I don’t see myself as a controversial individual, yet surprisingly enough I have been regarded as such on numerous occasions by people who have asked my opinion on the markets. You see, I speak to many people every week who have a healthy interest in the markets and they are usually looking to increase their skills in trading, hoping to finally become consistent and make money on a regular basis. In fact for some, I think they just want to stop losing so much. Motivations are different for everyone, yet one thing I have noticed in my years of teaching and trading for myself is that no matter when someone started, or what their journey has entailed, for most novice market speculators the experiences that they have had are mostly the same on the whole. You can do a search on the internet for “trading strategies” and it is overwhelming how many hits you receive!
Now knowing that the vast majority of people in the FX markets today (retail speculators) are losing money or just breaking even in their daily trading activities, we need to ask ourselves why that is if we hope to avoid the same outcome personally. It would seem at face value that trading profitably is just practically impossible because so many people seem to fail, but this is completely the wrong way to look at it. Considering that all of the information available on the internet is freely available to anyone at anytime for absolutely no financial cost whatsoever, is it really surprising that most people take the free education option and then run into problems? One of the most impactful statements I ever heard was by none other than my friend and mentor Sam Seiden himself, when he said, “If trading books had all the answers then every librarian in the world should be a millionaire trader by now.” The equation is simple in nature: if you do what everyone else does (uses the free trading education available to us all) then you have to expect to get what everyone else gets (a lack of consistency and profits from trading).
My reason for sharing this reality with you is in direct reference to what I said in my opening paragraph of this very article. Time and time again I am seen as being controversial in my opinions on trading because what I say, do and teach is typically not what the vast majority of people have heard or read before. Now I also have met people who find my teachings and those of Online Trading Academy worldwide, to be exactly what they needed to hear, and as such embrace it to its fullest extent. It is great when this happens. However, like I said before, most people have to take a little time to digest the ideas at first, as they are not what they have likely heard or seen before, and this I completely understand.
One such area which always comes up when I am presenting or teaching trading is the topic of trend. I would go as far as to say that this area is where I am also deemed to be the most controversial as well, although I promise you that is not my intention at all. If you ask people who are on their trading journey about trend, they will likely say things along the following lines:
– “Don’t fight the trend…go with the trend.”
– “The trend is your friend.”
– “The big money is made when you trade the trend.”
– “Counter-trend trading is the most dangerous way to trade.”
Are any of these ideas and statements familiar to you? They were some of the things I first read about when I got into trading myself and then realized that I also needed to be more open-minded. As you may have read in my articles before, I like to follow a very simple rule-based approach to trading which is based on the most important deciding factor in price changes throughout: I respect that prices must rise when Demand is greater than Supply and that prices must fall when Supply is greater than Demand. It is very hard to make money buying into areas of supply and selling into areas of demand. The lowest risk way to trade will always be when you have the chance to buy before everyone else and sell before everyone else. This also offers you the very best potential rewards as well. Sure, sometimes you will lose and other times you will win but you always need to give yourself the best possible chance for success in your strategy, as let’s face it, none of us really know what’s coming next.
So how does this relate to trend? Take a look at the chart below:
The above chart is a Daily representation of the GBPCHF currency pair. For almost a year now, the pair has been following a clear upward trend in price. Clearly this tells us that Demand is greater than Supply for the GBP over the Swiss Franc. For the buyers of this market, the trend has most definitely been their friend. Yet does this mean then that we should just buy this market without a second thought? Do markets just move in straight lines? Clearly not and if we would have adopted this approach then we would have faced some nasty losses potentially. Obviously the lows have held in the long run but not without some solid supply putting in downwards pressure from time to time.
Because my strategy involves buying low at areas of demand and selling high at areas of supply, it is often misinterpreted that I am a counter-trend trader. When markets fall into levels of demand, they are in downwards trends at the time and when they rally into supply they are seen to be in upwards trends, so it will always seem that a counter-trend trade is being taken. However, the reality is that even if there is a prevailing trend in action at any time, my task as a trader is to look at what the best low risk and high reward trade is now. Following my rules, I will never buy into supply or sell into demand. This allows me to always take trades which offer solid risk to reward ratios. Instead I will look for the best setup which offers me the greatest objective odds that are stacked in my favor. Look to the example below:
By doing this, the trend will always take care of itself, as we can see in the same daily chart of the GBPCHF. The demand levels clearly held stronger and gave much better overall risk to rewards, but we cannot ignore that fact that the supply level in this upwards trend did produce reactions in price, albeit with smaller moves to the downside. This can be expected in an upwards trend and if we are not long on the approach to the supply zones, we can use this for short term shorts. If we were long going into these zones, then we must look to take profits at these supply areas and prepare for a correction.
In any form of trading, it is simple to recognize that trend is nothing more than a movement of price between levels of supply and demand. I am not a counter-trend trader in any way, shape or form. In fact, I would class myself as the consummate trend trader. I look to get into the trend if there is still room for it to run and if not then I will look to buy or sell my way into the next big trend that I anticipate. There’s nothing too controversial about that. I hope you found this useful.
See you in two weeks,