STOP Thinking Like A Retail Trader, Start Trading Like An Institution

If 90% of day traders fail, then we must stop doing what 90% of these traders do. In this video lesson of the Order Flow series, I'm going to go over some very important concepts that everybody watching this will stop thinking like a retail trader and to start thinking like a smart money institutional trader who is very patient and those who have the edge over retail traders from the previous three lessons in this order Flow series. If you have not watched them, I'll link them in the description below. We learned about my favorite tools to understand how a stock market auction works and to gauge how strong buyers and sellers are. Well, now we're gonna use these tools to our advantage and to put away everything that we're struggling with and to start doing things that a lot of smart money traders do and to stop thinking like a retail trader and to start thinking like somebody who's patient that will make money behind the markets. If you're new to this series, if you're new to my channel, I would recommend hitting that subscribe button and also follow me on my socials. I'll post them in the link below. That way you stay up to date on all future videos in this order flow series. So in order to start trading like institutional traders smart money, we have to stop thinking like a retail trader. Now, I'll be honest, I'm not the biggest fan of saying retail versus institution or retail versus smart money. Let's use the famous Warren Buffett quote about the stock market as a device from transferring money from the inpatient to the patient. So let's call impatient traders versus patient traders. Now it's obvious 95% of retail traders lose and a good portion of why a lot of traders struggle is because of their impatience. So let's call retail traders being very impatient versus institutions, smart money, big pockets being very, very patient and they wait for the right opportunity to strike. Retail's obviously not as profitable as institutions, big banks, smart money versus smart money main component to trading, let's just say, is understanding where retail traders are buying and selling at and making money from retail. Because they know how impatient retail is, they leave their clues or they leave their trails. And this smart money, these institutions are very, very profitable. So in order to become successful, we have to think and we have to trade like smart money, like a patient trader or like an institution. Money is made from those who are smart, taking it from retail traders. Retail traders essentially provide liquidity for other smart money institutional traders, big pockets to buy from us when we're selling or if retail sell, institution, patient Traders are buying from us. So let's look at Goldman Sachs Performance. One year they had 236 profitable days in one single year and only 15 days of losses. Goldman Sachs is a very well known investment bank. They made $18.1 billion from sales and trading. 41 of those days they made over $100 million. Put that into perspective. Imagine making, I know it's a big corporation, but imagine making over 100 million dol 41 days out of the year and then 112 days out of the year making between 50 to 100 million dollars. Our job is to not compete with them. We don't want to be in competition, we want to trade with them. Follow their footsteps. Whether it be Goldman Sachs, whether it be a traditional mom and pop prop firm in New York City, just traders who are smart traders, who are patient traders who have other sophisticated tools that retail traders do not have access to. We want to follow the footsteps of these traders and not follow the footsteps and of majority of retail traders that fail. Now if majority of retail traders fail, we have to ask ourselves how do these retail traders treat. The first thing that comes to my mind is buying when when they should be selling and selling when they should be buying. For example, a very simple strategy that I've seen majority of traders especially in the beginning stages fall into is a simple little resistance break or a pre market high breakout or a simple low a day breakdown or pre market low. As soon as this low breaks, I'm going to get in the market. This while can be effective is not as effective in the long run. Not putting an emphasis on the data and not putting an emphasis on specific market conditions. I found and I was a victim of this when I first started out trading is I was buying when I should be selling and I was selling when I should be buying. Majority of my trades did not work. There's only two outcomes in the market. We either long or short it and we either profit or lose off of it. So if we're losing majority of the time time then we're most likely have to take the opposite side to our trade. Be honest with me, how many of you have taken so many losing trades that you told yourself one day hey, I'm just going to do the opposite. If I think I'm going to buy here instead of me buying, I'm going to sell. Because I am usually wrong. This relates to retail traders buying when they should be selling and they should be selling when they normally want to buy. How many times have you stopped out of A position for a loss, and then the market eventually moves in your favor. You buy the market, it's breaking out to the upside, you get in long as it's breaking out, it then pulls back on you. And on this pullback right here, you stop out of this trade for a loss. You're frustrated, you're like, what did I do wrong? And then a few minutes later, the market continues moving up. And if you did not stop out of this trade down here, you would have made a profit on this position. And that's so frustrating. Another example of this is what normal retail traders do is they will mark a trend line or they'll mark, put one line on their charts and they think that line is what causes the market to move. Or they think that is just because this level breaks or the market hits their line that they're going to profit off of it, they're going to be the next millionaire day trader and they're going to change their life forever. Let me tell you one thing for a fact. A line on your charts will not change your life. What will change your life is consecutive and consistent repeatable trades that you could approach the market every single day. So let's just say you see in the market hold of this trend line, you're like, okay, the trend's holding. Let me take the market long because this trend is holding. Then the market pulls back on you and you stop out of this trade for a loss. After you stop out for the loss, you're frustrated, you're like, what did I do wrong? Why did this trade not work out on me? Nothing's working. I'm losing all my trades, my account's depleting, I'm frustrating. Let me just quit trading. And then two minutes later the market rallies and your original analysis or your original plan would have made money if you, if you did not stop out. Also just being impatient, the amount of traders, and I'm victim to this too, like, even still to this day, there are some stupid trades that I take that are caused by my impatience. I expect the market to do something rather than the market telling me what to do. How many times have you longed the market just because you saw a really strong green candle to the upside? We do this every single time and look at every single time the move eventually fails. The market will make buying look like selling and selling look like buying. In this example, they make it look like buying for the market to then rally and then dump and stop out the original traders that are longing these moves up. Now, how can we trade like an institution, how can we trade like a patient trader? Or how could we trade like smart money? Let's just call it again, I'm not the biggest fan of using those terms, but let's just put it into perspective. Number one, do not think conventionally. Always know who is on the other side of your trade. Who is buying from you, who is selling from you. What I tell myself before I enter any trade is if I'm looking to become bullish, I try to question if I am long here, how are other participants feeling if they are also long here or if the market's selling off. And I know shorts or sellers are factored in at the high and I'm looking to short this move. I ask myself, how are the sellers that got short were sold before me feeling at prices now? So I always try to put into perspective and I put myself in the position or the shoes of other participants. And this is an edge in itself. Because when you do this, you understand where there's going to be pain, you understand where other traders are going to be targeting. Stop topping out at. And this provides a solid edge and an advantage. A big one is market versus wholesale prices. Don't you want to sell at market price and buy at wholesale prices? Buying this breakout above a resistance level is essentially buying a market price. You want to be buying a wholesale price at a discount. That way you can sell at market price for a profit. So if the market's ever breaking a resistance or a support level, I am first looking for where there's a lot of buying because I know where there's a lot of buying in the market I should be selling, or especially when there's a lot of obvious trades that I know a lot of retail traders are watching because it's so simple to spot on a chart or the classic stop run. Instead of getting long when the trend line is holding, I'd rather get long when there's a stop hunt. Because now I am buying at wholesale prices and then I could sell at retail prices. And the only way we're going to be able to spot this information is by reading the volume behind the candlesticks. This cannot fully be developed or understood or learned from a candlestick alone. When you pair it, we're spotting a lot of green buying where there's a lot of buying pressure or spotting where there's a lot of selling pressure and putting yourself in the shoes of those traders who are facilitating these transactions. This is where the edge comes from. By reading the volume behind the candlesticks that I'VE been mentioning in all the previous videos in this order flow series. If this is the first video that you're watching in the order flow series, in the link in the description below, you'll find all the previous videos. I recommend watching them and then coming back to this because they all are consecutive and all make sense one after the other. So in order to trade like smart money, we have to place orders when smart money or other patient traders or other institutional traders are active at. And we can profit from these areas by trading and acting like these participants who are winning 200 something days out of the year and making $18 billion, which is wouldn't we want to follow the footsteps of them and not follow the footsteps of other retail traders who are struggling? Just think about that for a second. And also to put something into perspective, if you see the market selling off, would you buy the market down here as it's aggressively moving lower? And the answer to this, that majority of people would say is no. Price is coming down, price is making lower lows, price is making lower highs. So we're obviously in a downtrend buying after a crash is bad. The stock market's crashing, Covid just hit doesn't make sense. The world's in a shock, we're going through a recession. Maybe a company just released bad earnings. A lot of traders don't like buying when there's a lot of fear or there's a lot of bad sentiment. But in my opinion, that's the best edge and that's where the best opportunities are. Because that's when there's going to be a lot of emotional decisions from the impatient traders and us. If we implement patience and trading like smart institutional traders, this is where the edge or the best profitable opportunities will arise from. Now put this into a different perspective. Let's say you're in the market for a car. And in the first episode of this order flow series, we relate it to like a markets auction. So let's go back to that for a second and relate this to we're in the market to buy this car. Now if you see the prices of the car act like a candlestick chart is representing the price of this car. If you see the price of this car selling off and moving lower every single day you see a new car on the market and every day it's getting cheaper and cheaper and cheaper. Would you ask yourself, if you're in the market for that car, would you now buy it? And the answer, as similar of an example as it is of buying a stock if we put a car into the equation, a lot of you will now say yes because look, car's on sale. I could buy it at a wholesale price. It's cheaper than it was a couple of days ago and I would like to buy it before prices maybe go back up. So when you put a good like a car or a house or a watch here, it makes total sense. But when you're blinded by what you are normally used to not buying when things are not looking good, it puts it into a different perspective and opens your mind that you have to relate the stock market and treating like you would relate buying any other good at any other auction. We would want to buy any good at wholesale price. Wholesale is going to be at discount. Wholesale is going to be at a price that not the market is paying. We don't want to pay what everybody else is paying. For us to profit, we have to pay or buy when nobody else or minimal people have an opportunity to buy at such a discounted price. As the market hit this level, we've bounced off the wholesale price and then rallied up. And this is where the opportunity comes. And this is how we trade like a smart money where this is how we trade like a patient trader and not a retail trader trader. We want to be selling at market price and buying at wholesale price. This is how price moves and this is how price changes. It goes from imbalance to balance and wholesale to market. A lot of retail traders buy market price and sell wholesale price. We have to flip the equation and buy wholesale and sell market price. When the market moves up, retail traders see the move up and they automatically get so bullish or they automatically think, think the thing is going to go to the moon and they're going to make a lot of money just because they see a green candle or the market's coming up, they are buying. If they are buying, you have to ask yourself who is selling? As we've learned from the previous videos in this series, for every transaction there's a buyer and there's a seller. So if retail's buying, who's buying from retail? Majority of the time people could say market makers, but let's just say patient traders or smart money is selling when they know majority of retail traders are buying and then price drops aggressively. And a lot of retail traders see this aggressive sell off to the downside and they start selling not realizing that if they're selling, somebody else has to be on the other side of their trade. Who is that? And this could be the patient traders. We want to be Trading with patient traders. Because when we're patient, we let the bait come to us. When we're impatient, we are the bait and we're swimming around getting caught up and providing liquidity for other traders who are the fishermen outside of the water looking for us to bite the bait. So we don't want to be liquidity, we want to trade with liquidity and we want to be the fisherman, not the bait swimming in the water. Buying when we should be selling and selling when we should be buying. Traders do not understand how dynamic the auction process of the market is. Retail and big money are the auction. Big money has a need to stay ahead of retail traders for their orders to be filled. If they have to buy, they want retail to sell. If they have to sell, they want retail to buy. They do not want competition. We are their bait. Outsmart the fishermen. Think of big market players, call them patient traders. As the fishermen, they see the support level breaks, they know, hey, as soon as the level breaks, I know majority of retail traders are going to get short. They absorb all this liquidity. If majority of retail traders are selling, who is buying the big market? Patient traders. So switch your mindset a little bit. Start thinking outside of the box. Start thinking like a patient smart money trader and stop thinking like a retail trader. I want to make this very clear. This does not mean every single move up you're looking to short and every single move down you're looking to buy. This does not mean that. This just means put yourself in the shoes of other retail traders when you know other traders are stopping out. When you know other traders are buying. A breakout breakdown. Think twice and think how those traders could be put in pain. Because where there is pain, there will be gain. And this is how we come into the market and profit off of it. Where I personally find the highest quality and the highest probability opportunities. Don't just think that you're going to do the automatic opposite. Hey, this is a trade that I normally buy and since I normally buy this and I'm wrong, I'm going to automatically sell it. This is not the point of this video. This is for you to switch your mindset and to start thinking like a patient trader and to stop trading like an impatient trader. Now the next video, I'm going to explain how to use these support and resistance levels to our advantage and to know whether a break of a support or a resistance level is going to be a fake out or if it's actually going to continue moving up or down. A lot of traders use support and resistance completely wrong. I'm going to explain how I use it and to differentiate between a really strong support and resistance level versus a weak one. And if we can differentiate between a strong and a weak one, we can use that to our advantage and find really good trading opportunities. If you're new to this series, you're new to my channel. I would recommend subscribing to it. If you have any questions, let me know in the comments below. And if you learned anything from this video, drop a like thumbs up this video and also follow me on my socials linked in the description below. But on that note, I'm ending it. I will see you all in the next video of this series.