The world consists of all kinds of folks having all kinds of opinions. Frankly, I think that makes it all the more interesting. The fact is, however, just because others have opinions, it does not mean those opinions can go without debate, especially when those opinions are about trading the market.
This morning I came across an opinion from a notable source, Sam Seiden, a man involved with the Online Trading Academy, a notable resource for traders. He wrote an article that appeared in TraderPlanet Today titled, “The Science of Trading.” The title intrigued me, but what inspired me was the opening paragraph below.
How many times have you heard someone say, “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 I have heard 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. It’s the buy orders versus 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.
Wow! I have been one of those saying that for years. Smack! Okay, that is fine and his explanation is reasonable, but let’s look at this from another point of view …
Empirically, Mr. Seiden is correct. Ultimately, price action comes down to the numbers on both sides of the equation – buyers versus sellers, supply and demand. Where Mr. Seiden misses the point is in his statement, “How much willing demand and supply at each price level is what determines price movement.” True enough, but his statement raises the question, “What determines supply and demand?”
In the oil world, supply and demand is easy to quantify and, clearly, it is a determinant in the basic price of a barrel of oil. But, it is not the only determinant. On both sides of the equation, there are people guessing as to what the future price will be. This, then, removes the purely mathematical calculation because you have an irrational variable in the computation. So, on any given trading day, you start the morning with X buyers and 2X sellers, but then news comes out about Iran oil sanctions and you now have in an instant 2X buyers and X sellers. The price action immediately switches because of an unforeseen variable. How does one predict that mathematically? One can only guess at it through induction, which means the more information the better.
When trading stocks, supply and demand do determine price, but supply and demand can change and change quickly based on unforeseen variables. So predicting where the price action will go is more than just looking at the numbers as he describes in his article and it is more than what he says in the sentences below.
Therefore, trading opportunity exists at price levels where this simple and straight forward equation is out of balance. You simply buy where the major buy orders are and sell where the major sell orders are.
And, here is the rub. Mr. Seiden goes on to explain in his article that one has to induce (not deduce) where the major buy and sell orders are. This, then, makes what he does, at least in part, an “art.”
Now, let me say, I have great respect for the Online Trading Academy, Mr. Seiden, and the proposition he puts forth. I suspect he and his students are successful using the methodology he espouses. My only point in challenging his statement that considering trading as an art is ridiculous is that no matter what the methodology, no one has ever come up with a scientifically-based approach to trading that is 100% successful, just as no one has ever come up with an artistic-based approach to trading that is 100% successful. Ergo, one can approach trading as an art or as a science and still find success.
Having said the above, I encourage everyone to read the article, as it is enlightening and helpful in furthering one’s understanding of the trading world. The link is below.
For the record, my trading is more of an art, but the way I do it would never compare to Van Gogh or Picasso. If I were that good, I would own the world.
Trade in the day; Invest in your life …
