Ships don’t sink because of the water around them, they sink because of the water in them. There will always be many challenges happening around you, many financial experts trying to give you advise that often is better for them than it is for you. There will always be global events and so much more that happen around you that are certainly out of our control. Like the ship, the key is to not let any negative influences enter your world. Instead, create a bubble around you and your family so that whatever happens around you, and whether markets go up down or sideways for whatever reason, that for the rest of your life the negative impact on you and your financial well-being is minimal to none.
For trading, the separation in your mind needs to happen at the level of the influence on price and its relation on the movement in price itself. The number one challenge people have is that they think they are one in the same. What you need to really understand is this…
Any and all influences on price are reflected in price.
When you really understand that concept, you realize that all that needs to be considered is supply and demand to make your trading and investing decisions. Why the supply or demand is present is irrelevant, yet that is where most people’s focus is. Let’s take a look at a recent live trading session I delivered where we traded Oil Futures, a market that always has reports coming out and is always in the news.
Live Trading Session: Oil Futures – 6/5/18
At the end of May, Oil prices rallied into a strong supply zone where we took action, selling short and planning on a downside move. June 5th, price reached the profit target (blue line), moving from $72.00 a barrel to $65.00. This trade took about a week to play out and during that time there was plenty of news on Oil, plenty of reports that came out on inventory, production, etc. For us to plan and execute this trade, there were two key areas of focus:
We had to properly quantify supply and demand by analyzing the price chart.
We had to completely ignore any and all outside influences on price (news, reports, data, opinions…)
In other words, the ocean of influence is massive, but our trading ship is very healthy as long as we keep the water out of the ship.
Why is focusing on news, reports, and other influences on price a problem? Here is how it works… When news or reports are good, most people get bullish and buy. What they don’t realize is that by the time the news and data is positive, the price of the market in question is at or near supply (retail prices). When the news and reports are bad, most people get bearish and sell. What they don’t realize is that by the time the news and reports are negative, price is almost always at demand (wholesale prices). This leads to most market participants taking the opposite buy/sell action as they should at key turning points in the market. This is the primary reason most traders and investors never come close to achieving their financial goals; they let the water into their ship, on purpose.
Instead, make sure your strategy to buy and sell in markets is exactly in-line with how you make money buying and selling anything in life. That means making sure you focus on price and price alone, not any of the other influences on price. This will have you consistently buying at demand (wholesale) and selling at supply (retail) which is key in achieving your financial goals and ultimately living the life you choose to live.