Joe Ross
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Successful trading is often a matter of selling at the right time. It is often possible to be a conformist and just follow the crowd. When there is strong interest in what you are trading, you can merely follow the prevailing trend. As prices move up, the media reports on the optimism, and the confidence of the masses rises. Soon, more and more enthusiastic buyers enter the markets. There are times when all you have to do is ride the wave.
That said, following the prevailing trend doesn't always work. As we have seen, periods of optimism are often followed by periods of fear and pessimism. You cannot always "buy low," wait patiently, and assume that there will be crowds of naive amateur buyers ready to push the price up higher. If you wait too long, you'll hit so-called resistance, and it will be too late to profit from the move. Obviously, trading is not always easy. You must gauge the phase that the market is in, anticipate what will happen next, and enter and exit a trade at optimal times. You must do your homework, rely on your instincts and make educated guesses as to where the markets will go next.
Many traders make the mistake of assuming that they can merely look at the trend and trade on impulse, with little knowledge about what they are trading and what makes it move, but astute traders do their homework. They study the history of a company or a market, the range of prices and the factors that influence the rise and fall of the price. By doing your homework, you can better anticipate how the price will move. For example, you can determine what others see as support and resistance levels. You can determine whether the current price is the result of various market factors, or seemingly for no discernable reason.
By knowing all you can know about what you are trading, you will ultimately take less risk. When you buy at typical levels of so-called support, you know that in the long run it is likely that prices will return to that point in a worst-case scenario. When prices go beyond that range, and you know there is no sound reason for the increase in price, you will know to sell while the masses are interested. And when they sell out of fear and prices drop back to their previous levels, you can buy back. It's possible to make money on the way up and on the way down. It's all a matter of knowing as much as possible about what you’re trading to the point of becoming an expert.
Trading is much like sales. You have to know what the public thinks they want and when they want it. You need to buy at low prices and sell it to the public when the price is high. Just like in any business, however, you can't make such forecasts without knowing what the price patterns look like when the public is going to come in. Don't trade on impulse. Do your homework and make sound educated speculations. It's less risky and more profitable.
That said, following the prevailing trend doesn't always work. As we have seen, periods of optimism are often followed by periods of fear and pessimism. You cannot always "buy low," wait patiently, and assume that there will be crowds of naive amateur buyers ready to push the price up higher. If you wait too long, you'll hit so-called resistance, and it will be too late to profit from the move. Obviously, trading is not always easy. You must gauge the phase that the market is in, anticipate what will happen next, and enter and exit a trade at optimal times. You must do your homework, rely on your instincts and make educated guesses as to where the markets will go next.
Many traders make the mistake of assuming that they can merely look at the trend and trade on impulse, with little knowledge about what they are trading and what makes it move, but astute traders do their homework. They study the history of a company or a market, the range of prices and the factors that influence the rise and fall of the price. By doing your homework, you can better anticipate how the price will move. For example, you can determine what others see as support and resistance levels. You can determine whether the current price is the result of various market factors, or seemingly for no discernable reason.
By knowing all you can know about what you are trading, you will ultimately take less risk. When you buy at typical levels of so-called support, you know that in the long run it is likely that prices will return to that point in a worst-case scenario. When prices go beyond that range, and you know there is no sound reason for the increase in price, you will know to sell while the masses are interested. And when they sell out of fear and prices drop back to their previous levels, you can buy back. It's possible to make money on the way up and on the way down. It's all a matter of knowing as much as possible about what you’re trading to the point of becoming an expert.
Trading is much like sales. You have to know what the public thinks they want and when they want it. You need to buy at low prices and sell it to the public when the price is high. Just like in any business, however, you can't make such forecasts without knowing what the price patterns look like when the public is going to come in. Don't trade on impulse. Do your homework and make sound educated speculations. It's less risky and more profitable.
