Inside-Out-Trading changed my trading around. From a hit and miss trader to a consistently profitable one. The journey has been one hell of a ride. I know you are excited to know about it so read on…
But before you start Inside-Out-Trading…
Please consider if the following things sound familiar to your trading,
- You track multiple technical indicators for a given market. Some of them essentially show the same thing. Like using more than one Oscillator or multiple Moving Averages. Do you sometimes feel overwhelmed by them? Do you often miss out signals on one of the indicators and realize it only after the markets have moved?
- You are glued to the TV Set before an important announcement. You do multiple permutations and combinations for the event result and take positions accordingly, before the event. Do you then find yourself getting too anxious about the outcome of the announcement? Does your stop loss often get hit in the ensuing volatility post the event? Do you beat yourself up for not figuring out the outcome correctly or about taking the wrong position?
- You are a fan of fundamental analysis, but often get anxious looking at the short-term market movements. You invest in a stock and then worry about the short to medium term swings, which sometimes go against you. Do you then try to trade around your original position? Or do you try to hedge your original position and end up losing money on your hedges?
- Are you trading based on tips or recommendations of a stock guru? Well, I don’t even want to discuss that further…
If you are doing any of the above and thousand other similar things, then you are trading outside-in. There is nothing criminal in doing that, the only problem is you won’t ever feel or be in control of your trading. Because all the above things are dependent on exogenous factors.
Factors that are outside of your control and sometimes impossible to know in advance. Now if your trading is based on uncertain events, which you have no control over then your chances of success are slim. Majority of trader universe trade like this and then keep wondering why are they not successful.
To remove uncertainty from trading never do this…
Traders read about how to trade, they study the next hot thing, an indicator or an algorithm or some such thing. They get all excited that now their fortunes are going to change. But once again end up with the same result, losses. Now losses are a part of the trading game, but only if you have control over your trading process.
If you are going to rely on something that you have no control over then how can you expect to control your outcome? In martial arts, a student is often asked to control the outcome. That does not necessarily mean to always come out a winner. But even if you lose, be safe and healthy to fight another day. There is no point in losing your fighting ability to just win one fight. A great fighter is a sum total of all his fights, likewise, a trader is a sum total of all of his trades and not a single one.
In fact, great traders often say any one trade is insignificant in identifying your trading success. It is the repeatability of your success that matters in the long run.
So how do we become consistently successful in this extremely competitive game of trading? If outside-in trading is not such a good idea what is the alternative? Is it inside-out trading? If yes then how do we do that?
I know all these questions are cluttering your mind right now. That is a good sign, it means you are curious and want to improve your trading. You want to learn something new. So let’s get straight to it.
Here is the solution, go Inside-Out…
Yes, the solution is inside-out trading. You may have heard top-down or bottom-up trading. This concept is similar in many ways but applies to each individual trading instrument. A trading instrument moves up or down in price based on the buying and selling of the traders trading in it. If buyers are more and aggressive the instrument is likely to move up in price and vice verso for sellers.
If there is a good news associated with a stock the buyers are more eager to acquire it, on the other hand, if the news is bad people holding it would like to get rid of it. It is always the action of the traders that causes the instrument to move up or down in price. What spurs the traders into action is external to the instruments price movement.
That is why we at GTTE try to focus on the generator of price movements, namely traders actions and try to figure out what the stocks, commodity, future, etc are going to do.
So how do we do it, inside-out trading? Well, we do it by trying to figure out what the Smart Traders [those who often come out on the winning side] are doing. Are they buying? Selling? Are they present or absent? These are few of the questions that we try to answer when we are trying to trade the markets.
Do we always come out on top, no not always? But there are certain benefits of trading inside-out that outweighs any other method by a huge margin. A few of them are,
- Every trade you take may not be a winner, but you will surely avoid a lot of bad trades.
- You don’t have to watch TV again, unless of course for entertainment purposes.
- No need to track all the events and their dates to run after that opportunity which lasts for fleeting second and often traps traders in bad positions.
- Incredible peace of mind, a lot of your mental load will be released and you can trade without anxiety, yes that is possible.
- This way of approaching the markets will greatly improve your market understanding. Crucial to avoid bad trades and not miss out on the meaty ones.
- And many many more….
Ok, so we use inside-out trading, but what tools does one use to make it happen?
Well here is the low down on the tools required for this type of trading…
- Our process consists of three parts, logic-context-timing.
- Logic, we use Wyckoff Market Cycles and Auction Market Theory. [Included in all our courses.]
- Context, we use Market Profile Charts. [Check out our Market Profile Course.]
- Timing, we use either Order Flow Charts or Volume Spread Analysis Charts. [I use both, but you can trade with any one of them.]
We believe all these tools have the ability to look behind the obvious and that is the price, to give you the real picture of what is happening in the markets. While Market Profile or VSA go one level deep, Order Flow can go two levels deeper than the ordinary price chart with volume.
It may seem a bit over the top for the uninitiated, but trust me once you get to know these methods and the correct way to apply them, you will believe. And for that very purpose, I am sharing an example that includes all the three charts that I use. That is Market Profile, Order Flow and VSA charts covering the same trade.
Go through this example for better understanding of inside-out concept…
The charts are amply annotated so go through them one by one and see how the trade develops and gets executed.
So that is how we observe the market generated information, that is we observe the markets from inside and gradually move outside to timing our entry. This inside-out approach has improved my trading so much that I can’t be happier that I discovered it. The only regret is I should have discovered it sooner.
Just in case you are wondering how the trade worked out, here is the follow through move. Our target was hit comfortably.
Ok, so that was it. The inside-out approach and a nice example to go with it.
So where do you go from here…
Now, if this method of analysing and trading the markets piques your interest then you can learn this too. I have covered the first part that is the Market Profile part, in my home study course Market Profile Gateway To Profits Course.
You can find more about it by visiting this link – Market Profile Gateway To Profits Course