How many times have you heard someone say that “trading is an art, not a science”? I have heard that for years and years, and I have to say, it is probably the most ridiculous statement when it comes to trading. And as we all know, there are some pretty ridiculous statements in the trading world. There is absolutely nothing artistic about trading at all. This is 100% a numbers game… How much willing demand and supply at each price level is what determines price movement. It’s the buy orders vs the sell orders and again, it all comes down to the numbers on both sides of that equation and nothing else. To think Picasso or Van Gough should be brought into this discussion is rather amusing if you think about it. To make my point, let me share a very recent trade I setup for our students in the Extended Learning Track (XLT, our live trading room).
An hour before the stock market opened, I was sharing a chart of the NASDAQ with our XLT members (grey chart on left with the black box around it). Notice the area shaded yellow, with the black lines around it. According to our supply and demand strategy that I write about so often, that area shaded yellow was a key supply level. Meaning, institutions/banks had large orders to sell at that level, there was a significant supply and demand imbalance at that level. We know this because price could not remain at that level and declined in strong fashion after a very short period of time (Odds Enhancer #1). Think about it, if supply and demand were in balance at that level, price… Continue Reading
