You see, when you keep it real and understand that trading is gambling, you will then understand that it is the ultimate form of gambling. It happens to be the type of gambling where we the trader can STACK the odds in our favor, much better than Vegas can. Imagine you are playing a card game in Vegas only this time, you can decide whether you want to put your money down on the table AFTER you see your cards and the dealer?s cards and also bet as much money as you like on this hand. That?s trading my friends and that?s why it is the premier form of speculating on the planet. I have a friend who always tells me that the trading I do is just gambling and I tell him he is right only that it happens to be the type of gambling where you can absolutely stack the odds in your favor. Ceaser?s Palace, Mandalay Bay, and the others don?t enjoy the odds we are able to attain in trading if you know what you?re doing.
With objective supply and demand analysis, I have the ability to clearly determine probability, risk, and reward and only put my money at risk when the odds are stacked in my favor. Here is an example:
When to buy:?
A Pullback in price to demand (not conventional support)
Odds enhancer: ???
1)????? Properly located on the larger time frame supply / demand curve
2)????? With a substantial profit margin of at least 3:1 (reward/risk)
3)????? A Quality demand level
- Strong rally in price from demand suggesting a big supply/demand imbalance
- A demand level that has not been retested yet which offers the greatest odds
- Very little time spent at the level suggesting a big supply/demand imbalance
4)????? Is the decline in price to demand a stair step decline suggesting a low odds buy or is the decline a sharp drop in price to demand suggesting a much higher odds buying opportunity
Each odds enhancer increases the probability of your potential trade (and there are more quality odds enhancers). After objectively assessing your odds based on the setup you see on your chart, you can then decide how much of your capital you want to risk on the trade. Vegas would LOVE to have these odds but they don?t come close. The one thing Vegas does however that brings them consistent riches is that they don?t change their rules when they lose. They know they are going to lose money every day but at the end of the day, they almost always come out ahead with profits. They have a system that tilts the odds in their favor so they know that all they have to do is stick to the plan and they will profit. Imagine if they became emotional and changed the rules each time they lost. If they did that, they would not enjoy the profits that they do.
Let?s take a look at a trade from the other day. I identified an objective demand level (yellow box/black lines). This demand had a few key Odds Enhancers at play suggesting a low risk, high reward, and high probability buying opportunity when price declined to that level. A short time later, price declined back to that level meaning someone was selling at that demand level. This is where the trade (bet, gamble, speculation) takes place. The buyer is betting that price will rise and the seller is betting that price will decline. Call it a trade, bet, or whatever, they are all exactly the same thing. As the buyer, we know the odds are stacked in our favor, obviously the seller doesn?t or they would not be selling at that demand level. By being very rigid in our strategy rules and Odds Enhancers, we are essentially doing the same thing as Vegas. The key for us is to not change any rules and don?t think, just execute.
Short Term Trade March 1, 2013
Price rallied strong off that level which meant profits for the buyer and losses for the seller, this is what makes a market (and a casino).
To do this, make sure you have a set of rules that stacks the odds in your favor. If you don?t have that set of rules, don?t trade because you are competing with traders who do and you will very likely lose. If you are in search of rules that carry better odds, email me, take an Online Trading Academy course, join the XLT if you want. Once you have that set of objective and mechanical rules that help stack the odds in your favor, make sure you stick to it and understand you will still have losses sometimes but that?s ok, think of the casino and all the times they lose in a day. Remember, in trading, gambling, speculating or whatever you choose to call it, the one thing that is certain is the lack of 100% certainty with each individual outcome. Instead of searching for certainty, become a part of the astute trading community that only searches for better odds and locks them in. And lastly, understand that trading, like gambling is certainly not for everyone.
Hope this was helpful, have a great day.
Sam Seiden