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Are You Too Smart to Make Money?

Sam Seiden
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Do you think you have to be smart to make money trading the financial markets? Think again. While there are strong studies on the correlation between IQ and income levels that show the higher the IQ, the stronger the income, I would argue the supply and demand strategy that I write about so often flips that equation. Meaning, from my experience, the less you use your smart brain and instead keep things at the kindergarten level with some discipline, the more likely you will have success.

Let’s take the same approach with this article and keep things really simple.

Trade smart, trade simple

The chart above is a recent trade we took in one of my live trading sessions with members of the academy. It was in Crude Oil futures, one of the many markets we monitor and trade. The trading opportunity offered us a $3.00 gain for $0.30 of risk. Price rallied up to our predetermined supply zone (retail prices) where we sold short, and then it fell to our predetermined demand zone (wholesale prices) where we bought back for a profit.

As you can see on the left, many students reported reward to risk gains that were very ideal. So, what did we need to master to identify and take advantage of this opportunity? Let’s dive into that question…

  • Free Trading WorkshopQuestion: How much do we need to learn about the fundamentals of Crude Oil and that market?
    • Answer: Nothing at all.
  • Question: How much do we need to focus on the fundamentals and news around Crude Oil?
    • Answer: Not at all.
  • Question: Do we need to know or focus on whose supply and demand it is at our levels?
    • Answer: No, we don’t at all, it doesn’t matter.
  • Question: Do we need to be an expert in math or economics?
    • Answer: No, not at all.
  • Question: Does it matter if we really don’t understand what Crude Oil is and think Oil is something that grows on a tree and we eat it?
    • Answer: Doesn’t matter at all.
  • Question: Do we need to know how to quantify and identify real supply (retail) and demand (wholesale) on a price chart?
    • Answer: Yes, this is how you profit buying and selling anything in life, so you have to master this.

The big illusion is that you have to be a walking calculator or Ivy League economist to be a great trader or investor. The reality is, you don’t. How we make money trading the financial markets is exactly how you make money buying and selling anything.

Really think about how you buy and sometimes sell things in other parts of life. We always try and buy at wholesale prices and sell at retail prices just like any business or store does.

Really think about it for a minute. You probably know what a sale price on laundry detergent is, but do you know the chemical make up of it? Do you care? Do you know the factory it’s made at and who manages that factory? No, you’re focused on price. Whether it’s the detergent, a car, your home or your trading and investing markets, your thought process and strategy should not change. There is only one way to make money buying and selling anything in life. Don’t let the illusion of a complicated financial system fool you.

If you have any questions or comments, please let me know I am always happy to help if I can.

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.