In this article we discover how to obtain a market entry that allows you to buy before others and at price levels with lower risks.
Smart investing and smart living
Naturally, we have been programmed to trade wrongly. Typically, we avoid things that we fear and embrace things that make us feel good. However, if you do this in trading forex, futures, or stocks, you have decided to choose trouble (losses). For instance, if you choose to buy into a market only when it's already in its uptrend, all indicators are pointing up, and the news is favorable on the market, where do you think the price is in that market? Of course, it is likely to be very high. Choosing to buy in this kind of market negates the appropriate way of making money from buying and selling anything, and it is very risky. Don't forget that when you buy, several other persons need to buy after you, and of course, at higher prices, otherwise, your chances of making a profit in that trade is very slim. To obtain an entry that allows you to buy before others and at price levels with lower risks, often (if not always) you are buying at the end of a downtrend when most indicators are pointing down and the news is not favorable. And this is totally the opposite of traders‘ mental make-up. Like we mentioned earlier, nature has programmed us to trade wrongly.
That belief system or action often gets reinforced during several years of traditional economics/ finance college and high school education. For instance, many college courses on the financial market teach us to do plenty of research on a stock before buying into that market. Generally, we must ensure that the company is an industry leader, has good management, good earnings, and a stock price that is in an uptrend. Once again, we ask, where do you think the stock price is when all these criteria are true? The price is almost always very high, ensuring that you are simply paying others who bought earlier at lower prices if you buy now.
In our opinion, to succeed in trading, you need two things: first, a robust understanding of the exact working principle of the market, a rule-based strategy that’s a function of the objective laws of demand and supply. Because of little regulation in the investing/trading education industry, most persons learn how to trade completely wrong because they often learn from individuals who are good at marketing but not trading. And this ultimately causes approximately 80% of people who attempt to trade to fail as they actually didn't learn how trading or the market works but instead poisoned with trading information and education that makes them buy high and sell low. This path is loaded with lagging oscillators, indicators, and conventional technical analysis information that results in high risk, low reward investing, and trading.
Secondly, you must be disciplined to follow your rule-based strategy. So, about 80% out of the approximate 20% who actually studied the proper trading education and equipped with the right information fail at trading because of the lack of discipline factor. This translates that only a few ever succeed in trading.
Before you stop reading this piece and throw it into your fireplace because it is so negative, sit tight and read on; help is on the way…
Here at our online trading academy, we have been trading futures, stocks, and forex for several years and have several interactions with new traders in our live trading classes – an educational live online trading room at the academy. We have seen several persons enroll for the program without any of the two most essentials mentioned above.
Let us discuss a few trades in from the live trading classes, hoping that you can better understand the exact way the markets and proper trading works. We will then show you how we handle discipline issues that can be challenging, especially for new traders in the live trading classes.
LIVE TRADING CLASS TRADE IDEA
We have two typical live trading class pre-planned and taken trades. Before the market opened, we marked the demand level below where the market was trading in the pre-market, which is before the opening of the US Stock market. Simultaneously, we marked the supply level above. As the stock market opened, we were excited to buy from individuals who were willing to sell following a price drop; at our pre-determined demand level, that is a low risk / high reward / high probability time to buy. Know that the demand and supply laws ensure that sellers who sell following a drop in price at price levels where demand exceeds supply will almost always lose. Hence, we ensured that we take that trade's other side using our rule-based supply and demand strategy, buying from ill-informed sellers.
As our price moved to our pre-determined supply level above, a few traders from our online trading academy initiated a short position or sold their long position. Whom did we sell to? We simply sold to those traders who are making the same two mistakes that all consistently losing sellers and buyers make, regardless of what they are selling or buying. The first mistake is that they buy after a big rally in price. Secondly, they buy at price levels where the chart suggests that supply exceeds demand – i.e., sellers are more than buyers. Why would someone buy at that price level? They buy because they have been programmed to buy when the news is favorable, a strong uptrend is underway, and because, as humans, our brains are wired to buy when others are buying at or near retail (supply) prices.
LIVE TRADING CLASS TRADE IDEA
In this trade, we first identified the demand level and drew our lines on the chart before planning our trade. Please take note of how the price arrived at our demand level. The fall before our entry was serious. A fall in price with big red candles are often associated with declining indicators and bad news. Many investors and traders are invited to sell when the price falls, especially just as it fell in the trade above. Newbie traders or investors may be very scared to but at the position that we did because of these realities of falling prices.
It is laughable to think that members of our online trading academy can take these trades because they've got some superpowers of successful traders or somehow dehumanized their brains. However, what you should know lies in the key that we discovered many years ago. And that is that the human brain has flaws about proper trading and can grow to become a trader's worse enemy. Hence, we ensure that we do our objective rule-based supply and demand analysis based on the laws of demand and supply, and then we take full advantage of today’s fantastic order execution capabilities. This ensures that emotion never has a chance to meddle in our trading world.
Below, there is a picture of the type of order we would use in a trade like the two opportunities illustrated above. By selecting the Order Sends Order (OSO) below, we can enter an order to buy at demand level, enter a protective sell stop order to limit possible risks because losses are inevitable, and enter a sell limit take profits, simultaneously. After setting up and executing that order, we are hands-off that entire trade from the beginning to its completion. This makes us achieve two things: one; it caters to our emotions; two, it saves us the stress of sitting in front of a computer screen throughout the day. We call this the “set it and forget it” trading.
Nowadays, every thinkable kind of order is available. Sometimes we use a customer API – a custom version of what you see above from TradeStation. We encourage you to start taking advantage of the opportunity to set and forget your trades, whether day, swing or position. There are several types of features and orders to share in this article, so do not hesitate to email if you have any questions.
Again, in our opinion, smart trading refers to keeping things simple, and smart living refers to not spending forever at your computer. Besides, remember that people who know what they’re doing in the markets simply get paid by those who do not know. So ensure you figure out the two issues discussed in this article before you risk your hard-earned money.
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