Accept This Trading Truth To Turn Your Trading Around
It happened on BBC a few years ago. Watching it now on YouTube will make your stomach turn. Watching it live under those circumstances was enough to make your lunch come back up.
The revelation didn’t come from a pandering anchor or a soothing advisor. It didn’t come from some reporter on the front lines hoping to shed light on the global catastrophe. Nor was it anyone shaping monetary policy from the government.
It came from an institutional trader.
In the early stages of the greatest economic meltdown in history, as investors worldwide were running for cover – this guy told it like it was. It was heartless, even a little arrogant. But there should have been a mic drop after it.
In the face of impending worldwide financial disaster, he basically said he’d been dreaming of a moment like this. He was pleased. Elated even. This was a chance to make a lot of money.
But he spoke the truth. And the sooner you accept this reality, the faster your trading will show the results you’re looking for.
Start with knowing who’s really in charge
As an institutional trader, he didn’t care what the news was or how bad it was. He only cared about spotting specific conditions and how to profit from them. Now he saw a huge chance to profit. As jaws dropped at the anchor desk and he was called out on his transparent greed… he didn’t stop there.
In case you were on vacation on Mars, you’ll recall that a government bailout was discussed as the rescue solution for both US and European markets. It was all anyone could talk about, especially in the days leading up to its approval. Investors were clinging to it like a lifeboat in a tsunami.
It was in this context that he dragged a stunning truth into daylight. Here’s a direct quote taken straight from the transcript:
‘The Governments don’t rule the world, Goldman Sachs rules the world. Goldman Sachs does not care about this rescue package neither does the big funds. So actually, I would actually tell people, I want to help people. People can make money from this, it isn’t just traders.’
Now that someone said it, albeit over 15 years ago… now you can use it to profit.
Trade with the prevailing force, not against it
By ‘traders’ he meant institutional traders like him. The interview ended about 10 seconds later mostly because there was nothing left to say. Sure the anchors made their best attempt to respond – but everything after that was window dressing.
If you’re interested in profiting, this cry to pull your head out of the sand is as relevant today as it was then. Yes, people can make money when news comes out. It doesn’t have to be a global meltdown either – and it’s not limited to trading a stock or an index.
This can be applied to just about everything. It’s really a matter of finding the right conditions to trade and then having the right system to trade them.
By ‘system’ you need to know exactly what direction the institutional traders ‘who rule the world’ are headed. They’re at the wheel anyway – you might as well roll where they roll and earn when they earn.
An immediate way to know where the institutions are headed
Although the trader on the BBC was talking about a global meltdown, his logic could be applied to just about any time frame and instrument. There are very clear identifiers that signal exactly what price levels institutional traders are interested in – and the ones that they’d prefer to steer clear of.
A practical place to start: A basic market profile that shows volume activity at each price level. Take a 300-day look at exactly where the institutions – the traders controlling 90% of the market volume – have put their foot on the gas.
Then simply look left. You’ll see that price respects those levels. They also respect the levels where the institutions have completely backed off. If you’re looking for a way to trade with the guys on TV and profit along the way – you’ll have a great starting set of entries lying right in front of you.
Take a look at the XLP here – the consumer staples select sector of the SPDR Fund. Notice the relationship between the institutional activity on a 300-day chart (profile on the right) and price action on the left.
When price busts through, make no mistake – it’s because it’s being driven there. When it reverses… well, we’ll leave that conclusion to you.
It’s time to start trading with the institutions and profiting along the way!