Lessons from the Pros

Why All the Doom and Gloom?

Sure the economy seems gloomy for most when you watch CNBC or pick up just about any newspaper. I have talked to people who are very depressed because they have lost a large chunk of their retirement accounts. Being the optimist and realist that I am, however, I see the situation today very different. How often in your life can you say "opportunity of a life time" and actually mean it? We hear that line all the time but it’s hardly ever completely true. Most of the markets we trade however have never seen this kind of volatility and for the trader who quantifies supply (resistance) and demand (support) and focuses on market turning points, these have been dream markets offering fantastic opportunity. The markets we trade always offer opportunity but the main difference with today’s volatile markets is that the "profit margins" are currently HUGE! For those who don’t know these terms, here is what I am saying in English: The distance between your support and resistance levels (profit margin) is currently larger than just about any time in history which means historic opportunity.

It really all comes down to demand and supply and understanding exactly what that looks like on a price chart. Whether you are a day trader, swing trader, or longer term position trader, prices are moving fast for one reason only: The distance between significant demand and supply levels is HUGE. On Thursday, October 9th, I was watching the NASDAQ futures and going over trading with a trader and the NASDAQ was crashing down and nearing my pre-determined demand level that had about seven points of risk with it. I showed this trader the demand level and also showed him how the nearest supply level was about 30 points higher – what an opportunity! I bought two at 1265 and then sold them at 1287 to show the trader how to do this. While some of you and I have made trades like this before, they don’t normally work out in less than 3 minutes! Here is the buy and sell from the statement…

Risking seven points to make 22 (3:1) in that short period of time. The trade could not have worked but who cares; it was so low risk, that there was small potential loss. I am not trying to impress you with this trade. Instead, I am trying to impress upon you the fantastic opportunity at hand if you know what you are looking for. When you have markets where prices are moving fast and your demand and supply levels are far apart from each other, take advantage of the opportunity.

Some of you share my excitement:

Sent: Wednesday, October 8, 2008 10:33:09 PM
Subject: You can call me super trader……
Sammy,
I am having a great trading week…love to chat about it….
Will all this go away when the market levels out….?
- Linnea

Sent: Friday, October 10, 2008 3:02 PM
Subject: Thank you

After 3 yrs of being the "novice" trader, I had decided that this Monday was my last day of trading. I had reached the absolute lowest point, where I did not want to place another trade for the rest of my life. However, I was only two weeks into my new XLT Futures and Forex programs, so I went over my recordings and concentrated on what I have learned so far. I put it into practice and started using these principles on Tuesday. Now four days later I had the most profitable week of my trading career, $12,000.
- Brenda

More opportunity… Look at the housing market. If you are one of the many responsible people who didn’t take on a mortgage you could not afford, you are either living comfortably in your home or you don’t own a home and are looking to buy a new home when they are on sale! If I sound excited about all this, it is only because there is so much opportunity and so little time to take advantage of it all.

More opportunity… Have you seen the US Dollar lately? We trade currencies in the Extended Learning Track (XLT) – Forex program at Online Trading Academy each week and I write about the Forex market often. The Dollar is gaining huge ground on most of the major currencies which means life is becoming cheaper for you and I as we purchase many of our goods and resources from foreign countries. Here is a chart of the Dollar.

While there is some significant supply above, there is still plenty of room before the Dollar gets there and the Dollar has certainly come a long way already. Again, this means that your Dollar you use to by goods from China, gas (crude oil) from the Middle East, and so on goes much farther than it did weeks ago.

By the way, have you seen the price of crude oil collapse lately? In three months, the price of crude oil has nearly been cut in half. Crude oil falling and your currency appreciating, that’s great news folks.

If you are one of the many millions of people who have a large portion of your retirement accounts tied up in investment vehicles that only appreciate when markets rally, unfortunately, that is what you chose to do but the good news is that you can always choose to take some control of your retirement accounts for two important reasons. First, invest in yourself with real market education and learn to take advantage of markets that are rising or falling. Second, learn how to protect your hard earned money by keeping your funds in SAFE interest bearing accounts and by only employing those funds into the market when low risk, high reward, and high probability opportunities are at hand. Don’t freeze up and do nothing during times like this. Recognize all the great opportunities at hand and take action. Be careful and recognize that knowing how to be safe and take advantage of opportunity all begins with educating yourself. If you need some education, begin with going back and reading all the free articles Online Trading Academy has to offer in "Lessons from the Pros". Starting there only costs you time, no money. If you desire further education, see me or one of many fine instructors in one of our interactive, hands-on courses.

In short, the glass is not half empty, it is half full. Take advantage of opportunity before opportunity goes away. The opportunity begins with a simple shift in your thought process.

Have a great day.

Sam Seiden – sseiden@tradingacademy.com