At the start of each trading session, you will receive an email with the author's new posts. To help get those questions answered I thought I would write an article on it based off of a live XLT session I led for students a couple weeks ago. First, the XLT is the graduate program at Online Trading Academy where students are live in the market with very experienced instructors.
XLT members login from home or anywhere with an internet connection. Each week for the Stock, Futures, and Forex XLT's, there are day trading sessions, swing and position trading sessions and a lesson day. Each session is two hours long with different start and end times, depending on which session it is. For example, day trading sessions begin one hour before the stock market opens.
This is so we can plan out everything we are going to do once the market opens. Keep in mind that everything we do in the XLT is rule-based and planned out. The goal is to do very little thinking, if any, once the market opens. If we have performed our rule based pre-market analysis properly, we should simply be executing our plan with no emotion once the market opens.
The first thing XLT members see when the session begins is an information page like you see below that the XLT instructor has prepared. This is because most of the time, those levels become key market turning points for that session. This information page takes a few minutes to go over and then it's on with the plan. According to our simple rule-based strategy, this is where the low risk, high reward, and high probability shorting opportunity was that day.
This meant most people were aggressively buying into the market that day. As you can see in the bottom right part of the premarket information page, there is a red arrow meaning the plan for that morning was to be short sellers at that supply level if the market traded higher and into our supply zone. If everyone else was buying that day, why would we want to do the opposite? Simple, because when price has rallied into a price level where willing supply exceeds willing demand, price declines.
I knew we would be selling to novice buyers. How did I know this? Because these buyers were making the same two mistakes every novice buyer makes.
Of course you wouldn't, so why would you do that in the markets with your hard-earned capital? Mistake number two is even worse. We want to sell to these buyers if and when price trades up to that level.
After this first information page, which takes a few minutes to go over, we then go over one more page before going into the live markets. This next information page you see below is filled with trading opportunities which includes day trades, swing trades and longer term position trades if we find some.
These trades are given to you before the market opens with the exact entry price, protective stop price, and profit target or targets.
While the XLT does hand you the trading opportunities, the main purpose is to teach and empower people to do this on their own. Next, I took XLT members into the live market to show them why I chose the levels and trading opportunities and how I set up the trades I did.
The screen shot below was taken from that session which includes the names of XLT members present, an area below where they interact with me and with each other and my charts that I am sharing during the trading session. Notice two things on the chart specifically.
First, there are two supply levels shown. The one below it is another level I spent time talking about as well during the session. My comments on it, however, were that we would NOT want to be a seller and take a short position at that lower supply level. Why you may ask? Because this supply level didn't meet the definition of true supply to the XLT member for two reasons.
It all has to do with our Odds Enhancers. Notice it opened below the supply area and well above the demand area. This means that we are to do nothing and wait.
We only want to take action and put our hard-earned money at risk in the market when the odds are stacked in our favor, the risk is low and reward profit margin is high.
Not doing anything for a bit is something that is not easy for the average trader. As soon as the market opens, most people want to jump in and push buttons because they are afraid of missing a move. This is a recipe for disaster. Those who don't have the discipline to wait for the market to come to them simply provide trading income for those who do. Patience and discipline certainly paid off. Because our rule-based supply and demand strategy told us this was very likely to happen.
We don't have a crystal ball. Instead, we have a simple rule-based market timing strategy. The key to proper market timing is two-fold. First, you must stay far away from anything that has to do with conventional technical analysis as that is a very flawed school of thought.
Second, you need to train your eye to identify price levels in any market where supply and demand are out-of-balance. One of the other things XLT members find most attractive about the XLT is the community of veteran traders from all around the world. This offers live interaction with like—minded people doing what they are doing. Non-XLT members may be thinking that it looks like we are trying to pick tops and bottoms as if that is a bad thing. My answer is, "Of course we are. Don't we always want to sell our homes and cars for high prices?
Why should it be any different in the trading markets? Why in the world is it taboo to talk about "market timing" and "finding tops and bottoms" in markets? That has always sounded so silly and ridiculous to me. We are not trying to pick every top and bottom. However, following the rules and laws of supply and demand, we should be able to identify significant market turning points in advance with a very high degree of accuracy. Another word for demand in the XLT is "wholesale," and for supply, we also call that "retail.
So, another way to explain our XLT trade above is this. We simply sold at retail prices to people who are trained and conditioned to buy at retail prices. Then for profits, we bought at wholesale prices from people who are trained and conditioned to sell at wholesale prices. The goal of the XLT is not just to hand people trading opportunities, but to teach people how to properly trade as well.
These sessions are very educational which is the main point of the program. Hope this answers questions and teaches you a little something about proper trading as well. This newsletter is written for educational purposes only.
By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader.
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