You don’t trade to make money – You trade to capture it, here's why and how

You don't trade to make money—you trade to take it.

And in a minute, you'll see precisely what I mean by illustrating Tuesday's trading.

Before we dive in: Often labelled as 'dumb money,' your success hinges on identifying exactly who you're taking money from.

You see: Dr Brett Steenbarger works with some of the best elite traders in the US. When he speaks you listen...

"..success requires we know who we're making money from, and that requires that we understand how they think and trade--"

The fatal flaw the elite don’t make

You've seen me reference playbook trades—trades you know like the back of your hand. 

But profitable trading is NOT spotting these scenarios and jumping in whenever they appear.

That's amateur hour, and it's not what those trades are for.

Instead: Let's say you've followed the evidence uncovering where the dumb money positions are.

And let's say you also have a solid read on what price they'll exit crystallising losses...

The reality is: Price can move in various ways from one price level to another. Correct?

But if the market moves in such a way that matches one of your playbook trades...

NOW you can trade because it's so familiar to you. You've made the same trade hundreds of times before:

• It's like running the exact course you run each morning.

• It's like driving to work along the same route.

• And so forth...

But at other times price will move in a manner you're not intimately familiar with. When the behaviour is foreign to you—what happens next? You stand aside.

Trading a behaviour you're not familiar with is like trying to play a song you've played a thousand times on the guitar but on a violin you've never touched—it's just not going to work.

Not every price move is an opportunity

But here's the thing:

Most traders are using 'strategies' based on setups—looking to trade each time they show up.

Time after time, the trader mistakenly thinks their trading has turned the corner because they have a bunch of wins. It could be weeks or a couple of months.

It's met with an intense sense of relief.

Finally! After all the blood, sweat and tears, the tide has turned. At least, that's what they believe.

But soon enough, that euphoria comes crashing down as the winning streak ends, returning to the all-too-familiar cycle of consistently unprofitable trading.

And the biggest mistake? Not knowing the real problem

It leads to wasting time on the wrong solution, like 'fixing your psychology' or 'changing strategies.' Sound familiar?

Onto the demonstration:

The market showed numerous signs of a buying opportunity. And that's exactly how the session commenced. See "Buying Opportunity" highlighted in the chart below.

But... and this is a crucial point:

As Dr Brett Steenbarger says in the quote above:

"...success requires we know who we're making money from, and that requires that we understand how they think and trade--"

Here are the facts:

1. The "buying opportunity" cues were those used by 'dumb money'.

2. The area marked "buying opportunity"—previously dominated by selling inventory—was now heavily skewed to the 'long' side after traders during the prior European initiated long trades.

Conclusion?

Using skills 'dumb money' doesn't have, there's a selling tsunami waiting in the wings if price trades below 0.6778

Before the tsunami, I attempted smaller-size trades, resulting in a win and a loss, effectively treading water.

Planning and playbook trades tell you:

• Size of trade.

• How long to hold.

• If and and when to add to winners.

Once the market breaches 0.6778, you can see aggressively adding to the trade—using the market's money to create an outlier payout.  

Red 'circled' areas differentiate the losing trades. 

Please note: I'm showing where the buys and sells occurred. The decisions to do so involve multiple points of evidence not shown. Just to reiterate, I don't trade from a chart.

In summary:

While most traders use their tools to predict price movements, professionals leverage professional tools to identify the 'dumb money'.

What would it mean to you if you could trade knowing how the game is played (i.e. get paid by losing traders) and trade these moves if and when they match your playbook?

Do you agree it diminishes the anxiety surrounding market uncertainty—so you finally feel a sense of calm and confidence as you trade?

The answer is undoubtedly yes, as it addresses the root cause of those feelings.