To become successful in the stock market, you need to know when the market is going to turn so you can buy or sell your stocks. There are two main principles at work in the stock market which causes a market to turn. Both these principles will arrive in varying intensities producing larger or smaller moves.
The herd will panic after substantial falls and start to sell usually on bad news.
Then ask yourself:
Are the trading syndicates and market makers prepared to absorb the panic selling at these price levels? (must be on a down bar). If they are, then this is a strong sign of strength.
The herd will at some time after substantial rises as seen in a bull market become annoyed at missing out on the up-move and will rush in and buy, usually on ‘good news’. This includes traders that already have long positions, and want more.
Then ask yourself:
Are the trading syndicates and market makers selling into this buying? (must be a up-bar) If so, then this is a strong sign of weakness.
Does this mean that the dice are always loaded against you when you enter the market? Are you destined always to be manipulated?
Well, yes and no.
A professional trader isolates himself from the herd and has trained himself to become a predator rather than a victim. He understands and recognises principles that drive the markets and refuses to be mislead by good or bad news, tips, advice, brokers advice and well meaning friends. When the market is being shaken-out on bad news he is in there buying. When the Herd is buying and the news is good he is looking to sell.
You are entering a business that has attracted some of the sharpest minds around. All you have to do is to join them. Trading with the strong holders requires a means to determine the balance of supply and demand for an instrument in terms of professional interest, or lack of interest, in it. If you can buy when the professionals are buying and sell when the professionals are selling and you don’t try to buck the system you are following, you can be as successful as anybody else in the market.
Indeed you stand the chance of being considerably more successful in the stock market than most!