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Why Pay Retail?

How you make money trading the markets is no different than how you make money buying and selling anything in life and it never changes. The only difference between Walmart and JP Morgan is what they sell, not how they operate. Walmart buys the products at wholesale prices, marks them up and sells to us at retail prices. JP Morgan buys stocks and bonds at wholesale prices, marks them up and sells to us (or China) at retail prices. Other than the products bought and sold, it is really the exact same business. Having this mentality when trading for short term income or long term wealth is the key to creating that pension or pay check from the financial system.

The key for these two groups is to get the public to believe that the retail prices they are offering are a good deal so that the public will buy and pay those retail prices. Marketing plays a big role in this game for the Walmart’s of the world, same with JPM. Let’s look at an example from Friday’s (9/5/14) Job’s report to illustrate this point.

NASDAQ Income Trade: 9/5/14 (Profit: $450)

NASDAQ Income Trade

Above is a screen shot of our Supply and Demand grid from that day. This is a service delivered 5 days a week for our members that gives them supply and demand levels for 20 of the major global markets for both short term income trading and long term wealth. The levels represent where banks are buying and selling in the markets. Friday, the jobs report was released in the USA which is a big economic report watched by most traders around the world. Typically, if the report comes out strong, retail traders buy. If it’s weaker than expected, most retail traders and the public sells. Truth is, none of that really matters anyway. The main point is when a significant report comes out, the market moves because people have strong perceptions, leading them to buy and sell. Banks and institutions know this, which makes trading very easy for them. I know because I started on that side of the business and learned that game.

Our Supply and Demand grid told us well before the number came out that banks had major sell orders in the 4076.50 – 4081.00 range. With the market trading well below that level and the jobs number coming out, the plan was to sell at the supply level (retail prices) if and when price traded to that level. Think about it, what would facilitate a rally in price? The release of a significant economic report. The jobs number came out and price moved quickly, reaching our “retail” level where we sold short but, who did we sell to? We sold to a buyer that thought the NASDAQ was worth buying at that price. Obviously, traders buying at that level where we were selling at had mistaken retail prices for wholesale prices. What the report was is irrelevant. For us and any Banks selling at that level, the Jobs report was an invitation for the retail public to buy at retail prices, allowing banks to sell at those prices. To be very honest, we don’t need to know what the actual number in the release of the report was, it adds no value. If we want to look later in the day out of curiosity, go for it. If not, it doesn’t matter at all.

Often, people ask me if they should not trade around major reports or around market opens. My answer is simple… If you know what you’re doing and know how to quantify and identify real supply and demand in the market, you for sure want to be trading during major economic releases and market opens. If you don’t know what you are looking for, there is no reason to put your hard earned money at risk in the market. Trading, you see, is simply a transfer of accounts from those who don’t know what they are doing, into the accounts of those who do. When you take action in the markets, make sure you know who is on the other side of your trade. Make sure you clearly know the difference between risk and opportunity.

Hope this was helpful, 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.

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