Free Class
Featured Article

The Profit Picture for Active Traders

Sam Seiden
Online Trading Academy, Chief Education, Products, and Services Officer

Have you ever been to a Dr. to get an X-ray and they only take one picture? Of course not. They almost always take at least 3. Why? Because an x-ray of the same elbow, but taken from different angles, may look very different.

Different views on the same price chart may give you vital information for planning your trade. The same applies in trading; one time frame active traders simply can’t compete with those who view and quantify the market’s entire supply (resistance) and demand (support) picture.Tweet: One time frame active traders simply can’t compete with those who view and quantify the market on a larger scale. http://ctt.ec/2ODF7+ Meaning, astute traders and investors can and should look at multiple times frames for the same reasons the Dr. does, to accurately assess.

Often, I hear active traders talk about the time frames they look at when they trade. I hear many different things like, “I trade off of a 2 minute chart,” “I like the 466 tick chart,” and so on. When I ask them what other time frames they look at, I can pretty much tell if they are profitable or not and here is how: For those who trade using JUST one small time frame, I have yet to see anyone make consistent profits. Those active traders who use the smaller time frames and also look at the larger time frames, they use a recipe for profits.

You may have the best buy setup you have ever seen on a 5 minute chart, but if that is anywhere close to larger time frame supply, that buy setup is not likely to work. Conversely, you may have the “picture” of what appears to be a very high probability sell setup on the 15 minute chart, but if that is anywhere near larger time frame demand, that trade is not likely to work either.

There is another reason to focus on more than just a small time frame or two, trends. Larger time frame trends begin and end at larger time frame demand and supply levels. In the XLT, we look at weekly and daily charts each week to identify larger time frame demand and supply levels for three reasons:

  1. To know where existing trends are likely to end and new ones begin
    1. We want to be first in line, at the right time, when the risk/reward is ideal
  2. To know where current price is on the larger time frame supply/demand curve so we know what side of the market carries the greatest odds for an active trader
  3. To identify longer term opportunities

After hearing from so many people about how volatile some of the markets are lately, like oil, the dollar, and others, and with the equity index markets moving to new highs and bond prices collapsing, I thought I would share with you how we look at things in the XLT, our live online trading rooms as they pertain to today’s topic.Free Trading Workshop

  1. We don’t focus on news when trading the global markets, we focus on price and price alone as that tells us the real time demand and supply equation. In other words: Any and all influences on price are reflected in price. Opportunity exists when this simple and straight forward equation is out of balance.
  2. By focusing on the reality of what is happening in a market, we are able to profit from those who don’t. In other words, when you focus on news and find yourself chasing trades on a 5 minute chart and losing money, understand that you are simply depositing your account into someone else’s, and who wants to do that?
  3. When a market is in an uptrend and is nearing a larger time frame supply level, that trend is about to end and a downtrend is likely right around the corner. Conversely, when a market is in a downtrend and nearing a larger time frame demand level, that downtrend is about to end and an uptrend is likely about to begin.

The strategy we use and teach those who want to learn to be active traders in any time frame is a simple rule based strategy that allows us to quantify real demand and supply in any market and time frame. This is very different than the conventional technical analysis and the faulty definitions of support and resistance.

From today’s article, my hope is that you understand two things:

  1. The importance of reviewing the larger time frames no matter how short term a trader you are.
  2. The importance of seeing price action for what it really is.

Hope this was helpful, have a good day.

Sam Seiden – sseiden@tradingacademy.com

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.