September 4th, 2015
by Sam Seiden, Online Trading Academy
Today's piece is about the power of simple; and simple starts and ends with the proper focus. I am going to suggest something today that some people won't be able to do and others will disagree with it. Still others, on the other hand, are already doing it in the Extended Learning Track (XLT), our online trading program at Online Trading Academy. It's a simple trading strategy and it's all you need to focus on.
One of the most important things you need to do to be successful when short term trading for income or long term trading for wealth is to have proper focus. What I mean is this... As a day trader, all you need to do each day is look at a chart, apply the Supply/Demand strategy, focus on where institutions are buying and selling that day and execute. The hard part is to only focus on that.
Below is a recent trade I took in the S&P Futures. This is a bearish position at supply, the entry is in the small circled area. This opportunity started out by locating on the chart exactly where institutions were selling the S&P, the supply level you see below in yellow. I then entered my bearish position by selling short when price quickly revisited supply (small circled area) and profited from a downside move. This is an example of executing our simple rule based trading strategy but the key is the focus and keeping things simple.
S&P Trade: 08/25/15
What makes this focus so hard for most people is all the other things they let in their decision making process. For example, prior to taking this trade, you may want to think about the economic numbers coming out that day. Wrong! We don't consider that number or pay attention to it. All we care about when it comes to profitable trading is where the big buyers and sellers are in a market. You may want to see what's happening in Greece or Asia or the next country nearing default. Let me tell you something... allocating one ounce of my focus on that is useless when it comes to identifying where banks and financial institutions are selling S&P and then shorting in that area. The focus needs to be 100% on where the institution sell orders are that day, week or month and then selling there, nothing else. When it comes to profitable trading, knowing the details of what is happening to the European economy is as important as knowing what the Rover is doing on Mars that day, you get my point. While that information may be interesting, it's not going to help put money in my pocket. I did notice the Rover took a nice selfie the other day.
You may be wondering what the big circled area represents. The picture inside that tells me that there is a significant profit zone to the downside. In other words, nothing in that circle represents demand which is the only thing that causes price to stop falling and rally. We take the trade equally because of a strong supply level above and the lack of demand below. This is the key to predicting price movement in any market in advance with a very high degree of accuracy.
When people use the term "100%," most of the time it's a figure of speech, I am not using it as a figure of speech. Again, when it comes to profitable day trading and longer term position trading and investing, 100% of your focus needs to be on one thing and one thing only; where are the significant institutional buy and sell orders, period. As I always write about, we do this by learning how to identify supply and demand levels on a chart. We look for the picture that represents a major supply and demand imbalance and then take action at that level. Some people will want to also include some indicators, Fibonacci levels or maybe the latest oscillator, wrong again... You need to have a razor sharp focus on where the major buy and sell orders are, nothing else matters.
Now that I have repeated myself a few times, hopefully you get the point and I will not waste your time with more repetition. This is just my opinion of course, but from my experience nothing else matters when you know where institutions are buying and selling in a market; that's the focus of Supply and Demand. If you don't agree that's fine as well, this is what makes a market.
Hope this was helpful, have a great day.