|
 Sam brings over 15 years experience of equities, forex, options, and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has traded equities, futures, interest rate markets, forex, options, and commodities for his personal interests for years and has educated hundreds of traders and investors through seminars and daily advisory services both domestically and internationally. Sam has been involved in the markets since 1991 both on and off the floor of the Chicago Mercantile Exchange. He has served as the Director of Technical Research for two trading firms and regularly contributes articles to industry publications. Sam is known for his trading, technical research, and educational guidance.
|
|
|
Seriously, I Thought It Was A Joke…
Typically, I write articles on markets through the objective eyes of supply and demand. Keep in mind, I started my career on the floor of the CME handling large quantities of order flow. If I had 10,000 orders to sell at 1350 in the S&P for example and there were no buyers at that price level, price would drop, it had to. It was not possible for price to trade higher than 1350 until each and every order to sell was filled and even then, you still needed at least one more buyer for price to move higher. In other words, resistance was at 1350 until each and every order I had (and everyone else's) was filled, period (can you hear the whispers of Adam Smith?). I have made my mark in trading and instructing simply because I know exactly what that picture looks like on a chart. Identifying price levels on a chart where supply and demand are out of balance is not that difficult if you know the information you are looking for and what that picture looks like. This is exactly what I go over with students in class and we typically have great trading days and weeks together.
This week in Boston was no different. Most trades we planned out worked very well and according to plan. Though we went over how to use indicators and oscillators in the trading room, we didn't use any of them for our trades. We simply quantified supply (resistance) and demand (support) on our charts and took our trades. One afternoon in class however, someone (not a student) mentioned an Adam and Eve. I first thought they were referring to something out of the Bible. No, they were asking about a chart pattern called an Adam and Eve which I had never heard of. I was training a new Online Trading Academy instructor and he was in the back of the room and heard this as well. I looked at him when I realized that this person was asking about a chart pattern called an Adam and Eve to see if he had heard of it and he hadn't either. Quickly, I walked into another room because I could not control myself, I had to laugh. I have heard some crazy chart pattern names before but this one put me over the top. Yes, I looked this pattern up and it actually is a pattern someone named that comes in many variations. I have heard of and seen most of the conventional chart patterns, or so I thought. What I also found was a Pipe Top and Bottom, a Roof and Inverted Roof, a Long Island, an Ascending Scallop, a Double Zigzag, Horn Top and Bottoms, and many more that I would list for you if I could stop laughing and type but I can't. Yes, someone has named these patterns and people do look for them.
Whether we are talking about a Cup and Shoulder, Head and Handle, Double Twist Fruit Loop, or Upside Down Donkey Reversal, I am about to save you LOTS of money in trading education and potential trading losses. Here it is… Most of these have nothing to do with the ongoing supply and demand equation in any and all markets which means they have nothing to do with trading. If Adam Smith were alive today, I wonder what he would think about these attempts to twist and convolute the simple governing dynamics of supply and demand. I wonder what the Austrian School of Economics would say about the Ascending Scallop chart pattern, you get the point.
Some of the very basic chart patterns represent important reversal and continuation setups. These however are in line with supply (resistance) and demand (support) and are taught in our classes but again, these are real pictures of order flow.
Friends, the movement of price in any and all free markets is a function of pure supply and demand. Opportunity exists when this simple and straight forward relationship is out of balance. Those who understand order flow and the foundation of markets and price movement derive trading income from those who buy Upside Down Triple Hump Camel Reversals. It is a simple transfer of accounts from those who don't understand trading and markets into the accounts of those who do. Let's put Long Island back in NY and the Scallop back in the ocean where it belongs. If you are going to use chart patterns, make sure they represent the governing dynamics of supply and demand.
Have a good day.
- Sam Seiden, sseiden@tradingacademy.com
|
|
