How to Trade Like an Institutional Trader

Summary

In a discussion with Sam Seiden from Online Trading Academy, the conversation centers on the fundamental differences between retail and institutional trading. Seiden argues that retail traders often buy high and sell low due to ingrained habits and misconceptions about market dynamics. He emphasizes the importance of buying at wholesale prices during market dips, akin to savvy shopping strategies in daily life. Furthermore, he advises against waiting for confirmation before executing trades, as this approach can increase risk and reduce potential profits. By adopting an institutional mindset, retail traders can enhance their market success.

Takeaways

• 😀 Retail traders often buy high and sell low, while institutions buy low and sell high.
• 😀 Many retail traders are unaware of the 'game' being played in the markets.
• 😀 The conditioning of retail traders leads them to prioritize high-quality stocks in uptrends, often at retail prices.
• 😀 Institutional traders do not have secret information; they operate based on fundamental buying and selling principles.
• 😀 Effective trading requires identifying institutional demand and supply on price charts.
• 😀 Waiting for confirmation or reversal can increase risk and decrease reward for retail traders.
• 😀 Retail traders often rely on a confluence of indicators for confirmation before making trades.
• 😀 Institutions buy without waiting for price rallies, focusing instead on price levels where demand exists.
• 😀 A shift in mindset from retail to institutional thinking can improve trading success.
• 😀 Understanding how to trade like institutions can help retail traders avoid common pitfalls and enhance profitability.

Q & A

What is the main difference between retail traders and institutional traders, according to Sam Seiden?

Retail traders often buy high and sell low, whereas institutional traders buy at wholesale prices and sell at retail prices.

Why do retail traders struggle to succeed in the market?

They are conditioned to think in ways that lead them to make poor trading decisions, often buying stocks when they are at retail prices.

What common belief do retail traders have about institutional traders?

Retail traders often believe that institutions have secret information that gives them an edge in trading.

How does Sam Seiden suggest retail traders should change their approach?

He advises them to think and trade like institutions, focusing on buying at wholesale prices instead of following conventional methods.

What does Sam mean by 'catching a falling knife' in trading?

It refers to the risk of buying an asset that is declining in value, potentially leading to further losses.

What strategy does Seiden recommend for identifying when to buy or sell?

He recommends identifying where institutional demand and supply are on price charts, which can help traders make informed decisions.

Why does Seiden argue against waiting for confirmation signals before trading?

Waiting for confirmation can increase risk and reduce potential rewards, as it often leads to missed opportunities when institutions are buying.

What fundamental economic principle does Seiden emphasize for successful trading?

He emphasizes the principle of buying low and selling high, which is essential for making money in any market.

How does Seiden suggest retail traders can develop a better trading mindset?

He suggests they should focus on understanding market dynamics and recognizing institutional trading patterns rather than relying on traditional indicators.

What is the significance of price levels in Seiden's trading strategy?

Price levels indicate where institutions are buying and selling, helping traders to align their actions with institutional behavior.