Market correlation can be a great asset to anyone's stock trading portfolio. It is crucial to know which markets and asset classes work best together for high reward and low risk opportunities. Just because two markets coincide with each other often, this does not make it suitable to use as correlation for upcoming trades. In this article I will discuss the leading indicator and how it can benefit you when trading stocks.

There is only one thing that causes the markets to move in any given direction (up, down and/or sideways) which is order flow. Order flow can be defined in many different ways but for this article we will refer to it as any order that is placed on an exchange to buy or sell an instrument. The common law of the financial market's equilibrium dictates that whomever has the most orders wins.

Find the recording to our latest free supply and demand webinar below. During the session we gave a brief introduction to Pure Financial Academy and covered some of the basic concepts that any and all supply and demand traders should be aware of to make high probability trade decisions. 

The most important thing is being able to have an accurate read on the markets to determine the upcoming direction. By locating the abundance of buy and sell orders in any given market we are able to follow the institutions with consistency. When trying to determine where the institutional orders reside we use a set of filters that help to alleviate low probability trades. A few of those filters include:

The financial markets are always reacting to orders being placed by institutions, commercial traders and even individuals all over the world. Each asset class and instrument will have its own trading hours depending on what exchange it is traded on in the world. Regardless of when these orders get placed, if they are not filled they remain on that particular exchange until they are executed. For all intensive purposes futures and forex markets are the best for this topic because they are open for the majority of the day and night.

Scalp trading is a very popular topic amongst many futures, forex and stock traders. It can be profitable and fun IF you have the personality for it. Scalp trading requires a lot of time in front of the monitors typically and can provide many trades during each session. While this may be right up your ally, some would strongly argue that they do not wish to stare at a monitor nor do they want to spend a lot of time doing an analysis of the financial markets. Our philosophy is that there really is no "right" or "wrong" way to trade as long as you are making money.

The financial markets are a complete mystery right? Wrong. In this article I will give my perspective on the financial markets and attempt to bring an understanding to the movement of price through Supply and Demand Zones Theory. First we must look at the market's underlying source which is pure psychology. Each individual, commercial or institutional trader around the world make up this psychology and are force fed massive amounts of news to influence their thoughts. Media is the main source of news and can be rather manipulating to many if the information is not interpreted in the correct sense. Luckily for us there is a single piece of information that we all have which cannot be manipulated, price action. It is our job to interpret the data and analyze accordingly. Price tells us every action and reaction that has occurred for any given instrument therefore telling us what the majority of traders were thinking at that time and placing a historical value on that instrument. It also leaves foot prints along the way to indicate where upcoming opportunities may take place. This leads us to our zone trading methodology.

Supply and Demand Forex, Futures, Stocks

Order flow analysis gives a low risk ability to see where upcoming market turns will take place. Order flow is a term used to represent the supply and demand of any given instrument. Supply and Demand is an economic model of price determination in a market. It concludes that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of both price and quantity. When supply exceeds demand there is a turn in price action. Price is driven down due to the quantity of goods being produced and the lack of demand for those particular goods.When demand exceeds supply there is a turn in price action. Price is driven up due to the quantity of goods being demanded and the lack of supply for those particular goods. To simplify the terminology supply refers to sell orders while demand refers to buy orders. It is important to note that a transaction must consist of both a buyer and a seller to exist. Whoever has the most orders wins. The equation is as follows:

There are three types of traders that make up the financial markets from trading and investing. Each type of trader will be unique in many ways regardless of which category they fall into. Some characteristics that make each trader unique include their trading strategy, risk tolerance, style of trading (intra-day, swing, long-term) and ability to control emotions. The majority of traders around the world are going to be known as retail traders or as I like to call them homegamers.

Supply and Demand Trading is used by many well known institutions, commercial and individual traders to assess high probability trading opportunities. In order to do so we use methods to locate a definitive area where there are many orders waiting to be filled, otherwise known as “unfilled orders”. Before moving on let’s define the difference between “filled” and “unfilled” orders.

Filled Orders

These are orders that have been placed and executed by a broker to an exchange and the transaction has already taken place. An example of a filled order would be if you hit the buy button for 1 futures contract and there is an available contract at your specified price for sale you would take ownership of that contract. When you take ownership of this contract that order has now been filled and therefore your order is no longer waiting.

Probably the most rewarding thing as an educator is hearing the success that your graduates are having. As stated time and time again in our live mentorship room, the most important thing one can learn is "how to read market direction". By reading the market's direction we are able to make highly educated trading decisions based solely on the psychology of the traders in that particular market. Each pile of orders placed in any given market leaves footprints that we can use for future reference. It is our job as a trader to read price and determine where the "unfilled" orders are so that we may fill them.

Below are two emails from a PFA graduate sent earlier today. Because he has a good read on the market's direction, he is capable of trading at the highest probability times in both directions. It may be important to note this is not something that is attempted daily because it is not offered each day, however reading price and market direction will let you know when a high probability entry with low risk is being offered.

As a new trader the process to get started can be extremely overwhelming. There are many options out there for data providers, brokers, trading platforms and more. In today's article I will focus on the NinjaTrader Platform. There are some needed steps to get up and running. Just downloading NinjaTrader is not enough.

Let me explain a bit about the process. With any platform there are key components that you must have in order for it to produce data on your screen and place live trades.

Today I want to touch on "how to simplify your technical analysis". Trading doesn't need to be extremely complicated! We want to buy at levels where the buy orders reside and sell at levels where the sell orders reside. So our only job as a professional trader becomes locating these levels to obtain the highest probability trading opportunities. Using pure price action we are able to do exactly that using very definitive methods to determine where the "unfilled orders" are sitting on the exchange for any given financial market.

Before continuing, let me clear the air by saying that this is by no means the only way to make money in the markets and as long as anyone is making money that makes them a successful trader with no need for change. Having said that let's look at the markets just like anything else in life (example below).

Today we will look at a brief video of our Supply and Demand Trading methods on the Emini Russell. You will see via the video below that the US Index markets continue to put in higher highs exhausting the buyers which creates corrective waves and/or pullbacks. These corrective waves generate volatility in any given market forcing more willing buyers and sellers. Utilizing supply and demand trading methods we are able to add probability in our favor. The Emini Russell offered an opportunity to take part in a short term sell with the potential of a larger move. Click to see the video below.....

With more and more individual traders around the world, we are seeing many interested in trading supply and demand levels or zones. Many of them have seen a webinar or event or even a YouTube video discussing the importance of institutional order flow. I will certainly agree with the importance and add to it. There is much more to trading supply and demand zones than simply looking at a chart and picking out levels that price increased or decreased quickly away from.

Market Manipulation

When looking for these levels on any given price chart it is important to note they are excellent trading opportunities only if all criteria is met, not just the level itself. Institutions and other large money traders use these levels not only for trading opportunities, also for manipulation. If they see a level that most retail traders will assume is supply or demand, this may be a great time to use it against the mass public. A great example of this would be "pivot" lows and/or highs. Most often when you see a pivot point it is simply formed due to a previous area of supply or demand. An institution may now use this "pivot" to manipulate traders allowing them to think price will turn there by forming a small base or pause, only to continue pushing price in the same direction.

Every trader goes through a process of learning their trading personality. This will include many things like style of trading, how much time they spend in front of the computer, which type of asset classes to trade and many more! In this article I will discuss my experience with a major component of any traders career; How many trades should I place?

Just like many other traders when I first started trading I wanted to place a lot of trades because that was the conventional thought process and I was being taught no differently. In my mind the more trades that I placed, the more money I could make. In the first few months I thought that I was doing something wrong (which I was) and so I began to spend every waking hour studying the markets and pure price so that I could figure out the problem. As I was being specifically taught one way of thinking I closed my mind to many other scenarios. After many sleepless nights, my confusion grew more and more because I couldn't figure out why I was being taught to do something that I would never do on a daily basis with anything else that I purchased. During this time as you can imagine, not only did my confusion grow, my frustrations did as well.

Trading the news is a topic that is broadly discussed throughout the trading industry with an array of opinions on the matter. So how do you know who to listen to, who is right and the infamous question should I let the news effect my trade? The fact is you will get a different answer from every individual you come into contact with therefore making this a very subjective matter. 

Trading is an art form in many ways and can be approached as such, or it can be methodical and approached systematically. Neither would be considered wrong nor right and the simple question would be are you profitable? In our methodology there is a bit of both art and systematic. There are particular items that are near impossible to make non subjective such as analyzing the trend across multiple time frames. This in itself can be confusing, so adding direction can be detrimental to your analysis.

In the financial markets many traders rely on technical "indicators" for information to assist them in making a trading decision. Each technical trading indicator has its own properties and algorithms that are used to determine certain details about any given instrument. Let's look at what a technical trading indicator is and how to use indicators for your benefit. In the examples below we are going to use two types of technical trading indicators.

To define an indicator, it is a mathematical calculation primarily based on price movement over a specified time period. The calculation(s) are used to present a graphical representation on a price chart to assist in technical analysis including entry and exit points.

Ninjatrader uses a very specific process to make it easy for individuals to know how to upgrade NinjaTrader Indicators, Strategies and other software. This process is quite simple and takes only a few clicks of the mouse.  In this article we are going to discuss how to upgrade your NinjaTrader Software step by step, as well as why these steps are necessary.

We are going to assume that you have already installed a previous version of software into your NinjaTrader Platform, as well as downloaded the new version of software that you wish to install. An example of "software" would be a 3rd party indicator (PFA Zoning MTF) or strategy (SD Model). 

In mid July we discussed Crude Oil breaking out of a Symmetrical Triangle Pattern and its price having a high probability of heading higher in the future. Since that market analysis in July when Crude Oil was $108.05 it has rallied to $112.24. During this move higher many traders chased this break out pattern paying top dollar for Crude Oil all the way up to $112.24. Well what goes up must come down, and this rule applies to Crude Oil as well which has fell in price to currently the mid $101 area. So Is Crude Oil finished selling off? Let’s take a look at the below charts and see what they’re telling us.

On the bottom is the chart included in the market analysis provided in July titled “How to Use Chart Patterns-Higher Gas Prices”, which shows Crude Oil breaking out of its Symmetrical Triangle Pattern. The top chart shows daily price candles of Crude Oil and how Crude has consolidated sideways after breaking out of that same Symmetrical Triangle Pattern, plotted with a purple trend line. Recently we sold off below the Aug 8^th low of $102.22 and are now in a Bear Trap Area, plotted with an orange horizontal line on the chart.