It’s quite simple… If you think like everyone else, you will take the same actions and get the same results as everyone else in all parts of your life. It’s amazing to me that people in general focus very little on this most important topic. Everyone goes to school, learns exactly how to think, act and make decisions like everyone else. Then, tons of people enter the workforce with the exact same skill set, compete for very few jobs and wonder why they never come close to making the money they need to live the life they choose.
Most traders and investors are also trained to think the same way because of school, books and the internet. This means they will also buy and sell where everyone else does, which is why most never come close to achieving their financial goals which in turn would allow them to live the life they want to live. With most things in life, trading and investing for sure, there are different levels of winning and losing.
The consistent winner has an edge over the loser that includes two things:
Your Mind: Having a mental edge is a combination of proper reality based thinking, self-control and focus.
Strategy: Having a strategic edge means owning a rule based strategy that ensures success over your opponent over time. Your strategy must have you buying before others buy and selling before others sell.
I started my career on the floor of the Chicago Mercantile Exchange facilitating institutional order flow. In other words, I started on the institution side of the business, not the retail side. So, I had the privilege of learning how the game of making and losing money really happens in trading. Another way to say that… I saw and learned firsthand the clear edge banks and financial institutions have over novice/average traders and investors.
To convey this important nugget of information to you, let’s use a trading opportunity from the Master Mind Community at Online Trading Academy.
Supply/Demand Grid: Gold Futures – 8/30/17
The Supply and Demand levels grid you see above is a service produced each day by Online Trading Academy for our members. It offers three supply and demand levels for the biggest markets in the world.
Last week, one of the many markets that met entry and worked out well was a demand level in Gold. This is a level where our strategy told us there were unfilled buy orders from banks and institutions: strong demand. Make sure you understand that this demand level is NOT the black line on the chart labeled “gap”. The demand level on the grid is below that, the price action in the yellow box. The black line labeled “gap” is a price level most novice traders would think conventional price “support”. Every trading book is going to draw a line from that area and extend it right, calling it “support”. So, that means we know that when price comes back to that level, retail traders will typically buy and place their protective sell stop just below the level. We also know that most retail traders lose money…
When price came back to that gap area and retail traders bought, price bounced around that and then went lower, triggering sell stops for anyone who bought because of the gap. Keep in mind that our demand level, from the supply and demand grid, is sitting below that gap area which is where we are willing buyers. So, when those sell orders are being filled below the gap, who do you think was buying and filling those orders? If you said banks and financial institutions, you are correct for the most part. You can buy there also but only by thinking differently from everyone else. Being able to out think your competition means understanding exactly how your competition thinks and acts so you can do the opposite.
Perhaps now you can understand how important it is to have a competitive edge when putting your hard-earned money at risk in the markets, perhaps not… Each day, wealth is transferred from those without an edge into the accounts of those who have that important edge.