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Understanding The Trading Psychology AtSupport And Resistance Point....!

WORDS OF WISDOM FOR THE DAY : 

 

In studying a chart for any liquid instrument, traders will observe that prices usually move in a series of peaks and valleys. The direction of these peaks and valleys provide us with a lot of valuable information about price action and direction. They also help us in determining the direction of a trend and levels of support and resistance. These valleys and peaks create opportunities for traders to enter or get out of trades.  Professional traders always like to buy at support and sell at resistance, since these trades will usually have a much higher probability of success.

A price support point or level is a place where buying interest is sufficiently strong to overcome selling pressure. As a result, prices hold at this level and eventually start to rise. Consequently, they provide great buying opportunities. On the other hand, resistance points are the exact opposite of support, they represent price levels where sellers dominate and are able to overcome buyers. Price increases are halted by resistance and eventually prices start to drop.

 

To understand the psychology of activity at support and resistance, we need to first understand the different postures or positions that traders may have at any price point. When we arrive at a support level, we are going to find traders that are holding long positions, traders that are holding short positions and traders that are holding no positions but are looking to get in.

At the support level, strong buyers are stepping in and prices are starting to hold. Traders with a long position that entered the trend at a wrong point, and were previously in a losing position, are now pleased that their losses are starting to dwindle and that prices will start to move their way. They may in fact be looking to add to their positions. On the other hand, when traders who are short will recognize the support level, they will exit and cover their shorts generating more buying power. Traders that are still outside will fall into two groups, one group realizes that prices are rising and they decide to immediately enter and thus help propel prices higher. The other group is still waiting for prices to dip back so that they can enter at a better price.

So as you can see that there are several groups that are eagerly waiting to buy a price dip. Naturally, if and when prices decline back near support more buying takes place. The support level becomes stronger and prices get an upward lift. Consequently prices continue to push up, until they encounter resistance. Once again, when we arrive at a resistance level, we are basically encountering supply or strong selling pressure. Recognizing this fact, many traders that are holding long positions will want to get out quickly to capture their profits and thus create an added selling pressure. Traders that did not exit quickly are now dealing with the psychology of watching profits slip away as prices continue to drop before their eyes. 

They are praying and wishing for prices to move back up to capture a little more profit and capture some of the gains that they just had. As soon as prices pull back up towards resistance they see this as their opportunity to get out and sell their long position. This in turn creates another wave of added selling pressure. Traders on the sidelines are watching prices and they can see that even when prices pulled back towards resistance they dropped again, this gives many traders on the outside their queue to short and get into the market. Sure enough this creates more added selling volume and continues to push prices lower. The resistance point holds and prices continue to drop until buyers decide to step in creating a level of support.

This behavior occurs continuously in the market in every time frame. Consequently, It's helpful for traders to understand the psychology behind the opportunities that present themselves. It helps them to time their entries better and gain a greater sense of confidence in the market. Note that in understanding theses valleys and peaks, traders need to always keep in mind that an uptrend is defined by a series of consecutive higher peaks or higher highs and higher valleys or higher lows. However, a downtrend is established when prices follow a sequence of lower highs and lower lows. I strongly believe that investment knowledge and education are always the best foundation for profitable trading in the stock markets.

Common Investment Mistakes Made....!

WORDS OF WISDOM FOR THE DAY : 

We all want to make money and then more money. Because of this desire to increase our income we set out to create ways to earn money outside of our normal jobs.  Because real estate investing or starting a business requires a lot more to get up and running, many people turn to paper assets. 

Stop and think about it for a moment.  If you can just scalp $50 net a day out of the stock market you have picked up an extra $1,000 per month.  Many stocks will move S$0.10 to $1.00 within a days trading so you don't even have to be totally right, just catch the move and scalp some money. Sounds easy right?  But as you may have well experienced it is a lot easier to say then to do.  Because this sounds to easy many have jumped in with their new idea and have been clobbered by the market. 

Why isn't this as easy as it looks?  Because the market is always right. This is a hard lesson to learn, but the market is never wrong. People are wrong. People will trust indicators to lead them when indicators are lagging. Markets can sometimes be confused, indecisive and even fickle, but the market is still right. Because the market is always right then if we are going to take on the market we have to realize that our battle is not with the market. Our battle is with ourselves. Everyone makes mistakes, but knowing what can go wrong puts you one step ahead. Here are some common mistakes investors make. How many of them apply to you?

Common Mistake #1 - Entering A Trade Without A Plan...

Common Mistake #2 - Entering A Trade Without Understanding Your Risk...

Common Mistake #3 - Breaking the rules of your plan...

Common Mistake #4 - Falling In Love with a Stock or Company...

Common Mistake #5 - Failure to Use or Stick with a Stop Loss...

Common Mistake #6 - Increasing Position Size to Make Up for Past Losses...

Common Mistake #7 - Failure to Learn From Past Mistakes...

There are only two kinds of stocks; Those that make you money and those that don’t. That’s why protraders don’t fall in love with their stocks.....!

WORDS OF WISDOM FOR THE DAY : 

One of the big investor mistakes I've observed is that some investors, once they've taken a loss on a stock, keep looking for an opportunity to buy that same stock. Without realizing it, they become enamored of the stock simply because it has "done them wrong." Like an adolescent who's been beaten up, they are looking to "get even." "I'll show that stock," they say to themselves. By so doing they lose focus of what they are trying to do: Make money, not save face.

There are thousands of companies available for them to invest in , so why do they keep coming back to a proven loser? The answer is, of course, ego. Ego is one of the most destructive forces that you can unleash on your investment performance, and we will take a close look at how it manifests itself in the next chapter, so you can recognize it. It crops up in everyone now and then, but when it does, you must resist it and think logically.

If you are fishing and a fish slips off your hook, do you refuse to pull in any fish other than the one that got away, from then on? Of course not – you throw your line back into the water in hopes of catching "a fish," not "the fish." It seems obvious when fishing, but unfortunately, many people's common sense goes out the window when it comes to the stock market. They keep gunning for that one particular stock, ignoring the other rich targets which abound around them. Thus, one mistake begets another.

Sometimes, people also return to a stock because they had such a good experience with it. They made some good money off this stock and so they have warm, fuzzy feelings for it. Again, this is not logical thinking unless the stock has recovered and is showing itself still to be one of the stronger stocks in the market. Once you have sold a stock, forget it, whether it was sold for a profit or a loss.

The Need To Be Right – Common Psychological Traps For Stock Traders....!

WORDS OF WISDOM FOR THE DAY : 

 

My experience tells me one of the biggest issues traders have is the ever present 'Need to be right'. 

Some thoughts on what characterizes great and successful traders:

• Great traders graciously accept losses. They don't need to be right all the time.
• Great traders focus on proper execution not on the outcome of a single trade.
• Great traders concentrate on good risk management. They constantly manage their open positions.
• Great traders are emotionally detached. Single trades do not affect their mood.
• Great traders don't compare themselves to others. They isolate themselves from the opinions of others.
• Great traders are not afraid to buy high and sell low.

As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the 'need to be right' and the fear to sell at a loss. What aggravates the situation is adding to a losing position.

 

Do more of the things that work and less of the things that don't. Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right. The most important rule of trading is to play good defense, not great offense.

YENİYIL YILBAŞI PASTASI

BABY SHOWER PASTASI 6