Markets & After hours
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Properly Thinking the Markets - Sam Seiden, Online Trading Academy
Wal-Mart, Tesco, Costco, Sam’s Club, just to name a few. These are some of the biggest retailers in the world, huge operations that make fortunes in revenue. How do they do it? What is there big secret? Simple, at the end of the day, they have mastered two simple things. First, buying at wholesale prices and selling at retail prices. Second, they have mastered the marketing game. Wait, this is supposed to be an article on trading so why write about the retail world of gadgets, clothes, appliances, and more? It’s an important topic if you want to understand how to be a consistently profitable trader or investor. Their buying and selling actions in the markets they operate in are no different than the actions of the consistently profitable trader. For you to be successful, you need to learn to properly think the market place you’re buying and selling in, just like Costco does.
Let’s get more specific so that you can become a better trader by the end of this article. For Costco to profit, they have to make sure that there are many willing buyers to pay the retail prices they are charging. When we trade, we must do exactly the same thing, we need retail buyers who are willing to buy at the retail (supply) price levels we are charging. How does Costco get you to pay their retail prices? There are many ways but let’s start with a look at the Costco sign above. This sign is in huge letters at the front of every Costco and on every piece of marketing material. Notice the word in blue that is a part of every Costco sign, “Wholesale.” Why do you think that word is there? There is one reason and one reason only… To get you to think you are paying wholesale prices so that you actually walk in the store and pay their retail prices, period. In short, the word “Wholesale” is an invitation to get you to pay a retail price. As a market speculator, this is also what you need to know how to do in the markets.
Take the example below from a recent short term income trade in Crude Oil. The yellow boxes are supply levels. This is a price level that according to our rule based analysis had much more supply than demand. Another word for a supply level is “retail.” A little while after identifying that level, price rallied up to our pre-determined supply (retail) level which means people were convinced Crude Oil was worth buying at our retail price. After they bought in the circled area (our short entry), price declined as it should and we were able to buy lower, profiting from this trade.
Again, this is really no different from paying retail prices for a new car. As soon as you sign the papers and drive it off the lot, the price declines dramatically. The first step in this process is to accurately identify key supply (retail) prices in a market. The second step is to wait for someone to buy from you at that level. Just like people walk into Costco each day and pay retail prices, people will be more than willing to pay your retail prices in the markets if you know how to identify retail prices in markets and have the patience to wait for people to pay retail prices. This is because most people buy on good news and in strong up trends. In both cases, they are typically buying at or near retail prices.
Take a good look at the chart and specifically look at the supply level and then the rally into it followed by the decline. We are looking at Crude Oil prices. That picture is the same picture of price movement if you were to buy something at Costco and then try to sell it at a garage sale at your home. You are going to sell it for a much lower price than you bought it for at the store. Whether we are talking the Crude Oil, the S&P, or a Costco product, the chart is identical. Just like the retail store, you must know what retail price to sell at (supply levels) and you must have the patience and discipline to wait for someone to be willing to buy at that level.
As a market speculator, you really do have a retail operation going at your home if you think about it. Good traders know price levels that are too low (demand/wholesale) and price levels that are too high (supply/retail). They buy at wholesale prices from people who are trained, conditioned, and willing to sell at wholesale prices. They also sell at retail prices to buyers who are trained, conditioned, and willing to buy at retail prices. Then, they just repeat the same simple process over and over for the entire life of their trading career. Try not to over think this and keep it simple. Hope this was helpful, have a great day.
Wal-Mart, Tesco, Costco, Sam’s Club, just to name a few. These are some of the biggest retailers in the world, huge operations that make fortunes in revenue. How do they do it? What is there big secret? Simple, at the end of the day, they have mastered two simple things. First, buying at wholesale prices and selling at retail prices. Second, they have mastered the marketing game. Wait, this is supposed to be an article on trading so why write about the retail world of gadgets, clothes, appliances, and more? It’s an important topic if you want to understand how to be a consistently profitable trader or investor. Their buying and selling actions in the markets they operate in are no different than the actions of the consistently profitable trader. For you to be successful, you need to learn to properly think the market place you’re buying and selling in, just like Costco does.
Let’s get more specific so that you can become a better trader by the end of this article. For Costco to profit, they have to make sure that there are many willing buyers to pay the retail prices they are charging. When we trade, we must do exactly the same thing, we need retail buyers who are willing to buy at the retail (supply) price levels we are charging. How does Costco get you to pay their retail prices? There are many ways but let’s start with a look at the Costco sign above. This sign is in huge letters at the front of every Costco and on every piece of marketing material. Notice the word in blue that is a part of every Costco sign, “Wholesale.” Why do you think that word is there? There is one reason and one reason only… To get you to think you are paying wholesale prices so that you actually walk in the store and pay their retail prices, period. In short, the word “Wholesale” is an invitation to get you to pay a retail price. As a market speculator, this is also what you need to know how to do in the markets.
Take the example below from a recent short term income trade in Crude Oil. The yellow boxes are supply levels. This is a price level that according to our rule based analysis had much more supply than demand. Another word for a supply level is “retail.” A little while after identifying that level, price rallied up to our pre-determined supply (retail) level which means people were convinced Crude Oil was worth buying at our retail price. After they bought in the circled area (our short entry), price declined as it should and we were able to buy lower, profiting from this trade.
Again, this is really no different from paying retail prices for a new car. As soon as you sign the papers and drive it off the lot, the price declines dramatically. The first step in this process is to accurately identify key supply (retail) prices in a market. The second step is to wait for someone to buy from you at that level. Just like people walk into Costco each day and pay retail prices, people will be more than willing to pay your retail prices in the markets if you know how to identify retail prices in markets and have the patience to wait for people to pay retail prices. This is because most people buy on good news and in strong up trends. In both cases, they are typically buying at or near retail prices.
Take a good look at the chart and specifically look at the supply level and then the rally into it followed by the decline. We are looking at Crude Oil prices. That picture is the same picture of price movement if you were to buy something at Costco and then try to sell it at a garage sale at your home. You are going to sell it for a much lower price than you bought it for at the store. Whether we are talking the Crude Oil, the S&P, or a Costco product, the chart is identical. Just like the retail store, you must know what retail price to sell at (supply levels) and you must have the patience and discipline to wait for someone to be willing to buy at that level.
As a market speculator, you really do have a retail operation going at your home if you think about it. Good traders know price levels that are too low (demand/wholesale) and price levels that are too high (supply/retail). They buy at wholesale prices from people who are trained, conditioned, and willing to sell at wholesale prices. They also sell at retail prices to buyers who are trained, conditioned, and willing to buy at retail prices. Then, they just repeat the same simple process over and over for the entire life of their trading career. Try not to over think this and keep it simple. Hope this was helpful, have a great day.
Folks, can I request not to post comments about comments? The purpose of the thread is to inform, inspire, and share insight with some light hearted humor thrown in, but let's not make it a meaningless chat-room. I also plead guilty to passing a flippant comment or two, but request let's provoke thoughtfulness and reflection.... and not inane comments. Thanks.
A man who lives fully, is prepared to die at any time. Fear of life comes only when a man does not face the obvious truths - Mark Twain
The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In life, be aware of the danger - but do not fail to recognize the opportunity it brings - John F. Kennedy
You can go through the routines of life and let destiny reveal itself to you. Or else, you can choose your destiny and create a path to meet it - Unknown
The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In life, be aware of the danger - but do not fail to recognize the opportunity it brings - John F. Kennedy
You can go through the routines of life and let destiny reveal itself to you. Or else, you can choose your destiny and create a path to meet it - Unknown
Overcoming the emotional barriers to day trading success - Ricardo Da Silva works
http://www.traderslog.com/overcoming-the-emotional-barriers-to-day-trading-success/
There is a rather common saying in financial circles, that the markets are primarily driven by two opposing forces namely, fear and greed. This is, perhaps, an over-simplification. There are, however, some psychological barriers that a trader should seek to understand and conquer. To ignore these will likely decrease the chances you have to become a consistently profitable trader.
Most online trading sites such as ours now offer the ability to try out and ‘paper trade’ on demo accounts in order to gain experience through a simulated environment. While this may be beneficial to learn the platform, it is impossible to simulate the psychological side of a trade unless you actually fund your trading account and put your own hard-earned money at risk.
With fast paced day trading, your strategy and profits can easily be eroded should you let your emotions muddy your decisions. Despite fear and greed ultimately being the core reactions, they do have their important affiliates:
• Hesitation: Traders need to have a trading plan and most importantly stick to their rules no matter what. As an online day trader, there isn’t always time to second-guess decisions especially while reacting to market news. Backtesting can help build confidence in a plan while the use of automated trading tools can help overcome the tendency to hesitate before clicking on the mouse button.
• Anger: The markets won’t necessarily do what you want them to do, often at the expense of your money. Losing large amounts of money can result in the inexperienced trader losing their temper. A dangerous precedent set, always reacting to losses with anger can stop you making rational choices. If you feel your anger rising you should step away from the dealing platform. The way to consistently outperform the market is to be as methodical as possible in your approach and clear about your risk management.
• Anxiety: This is often brought on by the anticipation of trades going wrong. Anxious people avoid whatever it is that makes them upset. This can result in the trader not making an obvious trade or perhaps holding a losing position for too long instead of cutting their losses. Also known as: not sticking to the plan. A way to combat this is to use stop and limit orders so that you don’t have to sit on the edge of your seat watching every tick of the market.
• Boredom: It can be dull waiting for a trading opportunity to present itself. And it is during this time that traders start making bad decisions and start chasing the market. It is very important to understand that you do not always have to be in the market. If you’re really bored, take a break, or use this time to research your chosen instrument further.
Unfortunately there is no ‘magic secret’ to trading the financial markets. Having a well thoughtout trading plan– including proper risk management techniques– can significantly improve your trading performance. Discipline is ultimately the name of the game. It simply comes down to putting in the time and planning.
http://www.traderslog.com/overcoming-the-emotional-barriers-to-day-trading-success/
There is a rather common saying in financial circles, that the markets are primarily driven by two opposing forces namely, fear and greed. This is, perhaps, an over-simplification. There are, however, some psychological barriers that a trader should seek to understand and conquer. To ignore these will likely decrease the chances you have to become a consistently profitable trader.
Most online trading sites such as ours now offer the ability to try out and ‘paper trade’ on demo accounts in order to gain experience through a simulated environment. While this may be beneficial to learn the platform, it is impossible to simulate the psychological side of a trade unless you actually fund your trading account and put your own hard-earned money at risk.
With fast paced day trading, your strategy and profits can easily be eroded should you let your emotions muddy your decisions. Despite fear and greed ultimately being the core reactions, they do have their important affiliates:
• Hesitation: Traders need to have a trading plan and most importantly stick to their rules no matter what. As an online day trader, there isn’t always time to second-guess decisions especially while reacting to market news. Backtesting can help build confidence in a plan while the use of automated trading tools can help overcome the tendency to hesitate before clicking on the mouse button.
• Anger: The markets won’t necessarily do what you want them to do, often at the expense of your money. Losing large amounts of money can result in the inexperienced trader losing their temper. A dangerous precedent set, always reacting to losses with anger can stop you making rational choices. If you feel your anger rising you should step away from the dealing platform. The way to consistently outperform the market is to be as methodical as possible in your approach and clear about your risk management.
• Anxiety: This is often brought on by the anticipation of trades going wrong. Anxious people avoid whatever it is that makes them upset. This can result in the trader not making an obvious trade or perhaps holding a losing position for too long instead of cutting their losses. Also known as: not sticking to the plan. A way to combat this is to use stop and limit orders so that you don’t have to sit on the edge of your seat watching every tick of the market.
• Boredom: It can be dull waiting for a trading opportunity to present itself. And it is during this time that traders start making bad decisions and start chasing the market. It is very important to understand that you do not always have to be in the market. If you’re really bored, take a break, or use this time to research your chosen instrument further.
Unfortunately there is no ‘magic secret’ to trading the financial markets. Having a well thoughtout trading plan– including proper risk management techniques– can significantly improve your trading performance. Discipline is ultimately the name of the game. It simply comes down to putting in the time and planning.
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