makes sense. Shorting into it doesn’t.

Example 2: Heavy Volume That Means Nothing

Now flip the context.

The 10-year has been stuck in a tight range all morning with slow movement. It hasn’t moved for fifteen minutes. Suddenly 8,000 trade on the offer and 6,000 trade on the bid.

New traders see that and assume something big is coming.

Often it’s just a large spread or hedge execution tied to a cash position—“one and done.” It needed to be executed, but it doesn’t imply the market is about to rip eight ticks.

If you understand Treasuries and context, that’s a very reasonable conclusion.

The Skill That Separates Profitable Traders

Being able to distinguish good action from bad action is one of the main traits of consistently profitable traders.

It’s how they:

• find high-probability trades
• avoid coin flips
• avoid obvious losers like doubling down or averaging into pain

I can’t stress this enough.

Always think context first:

• Who is participating?
• What’s normal behavior for this market?
• What’s the most likely scenario given this environment?

Yes, watch the DOM, prints, bids/asks, and volume profile—but don’t lose the broader view.

In chess, you don’t focus on the last two moves. You read the whole board.

Here are some additional articles about futures traders and order flow you will enjoy:

The Best Futures Funding Programs (more details below):

• Apex Trader Funding – #1 recommended firm. Have up to 20 accounts low cost
• Take Profit Trader – Great dashboard, fast payouts (treasuries allowed)
• My Funded Futures – Fastest payouts of any firm available, large selection of account types
• DayTraders – Straight to Funded, Static and Trailing DD available
• The Futures Desk – Build your own evaluation! (treasuries allowed)
• TradeDay – Move to full live account quickly (treasuries allowed)

Be Notified Of New Trader Evaluation Promotions

Submit your email if you want to be notified of new trader evaluation promotions. I never spam nor sell anything. Usually 2-3 emails a month are sent with the latest deals.

Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: 

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

You can read more here: Risk Disclosure

Affiliate Disclosure:

The external links on my site and in my video descriptions to trader evaluation companies and software companies are primarily affiliate links. I earn a commission from these companies on any sale made from people visiting these links. That said, I only recommend companies and software I personally use and actually do recommend. Believe me, I turn down a lot of companies who approach me. You can read my full Affiliate Disclosure here.

Additional Disclosure:

The content provided is for informational purposes only. I do my best to keep the content current and accurate by updating it frequently. Sometimes the actual data, rules, requirements and other can differ from what’s stated on our website. CanadianFuturesTrader.ca is an independent website. You should always consult the rules, faqs, knowledge base and support of any of the websites and companies we link to or talk about on our site. The information on their site will always be what ultimately dictates the current rules of their program, software or other. While we are independent, we may be compensated for advertisements, sponsored products, or when you click on a link on our website. The contributors and authors are not registered or certified financial advisors. You should consult a financial professional before making any financial decisions.