In forex, the markets are watching a fixed game with the USD/Chines yuan (USD/CNY), leaving plenty o...
A “Copy-Paste” Forex Trade
04/08/2010 12:01 am EST
Last week, I was in Dubai walking in a souk (shopping area) with a very good friend from Algeria. For those who have never been to Dubai, it's a great place, but many of the shops are the same shops we have in the United States. We walked by a Starbucks and I said, "There is another US store." She said, "Yes, another copy-paste." In the major malls in Dubai, most of the shops are US brands—even Toys R Us is there. Don't get me wrong though, you have never seen malls like this! Aquariums the size of a big hotel, with thousands of fish and full-grown whale sharks that you can scuba dive with, all in the middle of the mall. Another mall has a ski mountain with snow, moguls, and a couple really fast runs. And again, all this in the middle of the desert! But as you walk around and focus on the shops themselves, you realize that "copy-paste" is everywhere. I found her comment simple, yet powerful as it relates to those who are successful in trading and those who are not. As I have said many times, those who know what they are doing get paid from those who do not. What most don't realize is that the first step in successful trading is to simply think different than most. The losing trader has a "copy-paste" mind. They simply see what actions others are taking, copy those novice actions, and paste them into their belief system.
The copy-paste function for computers has not been around all that long. However, the copy-paste mind has been around forever. Think about how many people you know who make consistent income from trading based on the information they read in conventional technical analysis books. I would be very surprised if you knew one or two. Yet, every day, more and more people buy the conventional copy-paste books and take the novice copy-paste action that those books suggest. People who reach goals and achieve success don't care what others are doing. They ignore the copy-paste function in their brain and repeat the actions that lead to their success. They can do this because they are focused on what is real in money and markets. They understand the reality of how prices move in markets and realize that this whole game comes down to people’s supply and demand analysis.
Let me walk you through an extended learning track (XLT) class trade I took in my account in the euro/US dollar. This trade is a simple example of how simple, reality-based logic works. In the lower-left portion of the chart, price was trading sideways for a bit. Supply and demand appeared to be in balance. Then, price rallied from that level, telling me that behind the scenes, there was no balance, and that demand was greater than supply. Once that rally happens, we wrap two lines around that level and carry those lines forward, creating a demand zone, which is a potential turning point in the future. Once price declined back to that level, it was time to buy. The risk was low, reward was high, and the odds of the trade working were very strong. The high odds came from having a good idea as to who was on the other side of my trade, the seller. What I knew to be true was that I was buying from a seller who was making the same mistakes every consistently losing trader makes. That seller was selling after a decline in price and into a price level where demand exceeds supply. Only a market speculator with a copy-paste mind would do that, and this is the group I always want on the other side of my trades.
After buying at demand, price rallied up to the supply level above. As expected, the copy-paste came in and made the same two mistakes. They bought after a rally in price and into a price level where supply exceeded demand. This is where I took my profit and sold to the copy-paste buyers. I wish I had more to say and write about to explain this trade and all the others, but the truth is, proper market speculation is simple; actually having the right knowledge and discipline to do it is not easy.
What makes it most difficult and sometimes impossible is if you have a copy-paste mind and live a copy-paste life. Life is too short to settle for anything less than living the life you choose to live. Do you live the life you choose to live, or do you live a life of copy-paste and simply do what others do? Do you follow the paths of others, or do your actions leave a path for others to follow? Take some time and think about your decision making process and determine who you are. If you find that you copy-paste, delete that function!
By Sam Seiden, instructor, OnlineTradingAcademy.com
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