The Art of Buying and Selling

I am a big Dr. Suess fan. I had the stories read to me many time as a child and that has shaped much of who I am today. Many close to me would say I am very loyal. I can thank Horton, my favorite elephant, for that. Others know that I care very much about all living creatures and deeply appreciate all that nature has to offers us. I can thank the Lorax for that. I can go on and on but then I would be rewriting a Dr. Suess book and I’m sure you aren’t reading this article for that. I collect original Suess art and recently found a treasure of Dr. Suess artifacts; the kind of place that could trigger emotional buying. There were pictures of all my favorites, a Statue of Yurtle the Turtle, a Green Eggs and Ham plaque and more. They even had a statue of the Lorax; one of my favorites that I hope to add to my collection at some point.

The gentleman in the store saw how excited I was when I saw the Lorax and recognized the opportunity to steer me into an emotional buying decision. He also knew I was not a local and likely had a credit card in my pocket. As soon as he introduced himself, I knew right away he was Canadian by his accent. Quickly the conversation went to hockey as he was wearing a shirt from Toronto. He played hockey like I did so we had much to talk about. We connected quickly with having hockey and Suess in common. He then proceeded to tell me that the Lorax was $8,900 and that they were only selling a few of them. Next, he told me that as soon as I bought him, I could easily sell him for $10,000 because of the demand for the collectible.

The chart above is the Nikkei futures and represents not only a great trading opportunity for our students who were able to take it this week, but also represents my exact experience with my new hockey friend (sales guy) and the Lorax. Notice the Nikkei supply level of 19355 – 19420 on the Supply / Demand grid April 26th, last week. This was a price level at which our market timing strategy told us Banks and Financial Institutions were selling. Notice the Rally-Base-Drop on the chart representing that strong supply. Later that morning, price rallied up to our supply level which means people were willing to buy at that level. Members of our academy (OTA) are instructed to sell at that price.

Who would buy at that level when the big, smart money and OTA students are selling? Do you think it is someone who knows what they are doing or someone who doesn’t, someone who is thinking logically or based on emotion? If we stick to what we know to be true, the answer becomes clear. When price rallied back up to our supply level as seen on the chart, the buyer is making two key mistakes that almost guarantee they will lose money. First, they are buying after a rally in price, and second, they are buying at a price level where supply exceeds demand (our supply/demand grid and strategy already told us that).

Only a novice trader would make those two mistakes. The buyer is buying either because of good news, the strong rally uptrend or both. In either case, the novice trader is making an “emotional” decision to buy, not a logical one. The logical trader at that supply level is the seller. The seller realizes that prices are at retail levels and when that is the case, you want to be the seller.

In trading, our goal is to make decisions logically and based on our rules following the supply and demand strategy. Otherwise, we end up making emotional buying decisions and pay too much. The salesman in the Dr. Suess store was no different in that he was trying to get me to make an emotional buying decision. If he really thought I could sell the Lorax for $10,000 minutes after buying from him for $8,900, would he really sell it to me for $8,900? While he was very convincing and my connection to the art is very strong, the gentleman didn’t know one thing. He was talking to a trader who gets paid the same way he does. I use a simple logical mind and set of simple and logical rules to get paid from those who make decisions based on emotion in the financial markets.

I hope this was helpful.  Happy trading.


Original article