econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 23 June 2016

The Genetics Of Trading

by Sam Seiden, Online Trading Academy

Article of the Week from Online Trading Academy

Before starting my career at the Chicago Mercantile Exchange, I did two things and really two things only. I played ice hockey and went to school where the focus of my studies was Biology and Genetics.

I know what you're thinking, how boring... Well, I actually was and am still fascinated with the study of life so I really enjoyed those days. Around every corner of Biology, Chemistry, Genetics and so on is another mathematical equation. After diving into this field, I quickly realized that though there were so many equations, the underlying goal of most of these equations were to quantify the forces of "change", "action" or "energy". So, one could argue that all these equations were really different variations of the same thing. For my simple mind, everything came down to Newton's simple concept of "motion into mass". Whether I was figuring out the concept of splitting a cell or how an earthquake happens, the underlying equation was quantifying motion into mass.

Knowing absolutely nothing about trading and economics when I started on the floor of the Chicago Mercantile Exchange, my first thought was that I now had to learn a whole new subject because my prior schooling and experience had nothing to do with trading and economics. How wrong I was! Within a few weeks of working on the exchange floor, facilitating institutional order flow, all I saw was "motion into mass", everywhere. The only difference was that quantifying it in the markets was easier than what I had learned in the science books. In the trading markets, the "Mass" is the buy and sell orders, or what I prefer to call Demand and Supply. At price levels where demand exceeded supply, price rises. At price levels where supply exceeded demand, price declines. "Motion" of price is in between the supply and demand levels. We enter and exit positions at these levels and get paid in between. My "edge" in trading is that I learned to see this on a price chart long before I ever heard anything about conventional "technical analysis". The focus of today's piece is to share a recent trade with you and illustrate this concept of simple motion into mass. The goal is that this nugget of information can help you whether you are a short term income trader or longer term investor.

What is wholesale trading?

Well before the Stock Market opened (last week), we suggested on our Supply Demand Grid that the market was near demand and likely to rally a bit that day. The opportunity was to buy the Russell Futures in the demand zone provided (1125 - 1127.50) for an active income trade. The day of the trade last week was a very volatile day with some news. The key to profitable trading that day or any day was to focus on where the real demand and supply was in the market. In the morning, the Russell fell quickly as you can see from the chart above. The drop in price and news invited many in to sell. That forced price down to a level where there was enough demand to match the amount of supply that was coming into the market which is why price stopped falling. The demand zone is over the lower left portion of the chart. The opportunity was to buy when price declined back to that level because it was low risk, high reward and very high probability. Price turned at our demand zone and the rally continued that day until it reached a price level where supply exceeded demand, as that is what always happens in a market. Note that the demand level is best seen on a smaller time frame than I am showing here.

The most important piece of information you can take from this is to understand that there are two ways to think trading and markets. You can focus on the news and conventional trend analysis and sell near the low and buy near the high. Or, you can focus on the reality of how you make money buying and selling anything. You see, if I were to call demand "wholesale" and supply "retail", I'm sure you would start to think different because we all want to buy at wholesale prices and sell at retail prices in every other part of our life. That is actually 100% how you need to think about the trading markets because the truth is, there is no difference between the proper buying and selling action you take when trading vs. the proper buying and selling action you take when buying and selling anything in life. The trading industry guides people to think there is a big difference and leads people down the thinking path of conventional fundamental and conventional technical analysis, but that is a big trap.

The information in this piece may seem a bit repetitious but the purpose of that is to help you understand how the markets work and one way of attaining low risk, high reward, and high probability profits when speculating in markets.

Hope this was helpful, have a great day.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Investing


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Expected Effects of Petitions to Improve the Monetary System
Energy and Falling Productivity
News Blog
Clinton Wins Round One
Why Alzheimer's Research Is Failing To Hit Treatment Targets
Voters Still Distrust Both Presidential Candidates
What We Read Today 27 September 2016
How To Get People To Exercise
September 2016 Conference Board Consumer Confidence Now At Highest Level Since the Great Recession
Richmond Fed Manufacturing Survey Remains In Contraction In September 2016.
September 2016 Chemical Activity Barometer Continues to Signal Improving Economic Growth
Case-Shiller Home Price Index July 2016 Year-over-Year Rate of Growth Decelerates
Between Geopolitics And Technology
Infographic Of The Day: See Every Single Part Inside An IPhone
Early Headlines: Asia Stocks Mixed, Europa Water Plumes, All About The Debate, Putin Reacts To Debate, Oblivious Students, India Rocket Success, China Profits Surge And More
September 26, 2016 Weather and Climate Report - Not Quite the Camino Real
Investing Blog
Investing.com Technical Summary 27 September 2016
Monday Morning Call 26 September
Opinion Blog
Housing Inflation- A Simple Case Of Supply And Demand Exacerbated By Low Rates
Heading For A Fall? With Summer Over, Europe Must Face Up To Its Mounting Crises
Precious Metals Blog
War On Cash Turns To $20, $50, And $100 Bills
Live Markets
27Sep2016 Market Close: US Major Indexes Closed Higher As Commodities Fell, WTI Crude Slipped Three Percent
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved