Fausto Pugliese was featured on TradeTalks with Jill Malandrino! Watch as they discuss how traders use Nasdaq TotalView to determine support and resistance. Click to play the video above or read the transcript below!

Jillian: Welcome to Nasdaq trade talks from your host Jill Malandrino global markets reporter at Nasdaq joining me at the market site in Times Square in New York City we have Fausto Pugliese, he’s the founder and CEO of cyber trading university and we’re gonna take a look at how traders use Nasdaq total view to determine support and resistance levels and some other techniques that they look for trading clues.

Nasdaq total view is used by institutional asset managers, traders, retail investors, and we’re gonna look first hand on how traders actually apply this platform faster.

Thanks so much for joining us! At market sight, we’re going to take a look at our first slide to see what the actual platform looks like on NASDAQ total view.

Fausto: I’ve been using this system since the day it actually came out and basically if you are familiar with high-frequency trading it is basically where a lot of the orders are going. I call it one big chat room so you got your buy orders, you got you sell orders. The big thing I like about this is I have it aggregated because what’s happening you can see there’s like 15 orders here that make up 7,000 shares, 14 orders make up 6,000.

 

So I kind of aggregate the orders but I kind of keep it more or less with three different columns, how many orders there are, how many shares, who wants to buy, who wants to sell. What you’re looking at is like I said one big chat room.

Whoever wants to buy for the most amount of money is up on top. Whoever wants to buy for less money is down at the bottom. Same thing here, whoever wants buy for the most down at the bottom. So you’re seeing all the orders out there and that should pretty much what we look at when we trade in today’s markets.

Jillian: Alright, let’s move along to our next slide we’re looking for support here, where people are buying this is in stock IQ

Fausto: Right, so what you have over here is buyers equals support. So everybody likes to look at this great looking chart so they look at the chart like oh wow look at this nice little support here. Well what makes support levels is buyers. Well how do you know there’s a buyer out there?

Well when I go to the total view, we’re looking at IQ, and everybody’s like “okay what’s IQ?” and it doesn’t matter! Everybody wants to know exactly what makes this thing go up and when you look your way down here what I look at as a trader and what I teach people what to look at, is as you see the shares, remember buyers are what makes support levels.

As you’re looking down here you got nineteen hundred, six thousand, BAM 134 thousand share buyer. Well it kind of makes sense why the stock basically came here and went back up. You had from like one o’clock all the way to about four or three o’clock and then finally that order never moved and that’s what drove that stock up. Remember that’s what makes a support level.

Jillian: Alright, now on the flip side let’s take a look at resistance where people are looking to sell.

Fausto: Right, so now when you’re looking at a chart and you wonder what makes a resistance level. Here you have a stock that we’re looking at and you can see how the stock just literally started all the way down here forty dollars and forty cents, maxed out at forty one and finally came down.

When you look over here, we’re looking at sell orders on the total view and you could see on the Nasdaq book as you go down you can see there’s a 60 thousand share buyer at 41.50 which would explain why that stock is having a tough time breaking that resistance.

Jillian: Alright, let’s move along to our next slide and this is on TVIX and this is where it’s really helpful because TVIX is one of those ETF’s, ETNS, that are intraday only. These are not good for longer-term hedges and so forth. So having this kind of technology really makes it helpful when you’re looking to see, especially with these stocks that trade within a range and day trading only.

 Fausto: Well what happens a lot of people think that this only works for like the stocks that we’re looking at. It works for all ETF’s, it works for everything. Here you have an ETF that literally went from $14 down to $13.60 and the first thing people look at is the trend is down, why are people selling?

Remember, what drives stocks up and down? Supply and demand.  Buyers and sellers.

So you have a big sell. So what do you think the stocks gonna do? Go lower. But this is the question, when is it gonna stop?

Jillian: Right, That’s what we could see on our next slide.

Fausto: Here we are looking at the TVIX and sure enough, we have the stock that’s going down. We will read back here at the total view and here I am looking at him, so okay listen the stocks going down, I want to have that little game plan. As I work my way down, boom 77,000 shares sitting here at 13.58. So think about it. What do you think is gonna happen at 13.57 with all those orders?

Remember, some traders are trading a thousand, a couple hundred, but that is what we call an iceberg order that’s what I came up with years ago watching the move Titanic. So that’s what we call an iceberg order and that basically you would think okay well big demand so that’s where itt just stopped.

Now when you change the slide and you go to the next one, you’ll see what happens to that chart

Jillian: We can see that on our next slide…

Fausto: Here you go you, see the stock how it literally just went up, this is what we were looking at just now and everybody’s like okay well the stocks not gonna go to zero. Why is this stock going to bounce? Well sure enough you could see we have a candlestick here, these are basically bar charts, and to several minutes and what did it do? It ended up going back up to 14.20.

So, when you’re trying to figure it out, why did the stock go up? Well because when you look at the total view that telltale guy basically is what made that go up.

Jillian: Right and it’s like what you were saying before. Does it doesn’t even matter what the ticker is as long as you have those in front of you, that’s where your supply and demand is.

Fausto: It’s all about following the money.

Jillian: Next one, US Steel X

Fausto: Okay, so here we’re looking at u.s. steel. We’re looking at a situation right and say okay what is this stock doing and everybody looks at this chart and they’re like “wow it’s a gorgeous chart.” It’s going up. So what is it gonna do, it’s obviously gonna keep going up.

The thing is, we don’t try to predict the past, we’re trying to predict the future. How do we predict the future? We have to see where the resistance levels are. People look at the chart but it’s not about the chart, remember a chart gets its data from orders that happened in the past.

So it’s not indicative of the future. We have to look at okay well where are the orders? Is this not going to go to back to 30, back to 50, or is it gonna stop here? That’s why we got to look at the total view.

Jillian: We see that on the next slide over here where we’re gonna go in to get those levels based on the volume that we’re seeing on total view

Fausto: Now we’re not even looking at a chart, we’re just looking straight at the data. We’re looking at a stock that was going up. So what are we looking for? When this stock gonna back off resistance levels. So we got to look at the ask, we got a look at the orders, we have them aggregated and as I’m working myself down, what do we have here?

Jillian: The 11:25 level

Fausto: At 162,000 shares. You’re talking close to over 2 million dollars worth of stock right there. Big order. So we’re not even looking at a chart. Most estate traders would be like okay well that’s obviously a big iceberg order, a very big resistance level, without even looking at a chart! Then we go to the next slide.

Jillian: Alright and then we could see on the next slide

Fausto: Here you are this is what we’re looking at earlier but sure enough, what did it do? Hit that resistance level boom it went right back down. Why did it go down? Not because the chart said so, because that seller said so.

Remember that is a seller, by the way people always joke and ask me “how do I know that’s a real seller?” and I tell them “yeah you want to know how it’s real? Go execute, see what happens!” Those are real orders, there’s nothing fake about that order.

Can a guy cancel an order? You could, but realistically you can’t sit there and second guess what total view is telling you. This is where the high frequency trades are. I’ve been this doing for 25 years. I was working with Nasdaq when this originally came out now at the beginning and the thing is this is where the orders are, that’s resistance, don’t buck the trend. Because we did, guess what? You’ve lost yourself a good nice 25 or 30 cents.

Jillian: Now is this where you put your limits and your stops in?

Fausto: Yes, all your limits go in here and actually, the big thing is people realize there’s two different types of brokerage firms. There’s online brokers and direct access brokers.

You got to make sure if you have a direct access broker, they give you access to what’s called the ECN, electronic communication network. So by having access to that, you’ll see your order go out, that’s the power of why we like the book viewer so we can actually see our orders be posted. You’ll see you already get posted out there and those are your limit orders so you’ll see your orders out there. The power of a direct access broker is one thing, seeing the orders is a totally different ballgame.

Jillian: Thanks so much for joining us at market sight and thank you for joining me on trade talks. I’m Jill Malandrino global markets reporter at Nasdaq.