There has been a lot of talk about new highs having been achieved by the equity markets. The Nifty broke to new highs as I write this article. If you have ever read a book on trading or technical analysis, you will know that buying stocks or the index on the breakouts is an extremely popular strategy. Most retail traders are told to look for breakout opportunities as a chance to buy and profit from new highs in the stock.
If this strategy worked so well then anyone who has read those books should be a crorepati! The problem is that the majority of retail traders or even academics do not make consistent profits in trading. So we need to examine our strategies and figure out who is making the money in the markets and mimic their strategies. So who makes the consistent profits in the markets? The institutional traders do!
At Online Trading Academy, we teach you how to trade like the professional institutional traders. When we trade, we need to find the areas where the amateurs are making mistakes and take the opposite side of the trade from them. That is what the professionals do on a daily basis.
It always amazes me when I look at peoples’ actions in the markets. In our everyday lives, we look to buy things cheaply or on sale. Think about a car buying experience. You wouldn’t walk onto a car lot and take the first price offered to you. Or even worse, you wouldn’t wait for the price of the car to go up before you bought it would you? Of course not, you haggle with the sales person to get a lower price and a value for your money.
But when it comes to buying stocks, amateurs often look to buy once prices have risen or when they breakout to new highs! Often they buy a peak and lose as prices fail to reach those new highs they had anticipated.
Notice how there is a large candle or a gap each time that prices move to a new high? This is caused from the amateurs jumping into stocks according to their breakout strategy. This sudden influx of buying pressure dies off quickly without institutional support. The amateurs are left holding the bag as price corrects and stops them out or moves sideways for a long time.
Trading the professional way really involves common sense. We should buy stock on sale and sell it when it becomes expensive, not the other way around. To learn more about how to trade like a professional, attend one of Online Trading Academy’s Courses and see how the professionals consistently profit in the markets.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
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