Plan your trade, S.E.T. it, forget it, and get a life!
In this article we explain the two things you need to succeed in market. You need to have an understanding of how the market works and a strategy that is based on Supply and Demand.
Plan your trade, S.E.T. it, forget it, and get a life!
By nature, we are conditioned to be horrible traders and investors in the financial market. We lean towards things that make us feel great or confident while we shy away from challenges or anything that inspires fear or uncertainty in us. If you decide to take that approach in trading and investing in the financial market, it will only lead to devastating effects, which simply means losing as a trader and investor.
A perfect example is if you only decide to buy into a trade after the market is well into its uptrend or almost at its peak, coupled with good fundamental news on that market. The danger in just buying in at that point is that the market price would be at a very high point. We, as an online trading academy, call that area – retail area.
Buying at a high price / in a retail area basically defeats the point of trading and investing. The goal is to buy at a low price, basically in a wholesale area, and sell in retail. You need more people to buy at a higher price after yours for you to actually make money as a forex, futures, and stock trader. Buying at a high price drastically reduces the probability of you making money from a trade or investment.
For you to be able to buy at a price that allows you to be profitable, you have to buy before others and buy at a low price when the risk is low. In most instances, you would be buying at the end of a downtrend when all indicators are pointing down, and the news is not good. This is totally against our natural mental orientation.
Just as we have pointed out previously, we are naturally conditioned from birth to be horrible forex, futures, and stock traders. Our natural bad configuration is usually further ingrained in us by the years of exposure to traditional finance and economics we learn in high school and college. For instance, most college courses teach us that it is essential to perform our due diligence in finding out information about a company before buying into the market. The general requirement is to look for a company with good earnings, great management and is also a leader in its industry – basically a company with a fantastic reputation, including a stock price that is in a strong upward trend.
Now the question is this: where do you think the price of the stock would be in that situation?
The fact is that the price would be very high (in a retail area) if all the above were to be true. In purchasing at a high price, you would basically be paying someone who bought earlier at a lower price. We are not suggesting that those criteria are wrong. We are merely pointing out that you should buy when the price declines to the wholesale (Demand) level due to the relationship between Supply and Demand.
In our expert opinion, there are two things you need to succeed in the forex, futures, and stock market. Firstly, you need to have a solid and clear understanding of how the market works and a strategy that is based on the objective laws of Supply (retail) and Demand (wholesale).
Supply and Demand
The concept of Supply and Demand has been around for quite sometimes. Adam Smith wrote about it extensively in his prized book called "Wealth of Nations". There are a lot of various theories about the different things that affect Supply and Demand. The endpoint is to be able to predict the direction of the price.
If you take your time to watch some minutes of CNBC, Fox Business, CNN Money, Bloomberg or any other news channels that talks about the global market or economics of the world, you will most likely hear enough of these theories and different opinions about what influences the financial market to become very erratic.
Almost everyone agrees that the Supply and Demand determine the price in any market. Opinions start to differ in the question of what is affecting Supply and Demand, which is why this is usually the focus of everyone, especially all the news channels.
Discussing what is happening in China, the whisper number for Google in the present quarter, and so many other speculations is what dominates the financial news channels around the world. People run out of phone battery trying to keep up with all the economic news coming in. Again, it is important to note that all these efforts are directed towards determining the future direction of the price.
We, however, take a totally different approach from the rest. We, as an online trading academy, decidedly ignore all the news channels, the excess data, and all the information about the various factors that influence Supply and Demand. We do not bother ourselves with the influences on Supply and Demand, but we place all our attention and focus on the Supply and Demand itself. There is absolutely no reason to worry about why the banks and investment companies are buying or selling when you know exactly where they are buying and selling.
Price directions will change at various price levels where Supply and Demand are out of balance. The major goal is to find and know where Supply and Demand are imbalanced and not about finding out the latest scandal in China. The fact is even if you take your time to dissect and study the whole balance sheet of Europe, there will be no edge for you because of thousands of people, if not millions, are doing the same thing.
We decided to concentrate on where the big banks and institutions are selling and buying in the market. Many might feel like it is not quite possible to notice that, but a market is usually filled with different opinions. The simple truth is you would be able to identify where the industry shakers are buying and selling if you have the skill of identifying and qualifying Demand and Supply in a chart.
Our expert traders studied under floor traders from Chicago Mercantile Exchange and Wallstreet, facilitating and causing institutional order flow. Due to their background of studying under these expert traders, they know exactly how smart money Supply and Demand imbalances look like on a chart. When you get a better understanding of quantifying Demand and Supply, you will be less bothered about anything else.
The primary goal of this article is to help you direct your focus on the right path when building your trading strategy. Otherwise, you may sadly come to realize that even after figuring the intricacies of the economic market out, it has not contributed anything to your earnings in the financial market.
Instead of worrying about the financial reports and numbers in trying to figure out the price movement, it will be more profitable to skip that part and ask yourself what exactly causes the price to turn and move in the market. You would realize it is strictly Supply and Demand.
The undesirable truth
There are minimal regulations and restrictions in regards to trading education. Due to this, a lot of beginners end up learning how to trade the wrong way. Beginners end up learning from people who are great marketers but horrible traders. This results in traders who never really learned how the market works and instead have had their knowledge contaminated with an education that has them buying high and selling low. This is characterized by lagging indicators, oscillators, and conventional technical analysis information that only leads to entering forex, futures, and stock trades that have high risk but low rewards. The second important detail is to ensure you have enough discipline and self-control to follow your predetermined trading strategy. Lack of discipline is one of the significant factors that weeds out a lot of aspiring traders and leaves only a few select traders. The point of this is not to fill you up with negativity, so don't discard it just yet because we have all the helpful tips coming right up.
Live futures trade example: S&P 500 Futures daily income trade (short – sell to enter)
Here, we have an example of a typical trade that we have pre-planned in one of our live trading sessions. The first thing is to identify the point of Demand, which is the wholesale point where we buy, and the point of Supply the retail point where we sell.
Afterward, we are very excited to sell to anyone interested in buying after a price rally and at our predetermined Supply level because that equals low risk, high reward, and high probability, which is the perfect time to sell for us. You must understand the fact that the law of Supply and Demand dictates that whoever buys after a rally in price will most likely be at loss because at that point Supply is higher than Demand. We make sure we are ready and set at the winning side of the trade to sell to the uninformed buyers.
Once the price starts to decline and hits our target, we buy back from a trader who is making the same major mistakes most losing traders commit – they firstly buy after a price increase and then sell after a decline in price.
To put in simple terms, the human brain is conditioned to buy when everyone is buying and sell when everyone is selling. This is what the smart trader understands, and this is why they have all the money because people keep giving it to them.
If you want to see more live trades that we took with our students, and our YTD verified trading performance please click here
You might start to wonder if we, the members of our online trading academy, have dehumanized our brains, and that is why we can make the right trading choices. Well, we haven't. We still think and feel the same as everyone else. The trick is that we have realized that our human brain is flawed when it comes to making the right and proper trading decisions. Having understood this, we have decided only to follow our objective rule-based analysis centered on the laws of Supply and Demand. We also take full advantage of the trading execution above to make sure that such emotions and sentiments don't have a way in at all.
"O.C.O." (order cancels order) is a vital tool in trading. With O.C.O., we are able to enter an order to buy at Demand and then enter a protective stop order to limit the risk because the fact is we all experience loss from time to time. Then we also enter a limit order to take profit, all at once. Immediately we enter the order. We are entirely hands-off the forex, futures, and stock trade. By doing this, we have not only avoided the emotions and feelings involved, but we have also created more time for ourselves by not having to sit in front of the computer all day. Life is too short and too precious to do that. The best way is to plan it, S.E.T. it, forget it and get a life!
We urge you to start taking advantage of the opportunity to set and forget your short-term income and long-term wealth trades.
As always, don't forget that those who are knowledgeable and skillful get paid off those who are not. Ensure you have the two major issues discussed here on lockdown before risking your money in the forex, futures, and stock market.
If you want to read more about the set and forget approach please click here
If you want to learn more about professional trading and investing across multiple asset classes such as forex, futures, and stocks, please sign up here for free at our online trading academy www.onlinetradingcampus.com and get access to a free three-hour introductory course.
Author Bio: Bernd Skorupinski teaches the undiluted truth about trading and investing at Online Trading Campus and takes you through what it takes to be a consistently successful trader. His favorite moment as a trading mentor is the way peoples’ eyes light up with excitement and confidence when they understand how Supply and Demand trading strategy works and how it can help win in the trading arena. He believes in building core values and discipline that ensures his students do not succumb to the pressures and temptations of the market. He very much believes in following plans and strategy through. If you want to know more about the author Bernd Skorupinski please read here