Science of Stock Price Action:
Focus on what market is doing, and not on what it should be doing.
Every day, we listen to people who claim to be experts on markets. They tell you that market will be doing this because of x, y and z. You process that information and if that matches with your thought process – you start believing it. Sometimes you even put a trade based on that belief system. Lots of times, this becomes the source of all the problem for the simple reason – Your focus is on what market should be doing. The problem becomes extremely difficult especially when the market starts doing something that is totally opposite to your thought process.
“A bull market makes one feel smarter than one is the same way a bear market makes one feel dumber than one is.”
Science of Stock Price Action:
Traders don’t trade markets. They trade their beliefs about the market
I Was Bearish, I Am Bearish & I Will Remain Bearish : Saurabh Mukherjee, Ambit Capital.
Saurabh Mukherjee is a very smart individual. He is a person of very high intellect and you can make that out based on his analysis but the statement above is stupidity of highest order. Always remember, Market does not care what you think. Nobody is bigger than the market. Also remember, The Market has its own rationale and thinking process.
Science of Stock Price Action:
The Market is Your Mai Baap (Boss) and The Boss is always right
If you have to survive in the market, you will have to listen to the market. The only problem – The Market cannot speak and hence you have to understand the sign language (The Charts/Price Action). It is with this sign language, you can understand the market’s thought process. This sign language requires you to be objective and you have to trust your eyes.
The bull market does not mean that the world does not have problems. Similarly, the Bear market does not mean that the world has turned into a hell. The Bull market only means that the Market is in very charitable mood and only wants to discount good news and ignore bad news.
Hence, It is more important to listen to the market… and not to opinions. You don’t need Ph.D. to observe simple things like Is market ignoring bad news (sign of Bull market) or good news (sign of bear market). If the market is behaving in a certain fashion, it will continue to do so till it proves otherwise.
Chalte Chalte
A healthy respect for the market is always necessary. A trader must respect a market that’s not doing what it’s supposed to be doing. So, always trust your eyes and even more when the market is acting contrary to your belief system.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers