MetaTrader

Metatrader Technical


Occam's Razor is an old scientific principle that suggests the simplest answer is typically the right answer to a given question. Often, the obvious can stare you right in the face and you will never realize it, the illusive obvious. The problem is not that illusion is distorting reality and creating confusion. The problem is that for most, the illusion is reality. As humans, we often look deeper into issues when attempting to resolve them which often ends up making the issue more complicated. Ever notice when you get into an argument with a loved one, the most heated part of the battle is typically filled with details? Then, by the next day, you realize that those details have nothing to do with the problem and the real yet simple issue becomes so clear? How many times have you said to yourself: "That was so simple, why didn't I think of that?" The illusive obvious is all around us if you think about it. I focus on the simplicity of markets and trading when writing articles and leading class rooms and Extended Learning Track (XLT) sessions for our Online Trading Academy graduates, but let me tell you something. Due to how complex most perceive this business to be, my job is not that easy. I spend more time peeling away the layers of illusion than I do delivering objective rules most of the time.


The Lemonade Stand

Recently, one of our XLT members (Shawn) sent in an email with a trade he took. He is one of our consistently profitable market speculators and understands the complex illusion traps that eat up trading and retirement accounts. Instead of falling for these traps, Shawn gets paid from them. One analogy I recently used in the XLT to describe how to properly think the trading markets is the simple Lemonade stand. Did you ever have a Lemonade stand when you were a child? Selling a cup of lemonade that costs you maybe $0.05 to produce for $0.50? Maybe even selling that same cup for $1.00? I am sure you didn't realize it then but you were taking some great trades, some real solid buying and selling. Remember how simple it was… You spent maybe $2.00 on the lemons, added some basically free water and ended up with $15.00 or $20.00 depending on the traffic at your street corner location.

Fast forward… Today, instead of being 8 years old, you're 40 and you're having a hard time with your trading, watching your 401 K turn into a 201 K, or worse yet, your retirement account is falling like a rock from the top of the Empire State Building and you don't know what to do. The way to fix this is not to seek the advice of so-called professionals who get paid not on performance but rather from giving you advice. Aren't these the same individuals that got you into this mess in the first place? Instead, bring yourself back to the days of the Lemonade stand. Remember the simple logic behind how you reaped huge profit margins and treat all these trading markets that appear to be so complex with that level of simplicity. I will use Shawn's real trade as an example of using simple logic to derive consistent income and build wealth.


Part of Shawn's Email:

Hello Sam,

Today I made two short entry trades and would appreciate your input on these trades. I believe they were both good trades but I would like a second opinion.

The first is on AA, it came right into a supply level on the daily chart where I shorted it. My entry price was 12.08. My first target is at 10.85 which is 3:1 and my second is 10.03 which is 5:1.

Thanks You,

Shawn W.


Shawn's Trade




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Lessons from the Pros
5608460e-7dff-4b78-82da-ac426de62a45

8

1
Simple Logic Always Beats Complex Illusion

Tue, Jul 14 2009, 10:19 GMT
by Sam Seiden

Online Trading Academy

Lessons from the Pros
Subscribe to the Weekly Newsletter published by Online Trading Academy. Receive the full newsletter with charts!

Occam's Razor is an old scientific principle that suggests the simplest answer is typically the right answer to a given question. Often, the obvious can stare you right in the face and you will never realize it, the illusive obvious. The problem is not that illusion is distorting reality and creating confusion. The problem is that for most, the illusion is reality. As humans, we often look deeper into issues when attempting to resolve them which often ends up making the issue more complicated. Ever notice when you get into an argument with a loved one, the most heated part of the battle is typically filled with details? Then, by the next day, you realize that those details have nothing to do with the problem and the real yet simple issue becomes so clear? How many times have you said to yourself: "That was so simple, why didn't I think of that?" The illusive obvious is all around us if you think about it. I focus on the simplicity of markets and trading when writing articles and leading class rooms and Extended Learning Track (XLT) sessions for our Online Trading Academy graduates, but let me tell you something. Due to how complex most perceive this business to be, my job is not that easy. I spend more time peeling away the layers of illusion than I do delivering objective rules most of the time.


The Lemonade Stand

Recently, one of our XLT members (Shawn) sent in an email with a trade he took. He is one of our consistently profitable market speculators and understands the complex illusion traps that eat up trading and retirement accounts. Instead of falling for these traps, Shawn gets paid from them. One analogy I recently used in the XLT to describe how to properly think the trading markets is the simple Lemonade stand. Did you ever have a Lemonade stand when you were a child? Selling a cup of lemonade that costs you maybe $0.05 to produce for $0.50? Maybe even selling that same cup for $1.00? I am sure you didn't realize it then but you were taking some great trades, some real solid buying and selling. Remember how simple it was… You spent maybe $2.00 on the lemons, added some basically free water and ended up with $15.00 or $20.00 depending on the traffic at your street corner location.

Fast forward… Today, instead of being 8 years old, you're 40 and you're having a hard time with your trading, watching your 401 K turn into a 201 K, or worse yet, your retirement account is falling like a rock from the top of the Empire State Building and you don't know what to do. The way to fix this is not to seek the advice of so-called professionals who get paid not on performance but rather from giving you advice. Aren't these the same individuals that got you into this mess in the first place? Instead, bring yourself back to the days of the Lemonade stand. Remember the simple logic behind how you reaped huge profit margins and treat all these trading markets that appear to be so complex with that level of simplicity. I will use Shawn's real trade as an example of using simple logic to derive consistent income and build wealth.


Part of Shawn's Email:

Hello Sam,

Today I made two short entry trades and would appreciate your input on these trades. I believe they were both good trades but I would like a second opinion.

The first is on AA, it came right into a supply level on the daily chart where I shorted it. My entry price was 12.08. My first target is at 10.85 which is 3:1 and my second is 10.03 which is 5:1.

Thanks You,

Shawn W.


Shawn's Trade
Lessons From The Pros

The supply level above is supply because of the pattern, Rally – Base – Decline (a pivot high). The fact that price can't stay at that $12.00 area marked supply in the upper left means that supply exceeds demand. When this is the case, price declines. Over to the right, Shawn understands that someone who buys after a period of buying and right at a price level where supply exceeds demand is making the same two mistakes every consistent losing market speculator makes. This group of novice buyers who bought from Shawn when he sold short are caught in that world of complex illusion. The last thing they are thinking about is the Lemonade stand. This faulty thinking is rampant in the financial world and the people who get paid from this illusion-based thinking are those who realize that the action you take when speculating in markets is EXACTLY the same as the action you take in other parts of your life when buying and selling.


Focus on Those Who Bought From Shawn

1. They bought AFTER a rally in price. This is a big mistake. This is like walking into a car dealership, seeing a $30,000 car they like and offering the dealer $40,000. I am sure these buyers who bought from Shawn would never take that crazy action when buying a car. They likely would offer the dealer $25,000 but because they are in the trading markets, they throw all simple logic out the window. The lesson here is to treat these markets the SAME as when you go buy a car.

2. They bought at a price level where the chart told us supply exceeds demand. Let me ask you… When driving a car and you see that 500 feet in front of you is a huge concrete wall that is very thick. Question: Do you step on the gas pedal or the brakes? Simple answer of course. I don't even think you need driving lessons for that one. Why then would you buy a stock or into any market at price levels where supply exceeds demand? It does not make logical sense to take this action which is why the simple logical mind typically gets paid from the complex illusion-based mind.

What is also ironic is today's lemonade vs. the lemonade from years ago. For those over 30 years old, we know lemonade as lemons and water. Today's lemonade is a packet of 30 chemicals that may very well cause your insides to glow some blue/green color mixed with plastic bottled water that comes from who knows where. There are some real benefits in keeping things simple and real.

source : http://www.fxstreet.com