There was a time when traders used to “read the tape” to get a sense of where prices were moving in the short-term and to identify where support and resistance levels were. Something similar today can be done by looking at market depth on the trading ladders (my favorite is CQG‘s). However, to get a real “feel” for the movement of a particular commodity, it is important to spend a ton of time “staring” at that screen. You have to listen to and watch a lot of noise!
By staring at the screen, not just the ladders, but also the charts, I’ve been able to develop a sensitivity to what’s “normal” and “abnormal” in the 20-25 markets I trade. It is by identifying normality that a trader starts to form his trading plan, because he’s able to define the risk he’s willing to take around normality (including doing nothing) and what to risk when there is a divergence from normality.
The other aspect of “staring” at the screen that is effective for me is the ability to identify a signal compared to the noise. In other words, you have to listen to a lot of noise in order to identify the signal. When there is a combination of news, at a particular time of the day, at a particular price level, following a particular pattern, with a particular volume, etc. a well-trained brain can sense a signal that something is different. Often that is a false signal, but at other times, especially if the signal falls into your pre-defined trading plan, it’s time to strike quickly and with full force.
I once heard that soldiers trained to patrol warzone areas develop the ability to identify anomalies in incredible ways that an untrained eye would never spot. Looking at screens, ladders, and charts, while also listening to news feeds, tweets, chats and other alerts I’ve developed the ability to identify anomalies in a similar way. The key is to have an action plan ready well before the anomaly occurs so that you are ready to strike when needed or stand still because it’s not worth the risk.