By Sam Seiden, Online Trading Academy Instructor
I thought I would use this week's piece to answer some important questions that many people likely share. Getting the right answers in an industry that is fraught with misleading information can be a daunting task for the new market speculator so I will do my best to give you the straight answer to some of the most frequently asked questions.
Question: How long will it take me to become a successful market speculator?
This is a frequently asked question. After being in the business for so long and seeing so many new market speculators, the answer is crystal clear to me. Typically, what determines how long it takes to achieve consistent profitability in trading is the amount of experience you have BEFORE you get the proper training. As an instructor, I tend to have the easiest time training someone who has little to NO experience. This is because they have not been poisoned with bad information which means money losing "decision filters" floating around in their head. The new market speculator that has been to many seminars and read all the trading books tends to take the longest to reach their trading goals.
The key piece of information here is to make sure that when you are ready to get educated on how to properly speculate in markets, you get the right information the first time. This is key because it is that first impression with any information that is engrained at the cellular level. Once it's there, it takes lots of effort to remove and replace with proper information. For the new market speculator, knowing proper trading education from bad is easier said than done. If you have no experience, how do you know the difference? The answer I always give is to use your simple logic filter. If information seems too complex or doesn't make sense to you, chances are great that it is poisonous information that will drain your trading account. Think about it, you already know how to buy and sell things properly in other parts of your life, don't you? If you said yes, you're already a good trader. All you need is someone to show you exactly how to do what you already do by looking at a price chart.
Email Question:
Hi Sam
Could you please help me with the attached chart for GENZ. I am a little confused. Today, August 3rd, the price opened up at 51.99. I had a plan to take the trade long at 51.35 based off the July 23 demand level or which I thought was a good demand level, with a stop at 51.00.
It was a stock that was "down graded". There was also bad news on the stock. I don't normally look at news and try to focus on the chart alone. I went back later after I was kicked out to see why there was such a huge sell on the stock and found out there was really bad news.
I looked for the drop base rally with a huge move out from that area which brought me to the July 23rd level.
Was I looking at this correctly?
I really would appreciate your help with this!
Figure 1 This email came in and the mistakes made here are common so let's go over them. The areas marked "supply" and "demand" are what the student/trader marked on the chart. The circled area was a pocket of sellers that the student didn't notice.
Hi – Thanks for the email…
1) It looks like there was supply level not that far above which limits your potential profits and also tells us there are some sellers close which is not ideal when thinking long.
2) This was the third time price came back to this level so caution on that. The more recent rally was not that strong. This combined with the supply just above means low odds.
3) The S&P is not at support (demand). Timing your trade to the S&P is not everything but it sure is important.
Just some thoughts to help increase your odds and low risk profits.
Sam
Question: What is a good trading book to read?
If I had a dollar for everytime someone asked me this question, I don't think I would need to trade. Here is the straight-forward (but not popular) answer. In my opinion, everything you need to know about how markets really work and when to buy and sell in any and all markets is found in two books. The first is your Economics 101 book from high school or college. This book has everything you need to understand demand and supply. Second, revisit your Psychology 101 book which is likely sitting on your bookcase, near the Economics book, loaded with dust. This book teaches you what you need to know about people and how we think. Specifically, how most people make decisions. I have written about this much in the past but it's all in that book on your bookcase that you have not read since your teacher made you. This is not a joke, try it and let me know what you think. There are some good trading books out there, don't get me wrong, but the vast majority are written by people who, well, write books and don't trade.
Once you have done this, come see us at Online Trading Academy and we can show you how to see demand, supply, and human emotion on a price chart. When you understand this, the low risk, high reward, and high probability trading opportunities in any and all markets become very clear.
Have a good day.
- Sam Seiden sseiden@tradingacademy.com
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