The goal for most traders is consistent profits, life-long income from speculating in markets. The key word in that sentence is "consistent." Anyone can have profitable trades here and there, but do they produce consistent income and profits from trading? I have a friend who day trades the S&P E-mini and has a very strong winning percentage, but the problem is that he doesn't make consistent income from trading. Sounds crazy, I know, but one loss for him tends to wipe out all the profits (I hope he doesn't read this article).
In the Extended Learning Track (XLT, our Live Trading Rooms), one of the "Odds Enhancers" Online Trading Academy focuses on for every short-term and long-term trading opportunity is the Profit Zone. Without a path for price to move after you enter a position on the chart, you have no trading opportunity. What I look for are supply and demand levels with very little activity between them. There are many supply and demand levels on a chart. Often, there is a very quality supply and demand level on a chart, but if they are too close to each other or there is too much trading activity between them, there is no trade. Typically, I look for opportunities on the chart that offer at least a 3:1 reward to risk to the first target. Often, I looking for more, but this is a safe minimum to make a trade acceptable to take.
DAX Futures Income Trade: May 13, 2014
At this point, you're probably wondering what any of this has to do with the title of the article. Let me explain through a trade I took that my class found in the Extended Learning Track (XLT). This was a trade in the DAX Futures. Notice the supply level on the chart shaded in yellow. The supply level is the origin of a strong decline in price and has with it some very key Odds Enhancers that make it a significant level where banks and institutions are likely selling, where supply greatly exceeds demand. The trade was to bet on a downside move, selling short at the supply level to a novice buyer for a potential move down in price. What made this trade work well are two specific odds enhancers. First was the quality supply level. Second, notice the rally that brought price up to the supply level where I sold short. It was a fast rally, people started buying in a hurry, and price shot up quickly. Notice specifically the two green candles prior to price reaching the supply level. There is no picture of demand in that rally. This means that when price reached the supply level where we sold short, price was likely to fall just as fast as it rallied because there was no significant demand to stop it from falling (no buy orders). Furthermore, you can really anticipate that this is likely to happen when looking at the entire blue shaded area. In this area, notice price moves quick and freely. This is because it's a price range with no significant buy or sell orders in it. When you have a supply or demand zone around areas like this, that means opportunity for price to turn and price to move. The more you can sharpen your focus on these two key odds enhancers, the better your trading results. Let's go over them so that you also can start seeing this picture of opportunity:
1. Quality Supply and Demand Levels: To identify market turning points and market moves in advance with a high degree of accuracy, you need to be able to know where institutions and banks are buying and selling in the markets. To accomplish this, you must be able to quantify real supply and demand in a market and most importantly, see this on a price chart. For this, a solid understanding of the Odds Enhancers is key.
2. A Clear Profit Zone: Just as it is important to identify strong supply and demand levels on a chart, it is equally important to be able to identify areas on the price chart where there is very little supply or demand. These are the areas where price will move quickly through the blue shaded area on the chart.
Everything you need to see is on the price charts, if you know what you're looking for. If you have been schooled in the theories of conventional technical analysis, you may be blinded by illusions of chart patterns that have you entering markets late, after market moves are well underway. Have no fear, there is a cure. Remove everything from your charts but price and price alone. Next, read some of my articles to begin to learn how to identify real demand and supply on price charts. At the end of the day, all that matters are two simple questions: Where is price going to turn, and where is price going to go? Sharpen your focus to the two odds enhancers that answer that question and your trading and investing life might just change for the better. My hope is that today's little nugget of information helps you achieve the consistency you're looking for.
Editor's note: This story by Sam Seiden originally appeared on Online Trading Academy
To read more from Online Trading Academy, see the following articles:,
Always Late to the Party
The Real Gap
GSCI -- The Big Basket of Goods