Sam Seiden
Independent Analyst
Moves in markets are a result of mass psychology. The stock markets have been on about a 6 year rally. We called the March 2009 bottom in our XLT program and have only had long positions in our ProActive Investor XLT program for years. Yet, the average person out there is not participating in this uptrend at the level they would desire. Why not? We make money in the markets by being masters of human psychology and supply and demand. It is well known that trading is 90% mental. Winning in the markets is more defined by your mental make-up than your trading style. What is more important than chart reading is to first understand how people think. Instead of focusing on changing our actions if you’re having issues with trading and investing, it’s time to notice where those actions come from. Moving backward, one step at a time, actions stem from behavioral patterns, and behavioral patterns stem from beliefs. So, it’s at the level of beliefs (thoughts) that decisions are made, and moreover, where your ability to differentiate reality from illusion lie. It’s time to start considering where your beliefs about what works and what doesn’t in trading and investing come from. In life which includes trading and investing, most of us tend to repeat the same processes over and over, expecting a different result. Over my many years in the business of trading, there are some very clear differences between the consistently profitable trader and the consistent losing trader.
The Novice Trade
They tend to follow the herd.
Watch and do what others are doing
Comfort in numbers
They avoid taking risk unless others are sharing the risk as well.
They feel that if others are buying then it is “ok” for them to buy too.
They act on the advice of so called “experts,” i.e. the advice of market gurus, analysts, and their brokers.
As humans, they tend to complicate the trading process and ignore the important simplicity of markets.
They always make the same two mistakes, they buy and sell after a move in price is well underway (late and high risk) and they buy into supply (retail prices) and sell into demand (wholesale prices). This is the opposite of how you make money buying and selling anything.
The Consistently Profitable Trader
They lead the herd.
They tune out all the subjective noise that can get in the way of making proper trading decisions. They don’t care what others are doing and make decisions based on a very mechanical and unemotional set of criteria based solely on the laws and principles of supply and demand.
They learn to identify the proper entry that most people never see.
They buy after a period of selling and into demand (wholesale prices).
They sell after a period of buying and into supply (retail prices).
They buy fear and sell greed
Successful traders:
Can identify opportunity before others.
Execute trading and investing plans mechanically.
Successful Trading
Having the ability to spot ill-informed individuals in any market and any time frame. These ill-informed individuals buy at price levels that are too high. You know by objectively assessing real supply and demand.
Having the tools, knowledge, and ability to take the proper action when this ill-informed market player appears.
Play the bandwagon correctly… Proper trading is knowing how other market participants think and react when they are correct and, more importantly, when they are wrong. Price patterns are thought patterns.
Mental Musts…
Confidence
Discipline
Patience
How to get these…
Reduce and eliminate subjective analysis.
Learn to fight the urge to do what others are doing and make decisions based on a very mechanical and unemotional set of rules and criteria.
The Proper Entry
Know Where to Enter, Demand and Supply
Smart money enters here.
Trade with the trend
The odds are on your side.
Entry Must Be Low Risk
Most important part of the trade.
Enter Before The Masses
This is how we get paid.
OTA Income Trade: S&P Futures – Oct. 31, 2014
Lets look at a trading opportunity that was given to our students using one of our trade picking services. This trading opportunity was given in the Daily Market Overview which comes out well before the market opens, five days a week. We identified where banks were buying and selling using our core supply and demand strategy. Notice, when there was fear, people were selling, and price declined rapidly, the proper decision was to buy at our demand zone. Conversely, when there was a price breakout to the upside and most people started buying, the proper decision was to sell as price was right into our supply zone. Throughout history, the masses are on the wrong side of the market and this can be atributed more than anything else to a faulty belief system.
One of the most important things to understand about proper trading and investing is that conventional visible confirmation and opportunity are completely inversely related in trading. Those who know get paid from those who don’t, that’s how markets work.
Hope this was helpful, have a great day.
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Editors’ Picks
EUR/USD hits fresh 2026 lows near 1.1570
EUR/USD adds to Monday’s heavy losses and reaches new yearly lows around 1.1570 on Tuesday. The pair’s deep pullback comes as the US Dollar extend its strong bounce, always propped up by the intense flight-to-safety environment amid the deteriorating geopolitical landscape in the Middle East.
GBP/USD attacks 1.3300, refreshing three-month lows
GBP/USD is deep in the red near 1.3300, accelerating its downside to renew three-month lows in European trading on Tuesday. The ongoing escalation in the Iran war, combined with rising Oil prices, weighs negatively on the higher-yielding Pound Sterling as the US Dollar capitalizes on increased haven demand.
Japanese Yen flat lines vs. rallying USD; bearish bias remains amid BoJ rate hike delay
The USD/JPY pair extends its sideways consolidative price move through the early European session. Spot prices remain below the highest level in over five weeks, touched the precious day, and currently trade below mid-157.00s, nearly unchanged for the day.
Editors’ Picks
EUR/USD hits fresh 2026 lows near 1.1570
EUR/USD adds to Monday’s heavy losses and reaches new yearly lows around 1.1570 on Tuesday. The pair’s deep pullback comes as the US Dollar extend its strong bounce, always propped up by the intense flight-to-safety environment amid the deteriorating geopolitical landscape in the Middle East.
Oil meets initial resistance near $78.00/bbl
Crude oil has surged to levels not seen in over a year, trading near the $78.00 mark per barrel and edging closer to a potential test of the key $80.00 threshold. The sharp advance in WTI continues to draw support from escalating geopolitical tensions in the Middle East, the effective shutdown of shipping through the Strait of Hormuz, and mounting concerns over supply disruptions.
Gold drops further, threatens $5,000
Gold comes under renewed and marked selling pressure on Tuesday, dangerously approaching the critical $5,000 mark per troy ounce, reversing at the same time four consecutive daily advances. The yellow metal’s bearish tone comes on the back of the increasing demand for the Greenback and investors’ repricing of Fed rate cuts.
Crypto Today: Bitcoin, Ethereum, XRP pull back as sentiment remains in extreme market fear
The cryptocurrency market is broadly in the red on Tuesday as the Middle East grapples with an escalating war. Bitcoin (BTC) is in a pullback, trading below $67,000 at the time of writing, and most altcoins follow suit.
Energy shock 2.0: Why rising Gas prices could hit the Euro Premium
Even without a confirmed, sustained disruption, the mere risk to a key global energy chokepoint is enough to inject a significant premium into European Gas markets. And for the Euro, that matters.
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