Asia and London are two Forex trading hot spots on the planet.

I live
in Chicago but also spend time in both Asia and London. When I am
with traders in those parts of the world, I notice they tend to try and
make so many different Forex strategies work, yet I meet very few
who achieve the success they are in search of. They don’t realize the
key factor in trading is proper market timing.
Market timing is the ability to identify market turning points and market
moves in advance, with a very high degree of accuracy. In other
words, this Forex strategy gives you the ability to identify where
market prices are going to go, before they go there. The main reason
you want to know how to time the market’s turning points in advance
is to attain the lowest risk, highest reward and highest probability entry
into a position in the market. Think about it, by entering as close to the
turn in price as possible, you enjoy three key factors:
1) Low Risk: Entering at or close to the turn in price means you are
entering a position in the market very close to your protective stop
(risk). This allows for maximum position size while not risking more
than you are willing to lose. The further you enter the market away
from the turn in price, the more you will have to reduce position size to
keep risk low and in line.
2) High Reward (profit zone): Similar to number one above, the
closer your entry is to the turn in price the greater your profit zone.
The further you enter into the market from the turn in price, the more
you are reducing your profit zone (and increasing risk).
3) High Probability: Proper Market Timing means knowing where
banks and financial institutions are buying and selling in a market.
When you are buying where the major buy orders are in a market, that
means you are buying from someone who is selling where the major
buy orders are in the market and that is a very novice mistake. When
you trade against a novice market mind, the odds of success are
stacked in your favor. You can either bet with consistently successful
banks, or novice market speculators.
So, how do we time the market’s turning points in advance? It all
begins and ends with understanding how to properly quantify real
bank and financial institution supply and demand in any and all
markets. Once you can do that, you are able to identify where supply
and demand is most out of balance and this is where price turns
(where banks buy and sell). Once price changes direction, where will
it move to? Price moves to and from the price levels with significant
buy (demand) and sell (supply) orders in a market. So, again, once
you know how to quantify and identify real supply and demand in a
market, you can time the markets turning points in advance, with a
very high degree of accuracy.
While this article focuses on using this as a Forex strategy, everything
I am suggesting here applies to any and all markets. To better
understand how to do this, let’s take a look at a recent trading
opportunity that was identified in our live online trading program, the
Extended Learning Track (XLT) utilizing one of our daily services, the
Daily Market Overview. The XLT is a two – hour live market income
and wealth trading session with our students three to four times a
week. During the session, we identified an area of Demand in the
AUDUSD (highlighted in yellow). The two lines create a “buy zone”,
allowing us to apply our simple rules for entering the entire position.
This was an area of Bank Demand for a few reasons.
First, notice the strong initial rally in price from the demand level. Also,
notice that price rallies a significant distance before beginning to
decline back to the Demand level. These two factors tell us that
Demand greatly exceeds Supply at this level, banks are aggressive
buyers. The fact that price rallies a significant distance from that level
before returning back to the level clearly shows us what our initial
profit zone is. These are two of a few “Odds Enhancers” we cover in
the live trading sessions. They help us quantify bank dealer desk
Supply and Demand in a market which is the key to knowing where
the significant buy and sell orders are. The plan with this trade was to
buy if and when price declined back to that area of Demand.
This trade was high probability, but how do we know that? Well, being
very confident that there is significant Demand at that level, this tells
us that we will be buying from a seller who is selling at a price level
where Demand exceeds Supply. Selling after a decline in price and at
a price level where Demand exceeds Supply is the most novice move
a trader can take. Furthermore, these are the two most novice
decisions a buyer and seller of anything can make. These are “retail”
sellers selling where “banks and institutions” are buying. The retail
sellers are selling with the odds stacked against them which means
they are stacked in the buyer’s favor, at the demand level.
OTA: May 2016 Daily Market Overview – AUDUSD
As you can see, what happens next is price declines down to our pre-
determined Demand level where Banks and XLT members are able to
buy from sellers who are selling at “wholesale” (Demand) prices. They
are selling after that big decline in price and into that price level where
Demand exceeds Supply. So, by changing our mindset to thinking like
a bank, which leads to acting like a bank, we can then buy where
banks are buying which is opposite of what most traders and investors
do; which is exactly what we did when price returned to our Demand
level.
Next week we will look at the outcome of this low risk, high reward,
high probability trading opportunity.