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You’re Thinking Backwards… And Don’t Even Know It

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

Think about it…

You walk into your favorite store to buy your favorite item. Maybe it’s ice cream, new shoes, your dream car, the latest gadget at the Apple store, your favorite drink at Starbucks, a perfectly ripe avocado or watermelon, whatever… As soon as you enter the store, to your surprise, there is a sign that reads: “Today only, your favorite item is on sale for half price and there are only 3 left, and they are in the back of the store!” How would you feel after reading that? What would you do next? You are probably going to do two things, smile and run! How many are you going to buy when you get to the back of the store? All three of course unless it’s the dream car but at half price, who knows… After you leave the store, the first thing you’re likely to do is call everyone you know and tell them about the deal you just got because you’re still so excited.

Now think about this…

Free Trading WorkshopYou hear about a hot stock from your smart friend who dabbles in the markets. You then call your broker and ask about the stock because you want to buy it. He mentions that the stock recently had some bad news and follows that up by telling you that the stock price has been declining for a few weeks and is trending lower. You start to get a bad feeling about buying this stock and then, the broker pulls up a chart and shows you a picture of what he just described. What you see is actually worse because the decline in price is getting steeper, showing big ugly red candles that are getting bigger each day. To the left, you see that price is nearing a prior low where it rallied from before but he tells you that was in the past, the news is bad and getting worse. He then mentions that they are reporting earnings the next day and earnings are likely to be weak. You tell him thanks for the information but you are not interested in buying now because of the reasons he just mentioned. The next day, the company reports earnings that miss expectations and the stock price falls more. Do you buy the stock as it is reaching demand? Or, do you focus on the bad earnings and let that confirm your decision to not buy the stock. The vast majority of people will do the later of the two and not buy the stock. Furthermore, they think those who would buy the stock are crazy.

Finally, understand this…

Think of what the charts would look like with both of the examples above, your favorite item on sale and the stock price falling on bad news. Wouldn’t the charts look EXACTLY the same? Of course they would. However, because of how people are taught to trade and invest, they take the opposite action in the two examples. When prices are down for your favorite item, you are very excited to buy. However, when prices are down in a market because of bad news or whatever, you are conditioned to not buy but worse yet, sell.

At Online Trading Academy, what makes us different and our approach to trading and investing unique is that, like Wall Street, we realize that there is absolutely no difference between how you properly buy and sell things in every other part of your life and how you properly buy and sell in the trading and investing markets. When you approach the markets from this realistic perspective, market timing is not that difficult and low risk, high reward, and high probability opportunities can become achievable and consistent. Ironically, this simple approach is very different from conventional technical and fundamental analysis. It’s really an opposite approach from those traditional ways of thinking markets and trading yet these two forms of analysis are what most people use because that’s what all the books write about and schools teach. This is the reason most traders fail and most investors never achieve their financial goals.

Pro Pick Trade: 6/3/16 – KO: The Setup

Pro Picks are a great market learning tool

KO: The Result

Pro Picks are all delivered in a very educational way
Let’s take a look at a recent Pro Picks trade to see this reality in action. First, Pro Picks is our Stock, Futures, Options, and Forex educational picking service where we give you the exact entry, stop, and target/s for day, swing, and position trades. While we give you the exact entry, stop, and target prices, these picks are all delivered in a very educational way as the goal is to teach you how to do this on your own. The pick above is in a stock, KO. There was a strong rally underway as you can see above. However, stock price was nearing what we would call a “fresh supply level” where banks/financial institutions are selling. Given the distance from the supply level above to the profit target below (blue line is target #1), this told us we had a low risk, decent reward (profit zone), and high probability selling (shorting) opportunity. You now have two choices as price is rallying, prior to entry… You can focus on the good news, nice green candles, and up trend and that will lead you to either do nothing or buy as everyone else is buying. Or, you can focus on the reality of how you make money buying and selling anything and realize that you just walked into your favorite store and your favorite item has this time been marked up to twice what you normally pay. It would probably take you a few seconds to decide that you are not going to buy it at this price and also wish you were the company selling it. That’s how a consistently profitable trader/investor thinks which happens to be exactly how a smart buyer and seller of anything thinks.

KO reached the supply level for the Pro Pick selling opportunity, turned lower and fell to reach the profit target at demand for a Pro Pick gain of a little over $1,500.00. Another way to say this: Pro Picks suggested to buy at “wholesale” prices (demand) from people who are trained and conditioned to sell at wholesale prices. Pro Picks suggested to sell at “retail” (supply) prices to people who are trained and conditioned to buy at retail prices.

Over the past couple years, I have received more and more emails from our readers suggesting that they are really understanding this concept. They understand something that is not that difficult to grasp if your focus is in the proper place. However, the fact that most people around the world think in opposite terms when it comes to how you properly buy and sell things in every other part of your life and how you properly buy and sell in markets is truly amazing. Most people have it wrong. I suppose this is a wonderful opportunity for those who think this simple concept the right way, just make sure that’s you.

Hope this was helpful, have a great 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.