Trading Logic – The Key To Making Huge Profits Fast

If you trade any financial market, you will be aware that the majority of investors simply don’t make money. It’s not because they lack trading ability – investors don’t make money because they don’t understand trading logic.A focus on trading logic is essenital for any trader who seeks to make money. Forget, opinions and emotions, and focus on the reality of the trading environment - you can then apply trading logic, to make huge profits consistently.Here are some observations of trading logic, and how you can use them to your advantage.The Market PriceFirstly, before we look at anything else, we need to look at what moves financial markets:Supply and demand (fundamentals) + Investor perception = Market priceTherefore, prices are determined not just by supply and demand - but also by persons. So, what does that trading logic tell us?

- Predictive theories don’t work, but odds theories do work.There are lots of theories that claim markets move to a scientific theory - that isn’t true - if they did, then everyone would know the cost in advance - and there would be no market!

Correct trading logic tells us that while we don’t know exactly where prices are going to go, we can calculate the odds of a move - by studying cost history.While human nature is unpredictable – driven by the emotions of greed and fear, there is patterns that constantly repeat – and that leads us to technical analysis.Human Psychology Repeats ItselfTrading logic tells us that human psychology repeats itself - because we can see it in charts.Although there’s never a marvellous scenario, we can calculate the odds of success of a trade - based upon what happened in the past.

Therefore, by using a soundly based trading method, we can make money - over time.Day Trading V Long Term Trend FollowingFrom the above, trading logic tells us that day trading is futile.
Why?

Because you cannot predict - and that’s what market timing tells us to do.

Therefore, you should follow market action - rather than try and predict it. This means leaving top and bottom picking, to the losing majority.Money ManagementAs we’re playing an odds game, money management is essential – we must be constantly trying to preserve our capital.If you lose 50% of your capital, you have to make 100% on your next trade, just to get back to even - so try not to lose money in the first place!

This is of course difficult - and involves donig two things:1. Only trading when the odds are heavily in your favour - and in many markets, that means tarding only a few times a year.2. Taking enough risk - so you aren’t stopped out of your trade, by normal market volatility.Risk and RewardTrading logic tells us that risk is a combinaiton of the following factors:Market volatility + Trading methodology + Money management = Risk of trade.This complex interaction is much more than setting a stop, or allocating 2% of capital to a trade - which is the way most traders view it. It involves seeing risk in a different light.Some trades you make may look risky - but if you have balanced the equation correctly, the odds will be on your side.Trading LogicThere are many other examples of trading logic, that we can look at - but the above covers the most important areas.To make money, you need to see the markets, and their behaviour, as they are - not how you want to see them.Don’t make the same mistake as the majority of traders. Instead, guess logically, and without emoiton - and it will lead you to huge long-term gains.New!