Reality Based Trading and Investing

If it flies like an airplane, looks like an airplane, sounds like an airplane, it’s probably not a pigeon. No matter what the experts on airplanes and pigeons say. Even if someone wins a Nobel Prize because they have determined that a pigeon is actually a dinosaur based on a sophisticated mathematical equation, it’s still a pigeon. Adam Smith, whom many call the father of economics, laid out the ground rules for Supply and Demand hundreds of years ago. In his book, The Wealth of Nations, supply and demand is explained in very simple terms. Smith however didn’t invent supply and demand, it has been here all along and, guess what, it hasn’t changed; it never changes. When price is at a level where willing demand exceeds willing supply, price will rise. When price is at a level where willing supply exceeds willing demand, price will decline.

Over the centuries certain big name self-promoting economists have tried to twist this simple equation with fancy math to make a name for themselves, sell some books and win fancy prizes, only to eventually be proven dead wrong. The math works but it’s the old garbage in garbage out.

Just like gravity is always gravity, there are certain principles of how the world works that NEVER change. In our world of proper trading and investing, the only way to profit consistently is to buy low and sell high. This is how you make money buying and selling anything. A successful business buys or produces at whole sale prices and sells at retail prices. Good news, this is exactly how the profitable market speculator does it as well.

OTA Supply / Demand Grid – USDJPY

Using the time honored principle of supply and demand, this market opportunity was to buy the USDJPY at 102.85 with a target of 105.59. In other words, at a “fresh” demand level in the USDJPY. Price had been declining and was nearing the demand zone on the chart. Three weeks later price reached our supply zone, profit target. As I said above, another word for demand is “wholesale”. So, when price reached that wholesale level, we want to be an aggressive buyer. Who are you buying from? You’re buying at wholesale levels from people who are trained and comfortable selling at wholesale levels. Why would someone sell at wholesale levels? They obviously don’t understand that proper trading is no different than how the gas station profits on chewing gum. They buy the gum for $0.05 and sell it to us for $1.00. They just keep repeating that simple process over and over. If they sold the gum for $0.05 and bought it for $1.00 two things would happen. First, they would have plenty of very happy customers who love them (the buyers). Second, the gas station would soon be out of business.

If your having issues with trading and investing and ready to pull your hair out with frustration, perhaps your complicating something that is actually quite simple. Maybe your trying to turn the reality of how markets really work into a way that they don’t. Maybe your really just looking at an airplane, thinking it’s a pigeon. Its an airplane, don’t overthink it…

Hope this was helpful, have a great day.

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