Lessons from the Pros

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The Profit Picture

The goal for most traders is consistent profits, an income stream for life from speculating in markets. The key word in that sentence is consistent. Anyone can have profitable trades here and there, but do they produce consistent income and profits from trading. To attain this, you must be able to answer two questions and clearly see the answers on any and all price charts. Where will price turn and where will it move to?

To help answer these questions, we focus on profit zone. Without a path for price to move after we enter a position on the chart, there is no trading opportunity. What we are looking for are supply and demand zones with very little activity between them.

There are many supply and demand zones on a chart. Often, there is a very quality supply and demand zone, but that isn’t all we have to look for. If they are too close to each other, that means no trade. Typically, we are looking for opportunities on the chart that offer us at least 5:1 reward to risk to the first target. Often, we are looking for an even higher risk to reward ratio, but this is a safe minimum to make a trade acceptable to take.

Let me explain through trades we took during one of my live trading and analysis sessions for our members.

How to make consistent profits trading.

These were two trades in the S&P from last week, buying at demand and selling at supply. Notice the supply zone on the chart, shaded in yellow. The supply zone is the origin of a strong decline in price and has with it some very key Odds Enhancers that make it a significant zone where banks are likely selling, where supply greatly exceeds demand. After buying at demand and price rallying up to that supply, the next trade was to sell short at supply, selling to a novice buyer for a potential move down in price.

Two specific things made this trade work well. First was the quality supply zone. Second, notice the rally that brought price up to the supply zone where we sold short. There was good news, people started buying in a hurry, and price shot up quickly. Notice specifically that there is no picture of demand in that rally. This means that when price reached the supply zone where we sold short, price was likely to fall just as fast as it rallied because there was no significant demand to stop it from falling.

Let’s go over two key pictures on a chart so that you can start seeing this profit picture also:

  • Quality Supply and Demand Zones: To identify market turning points and market moves in advance with a high degree of accuracy, you need to be able to know where financial institutions and banks are buying and selling in the markets. To accomplish this, you must be able to quantify real supply and demand in a market. This answers the question: Where will price turn?
  • A Clear Profit Zone: Just as it is important to identify strong supply and demand zones on a chart, it is equally important to be able to identify areas on the price chart where there is very little supply or demand. These are the areas where price will move quickly through as there is little supply or demand to stop price movement. This answers the question: Where will price move to?

Free Trading WorkshopEverything you need to see is on the price charts, if you know what you’re looking for. If you have been schooled in the theories of conventional technical analysis, you may be blinded by illusions of chart patterns and indicators that have you buying high and selling low. Have no fear, there is a cure. Remove everything from your charts but price and price alone. My hope is that today’s little nugget of information helps you achieve the consistency you’re looking for.

Have a great day.

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.