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Out-Thinking Your Competition

Often, I write articles about the importance of having or owning a competitive edge. It is amazing to me that people in general focus very little on this most important topic. Most traders read trading books and learn to buy and sell where everyone else who reads the books buys and sells, which ensures they will not have an edge. With most things in life, trading for sure, there is a winner and a loser. The consistent winner has an edge over the loser that includes two things:

1)    Mental: Having a mental edge is a combination of proper reality based thinking (void of illusion), having extreme self control, and focus.

2)    Strategy: Having a strategic edge means owning a rule based strategy that ensures success over your opponent. Your strategy must offer you the lowest risk, highest reward, and highest probability entry.

I started my career on the floor of the Chicago Mercantile Exchange facilitating institutional order flow. In other words, I started on the institution side of the business, not the retail side. So, I had the privilege of learning how the game of making and losing money really happens in trading. In this piece, I want to share with you one of the tricks that allows Online Trading Academy students to enjoy a trading edge that can’t be obtained by reading a trading book.

To convey this important nugget of information to you, let’s use a trading opportunity from the Mastermind Community at Online Trading Academy.

The Supply and Demand levels grid you see above is a service I and my team produce each day for our graduates. It offers three supply and demand levels on ten (soon to be 20) of the biggest markets in the world. On Sep 4th, one of the levels on the grid was a demand level in the NASDAQ Futures of 2737 – 2743. This is a level where our strategy told me there were unfilled buy orders from institutions, strong demand. Make sure you understand that this demand level is NOT that pivot low and black line on the chart. The demand level on the grid was just below that pivot low (black line) and to the left, not seen on the chart here. The black line is from the pivot low on the left. Every trading book is going to draw a line from that pivot low and extend it right, calling it “support”. So, that means we know that when price comes back to that level, retail traders will typically buy at that level and place their protective sell stop just below the level. We also know that most retail traders lose money… When price came back to that level and retail traders bought, price then dipped below it, triggering there sell stops. Keep in mind that our demand level is sitting just below that black line which is where we are willing buyers. So, when the retail sell stops were being triggered, who do you think was buying and filling those orders? If you said institutions, you are correct for the most part. This is exactly where Online Trading Academy students were instructed to buy also. Partly because of the demand and partly because we knew retail sell stops would be sitting at that level which is where we want to buy. Being able to outthink your competition means understanding exactly how your competition thinks and acts which was the case here.

My hope from this piece is that you understand how important it is to have a competitive edge when putting your hard earned money at risk in the markets. Each day, wealth is transferred from those without an edge into the accounts of those who have that important edge.

Hope this was helpful, have a great day.

Sam Seiden


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.

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