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 Sam brings over 15 years experience of equities, forex, options, and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has traded equities, futures, interest rate markets, forex, options, and commodities for his personal interests for years and has educated hundreds of traders and investors through seminars and daily advisory services both domestically and internationally. Sam has been involved in the markets since 1991 both on and off the floor of the Chicago Mercantile Exchange. He has served as the Director of Technical Research for two trading firms and regularly contributes articles to industry publications. Sam is known for his trading, technical research, and educational guidance.
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Trading and Time Part II
Today we will discuss an issue that raised many questions a few weeks ago, trading and time. Before we get started, I wanted to mention a couple things. First, I was in London last week (5/19) and what a week it was. This was a week of great education and very successful trading based on the education. From day one, we were trading to the short side and all week as the market declined, we kept shorting. I actually don't think we had one day where we were interested in longs. Why only trade short? Simply, the supply and demand equation in the market the week of 5.19.08 (our class) suggested the global equity markets would decline and they certainly did. I am in no way patting myself on the back. I would love to say I own this strategy or have some super power insight into markets but the truth is, supply and demand have been around much longer than people have walked the earth. For those in Europe or elsewhere, I will be in London again July 12th – 16th where we will again, quantify supply and demand in the global futures markets and trade markets around the planet from our fingertips; what an amazing occupation, I love it! This class is either full or almost full so give Online Trading Academy London a call if you are interested.
Second, during my time in the UK, I discussed the US Dollar and other currencies quite a bit and this is because of a timely event. Without going into why, let me just say that this turn higher in the dollar over the past two weeks is something we went over in class extensively, suggesting that the turn was coming. Now that it has turned a bit, don't be surprised if this Dollar rally continues after a slight near term pullback. It is likely to strengthen against the Euro and the Pound more than other major currencies so watch for that if you are a long term Forex speculator like me. If you're thinking of shorting the Euro against the dollar, it is a good idea to wait for short term rally against the dollar to do this. Specific prices are reserved for our students but you can certainly email me if you desire more details.
Trading and Time Part II
The last time I touched upon this topic, many questions came up. Let's get right into the chart and discuss. Trading comes down to one of two styles - catching reversals or trading with the trend. Both can be low risk and work if you do them properly. When catching reversals, what determines whether you will be successful or not is your criteria or definition of support (demand) and resistance (supply). While there are many different definitions, the one that is closest in line with raw supply and demand is typically the one that pays. Notice area "A". Here we have a series of "pivot lows". Let's ask ourselves why price can't stay at price level "A". Why do we get pivot lows and no basing? The answer is because at that level, supply and demand are so "out of balance" that it is impossible for price to stay at that level for a long time. Therefore, that level is a very strong support (demand) level and we would look to buy the low risk entry at "C". "C" is the first pullback into demand area "A". Now focus on area "B". This is not a pivot, it's a "cluster" of trading followed by a decline in price. Again, let's ask the question, "why was price able to stay at that level so long and create the cluster of candles?" The answer is that supply and demand are not that out of balance. "D" represents the first rally back into what might look like resistance (supply, B) but price just rallies right through it like a hot knife through butter. When price declines from "B", this certainly happens because there is more supply than demand at "B" however the supply and demand imbalance is not that great and that's the point I am suggesting in this piece.
I am not saying that "B" never works as a level of support or resistance, I am simply suggesting that there is a hierarchy when it comes to levels of support and resistance and the "pivot" areas such as "A" by definition are most of the time (if not always) stronger levels than a cluster of trading activity. This is exactly how we teach it in class, whether it's our Pro Trader class, Forex Trader class, Options Trader class, or E-Mini Futures class.
Lesson: The greater the supply and demand imbalance, the greater the opportunity.
Our goal at Online Trading Academy is to give you tools and a deep understanding of those tools so that you can attain an edge in market speculating. If you don't have an edge when competing at anything, don't waste your time (or money) competing - you will lose.
Have a great day.
- Sam Seiden, sseiden@tradingacademy.com
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