Going Beyond Price Action

Is price action the holy grail?

You’ve rid yourself of all indicators in search of something that holds.

In forex, you’re probably not looking at volume either.

What you’re left looking at is the behaviour of price.

Price patterns, expressed in the form of candles, contain a psychology.

You are trying to understand this psychology in order to put on a winning trade.

However, everyone else is also watching the same patterns too, including the big boys.

Who are the big boys?

Institutions, banks et al.

Why are we talking about them?

They are the one’s capable of creating enough buying or selling pressure to determine the direction of price. Retail people, like you and I, are not.

That’s why.

And these same big boys know the patterns that you are looking out for, and are going to react to.

What do they do?

They tweak the patterns.

Think about it.

It’s the obvious thing to do. Stopping the public out will give them a smooth run later.

Is tweaking the patterns a biggie for them?

No.

Determining the direction of price is like winning a war.

What’s it going to take to win a small battle, like tweaking a pattern?

A fraction of one’s resources.

Where does that leave you?

If you’re looking at pure price action, you probably might not fare too well.

You have no choice but to look beyond.

What is beyond?

Truth is truth.

If the market wants to go somewhere, because of actual demand and supply dynamics, well, then it wants to go there.

It will reveal that with price action.

You won’t miss the message.

How can one overlook a very large-tailed candle, or an obvious support or resistance, for example?

As you are getting ready to act, based upon the obvious pattern you are seeing, you also observe, that most of the time, price is not behaving like the pattern is saying.

If the pattern is just too obvious, you need to go one step further and put on the trade, taking tweaked conditions into account.

Look at the chart for obvious points that the big boys might be targeting. Go beyond these points and set the levels for your entry, stop, and if it’s part of your strategy, your limit.

What have you basically done?

You have believed in the obvious price action that you have seen.

You have tried to factor in tweaking.

You have implemented your trade in a manner such that the negative effect of tweaking will just about give you entry, but the big boys will probably not be too bothered about going right up to the level of your stop, because its positioning is such.

This will fail.

Sometimes.

This will succeed…

…at other times.

Whether you make money or not will depend upon how you manage your winners.

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Nath on Equity – make that a hundred

Long-term equity is 81). brought low.

The idea is to, if required, 82). sell it high.

Otherwise, 83). it is sold when you no longer believe in the stock concerned, for strong fundamental reasons. Or, it is sold when something more interesting comes along, and your magic number is capped. Then you sell the stock you’re least interested in and replace it with the new one.

84). Attitudes of managements can change with changing CEOs. Does a new management still hold your ideology-line?

Is the annual report flashy, wasteful, rhetorical and more of an eyewash? Or, 85). is it to the point with no BS? Same scrutiny is required for company website.

Your winners 86). try to entice you to sell them and book profits. Don’t sell them without an overwhelming reason.

Your mind will 87). try and play tricks on you to hold on to a now-turned-loser that is not giving you a single good reason to hold anymore.

If you’re not able to overcome your mind on 87)., 88). at least don’t average-down to add more of the loser to your folio.

89). High-rating bonds give negative returns in most countries, adjusted for inflation.

The same 90). goes for fixed deposits.

Take the parallel economy out of 91). real estate, and long-term returns are inferior to equity, adjusted for inflation.

92). Gold’s got storage and theft issues.

Apart from that, 93). it’s yielded 1% compounded since inception, adjusted for inflation.

Storage with equity is 94). electronic, time-tested-safe and hassle-free.

Equity’s something for you 95). with little paperwork, and, if you so wish it, no middlemen. In other words, there’s minimal nag-value.

Brokerage and taxes added together 96). make for a small and bearable procurement fees. Procurement is far more highly priced in other asset-classes.

One can delve into the nervous system of a publicly traded company. Equity is 97). transparent, with maximal company-data required to be online.

As a retail player in equity, 98). you are at a considerable advantage to institutions, who are not allowed to trade many, many stocks because of size discrepancies.

All you require to play equity is 99). an internet connection and a trinity account with a financial institution.

If you’re looking to create wealth, 100). there’s no avenue like long-term equity!

🙂