Sam Seiden
Independent Analyst
The chart below is an income trade in the S&P that I took on 5/31/17. The S&P declined into one of my strong demand zones and then proceeded to rally for a couple days. As you can see on the chart below, I followed the simple rules I have been sharing and bought near the low, into a clear demand zone where banks were buying also. Then, I took a profit of $1,200 when price reached my target (blue circle). What surprised me was seeing many traders sell short in that red circle area, when price broke below those prior pivot lows. Watching the markets, I saw this happening and know why it happens so I wanted to talk about it here to help others not make this novice mistake.
People who shorted the S&P just below that 2408 level (red line) did so because conventional technical analysis rules tell them to short there. Bearish engulfing candles and a break of pivot lows is a clear sell signal for traders to follow the rules of technical analysis. The reason you don’t see people making a consistent low risk living from the markets with this school of thought is because there is a major flaw in it. The flaw is that all the chart patterns, indicators, oscillators and so on never take one thing into consideration – where are the buy orders (demand) and sell orders (supply). Yes, believe it or not, conventional technical analysis which is what dominates the trading/investing books and the internet IGNORES the only thing that matters when making a proper buy and sell decision, demand and supply! In the S&P here, this group was selling just above a price point where banks, and I, were buying, which is a very novice mistake.
S&P Income Trade 5/31/17 – Profit: $1,200.00
It’s simply a matter of how you “think the markets” that separates those who make a living in the markets from those who don’t. To be successful at trading and investing, you must focus on what is real, not what you feel. What’s real is that price movement in any and all markets is a simple function of an ongoing supply and demand relationship. Prices turn at levels where this simple and straight forward equation is out of balance, like my demand zone and entry into the S&P trade. There are only two groups at play in the markets, those who achieve consistent profits and those who provide those profits. So, before you put your hard – earned money at risk in the markets, make sure your trading and investing strategy is reality based and focused on how you make money buying and selling anything in life. This is the key financial mindset that allows you to produce the income and wealth needed to start living the life you choose to live.
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Editors’ Picks
EUR/USD flirts with daily highs, retargets 1.1900
EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.
GBP/USD remains well bid around 1.3650
GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.
USD/JPY edges up above 153.50 with all eyes on US CPI figures
USD/JPY appreciates above 153.00 but remains on track for a 2.4% weekly loss. Trading volumes remain subdued on Friday, ahead of the IS CPI release. The Yen remains supported by hopes of a stable government and calls for further BoJ tightening.
Editors’ Picks
EUR/USD: Yes, the US economy is resilient – No, that won’t save the US Dollar Premium
Some impressive US data should have resulted in a much stronger USD. Well, it didn’t happen. The EUR/USD pair closed a third consecutive week little changed, a handful of pips above the 1.1800 mark.
Gold: Metals remain vulnerable to broad market mood Premium
Gold (XAU/USD) started the week on a bullish note and climbed above $5,000 before declining sharply and erasing its weekly gains on Thursday, only to recover heading into the weekend.
GBP/USD: Pound Sterling remains below 1.3700 ahead of UK inflation test Premium
The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Bitcoin: BTC bears aren’t done yet
Bitcoin (BTC) price slips below $67,000 at the time of writing on Friday, remaining under pressure and extending losses of nearly 5% so far this week.
US Dollar: Big in Japan Premium
The US Dollar (USD) resumed its yearly downtrend this week, slipping back to two-week troughs just to bounce back a tad in the second half of the week.
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