Today’s piece will be somewhat short and sweet. One of the most important things you need to do to be successful when short term trading for income or long term trading for wealth is to have proper focus. What I mean is this… As a short term income trader, all you need to do each day is look at a chart, apply the Supply/Demand strategy, and focus on where institutions are buying and selling that day. The hard part is to only focus on that. Like last week’s piece, this focus combined with planning your entire trade and then executing it (setting and forgetting) is the key.
Below is a NASDAQ (QQQ) trade that we took in the Extended Learning Track (XLT – Live Trading Rooms) with our students. On January 8th, we started the day by going over the XLT prep screen where I gave our XLT members demand and supply levels for the major markets for that day. One of the levels we focused on was the QQQ demand level, highlighted in green. These buy and sell areas are found by locating on a chart exactly where institutions were willing buyers and sellers. The key is to follow our rules and perform our rule based analysis well before the market gets going and well before our trades take place.
XLT Session (Live Trading Room) – Jan. 8, 2014
Bank demand that day in the QQQ was in the demand range of 86.70 – 86.77 as you can see on our pre-market prep screen above. With an entry at 86.77, a protective sell stop at 86.67, and a profit target of 87.07, we had a 4:1 trading opportunity (risk 1 to make 4). If you’re at the race track and a horse has a strong probability of winning and is paying 4:1, who wouldn’t take that bet? Trading is really no different. Like a horses wager, once my bet is placed, there is nothing to think about or action to take. Below is the Nasdaq (QQQ) demand level (A) on the chart. Once the market got going, price declined to demand level (A) at (B) and then proceeded to rally from that level to our profit target (C), risking 1 to make 4. Had the trade not worked out, not a big deal, it was a risk (bet) we were willing to take because the chart suggested a high probability opportunity.
XLT Trade – QQQ
What makes this focus so hard for most people is all the other things they let sneak into their decision making process. They also let emotion play into the trade which will typically lead to a smaller trading account. They overcomplicate what is really not that complicated. The focus needs to be 100% on where the banks and financial institution buy and sell orders are that day and then buying and selling there, nothing else. When it comes to profitable trading, knowing the details of what is happing to the European economy or with the Fed is as important as knowing what the Rover is doing on Mars that day.
When people use the term “100%,” most of the time it’s a figure of speech, I am not. Profitable trading goes hand in hand with profitable thinking; 100% of your focus needs to be on one thing and one thing only: Where are the significant institution buy and sell orders, period. As I always write about, we do this by learning how to identify supply and demand levels on a chart. We look for the picture that represents a major supply and demand imbalance and then take action at that level. Some people will want to also include some indicators, Fibonacci levels, maybe the latest oscillator, wrong again… You need to have a razor sharp focus on where the major buy and sell orders are, nothing else matters.
Now that I have repeated myself a few times, hopefully you get the point and I will not waste your time with more repetition. This is just my opinion of course but from my experience, nothing else matters when you know where institutions are buying and selling in a market and that’s the focus of Supply and Demand. If you don’t agree, that’s fine as well, this is what makes a market.
Hope this was helpful, have a great day.
Sam Seiden – firstname.lastname@example.org