How to Become a Successful Trader

Bon Voyage

Oh, the good ol’ starting days. Everything is new. What is the name of that candle? What? You mean this software calculates this line automatically? Nah, I do not want the simple, I want the exponential moving average. And I want to calculate it manually, because… Stonks.

Yes, I have been there done that (I did persist on trying to calculate moving averages manually…In real time *shudder*)
I am about to explain to you what took me years of learning. After losing 2 accounts, I did not trade for a long time. I simply would log in to my brokerage account every single day, and just observe the markets. That was it. No trades, no stress, just observe price action and why things happen the way they do. Warning: Market is amazingly simple. Incredibly so. No, this is not a marketing trick or some sort of “Read this and become a millionaire”, but I promise you that if you are losing money… It is because you are overcomplicating.

Enter Supply and Demand

The Friendly Phoenicians

Think about the markets. Just the word. Markets. Absorb the meaning for a second. Markets have been around for thousands of years. Sure, in 300 B.C. there was no NYSE, but there were markets, where people sold all types of wares. How do these markets differ from what we have in front of us right now? They do not. It is the same thing. People buy and sell all sorts of things at an agreed upon price. Picture this for a minute:

Abdhamon would offer 3 silver coins for a bag of wheat (bid), and Sikarbaal would counteroffer 1 gold coin for 2 bags of wheat (Ask).
If there were 15 peddlers trying to get rid of hundreds of bags of wheat (Supply), Sikarbaal could just say: “Forget it, I’ll just go to Ummashtart and get a bag of wheat from him for 2 silver coins. He has 350 bags to sell!” in an effort to drive Sikarbaal’s prices down and most likely succeed.
However, if there were 50 starving Phoenicians in line behind Abdhamon waiting to buy the last 3 bags of wheat in the land (Demand), Sikarbaal could just charge whatever he wanted seeing as how everybody is starving and he has a monopoly over the last 3 bags of wheat on the market.

Simple, right?

How To Spot Supply and Demand Zones

The Tale Of The Baby Whale

Now think of a chart. Think of the candles. Some are big, some are small, and some ruin your account. The third kind is what you want to focus on. The imbalances. The candles that make you think “Well…I could’ve retired off of that”. Why? It is simple. Let us say Stock A has been trading at $10 per share for a month and then suddenly, in one single day, Stock A goes to $35 per share. What does that signify? That means there was an astounding amount of demand for that stock, at that price, at that time. Conversely, if Stock A goes from $10 to $1 in a day, that means there was a lot of overhead supply. Well, that is all fine and dandy, but what am I supposed to do with this information?
Well, you see, the participants that can make these moves happen have a lot of money. An exorbitant amount of funds. It takes billions of dollars to move a stock that violently (Unless a penny stock). Which means, now you have a friendly whale that is incredibly involved in keeping the price per share of stock A around the level where they bought in. So, a few days later when Stock A goes back to the initial price point, you have but one job: Observe to see if friendly whale is buying up loads of shares again to either protect their position, or just because it is at a particularly good, discounted price. If the price seems to be keeping levels, buy in, set a reasonable stop, and Bon Voyage baby whale. Bon Voyage.