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Sunday 19 October 2014

Reality of the Market

Majority of the traders fail because they do not understand the reality of the market. Most of us are not even playing the right game. Materials available over the net and the books written by failed traders teach technical analysis patterns and indicator based signals and we assume this is the reality.

The indicator based TA signals and price patterns are illusions. These are only effects. Cause is something else. Then what is the cause? Price .Indicators and patterns are derivatives of price. Then price is the cause and TA patterns the effect. So we need to focus on price.

Do not reach a conclusion so fast. Price is another effect and there is something that makes prices move in markets. What it is? It is the order flow. Orders make the market move. If the net order flow is on the buy side market will go up. If net order flow is on the sell side market will drift down.

Then order flow is the real thing that moves the market. Oh No .Dig a little deeper. Yes. It is the people who act in the market by feeding their orders. When people start bidding higher, price will move up when they start lowering their offers price will start moving down.

When people are going to bid or offer aggressively? It is when they feel the urgency and desperation to transact. This is when they become emotional. So it all comes down to the emotion of the market participants. Fear and greed are the most powerful emotions that can force people to act.

If you are able to identify the price levels where a large enough group of traders succumb to these emotions and able to act there without hesitation, you will win in this game. Trading is nothing but engaging the other party. Encashing their fear and greed.

Suppose you are in a shopping mall. People will be moving around in a random manner. Then you hear an announcement that the first ten purchasers of a particular item will get another free. You can see so many people rushing to that counter .That is greed in action. Then you go and press the fire alarm button. Everybody except you will rush to the exit. Fear in action.
Now you know it. Fear is much more powerful emotion than greed.


Parag Patil is a technical analyst and trading system designer with stock excel programmer. I hope the articles and live chart of nse future and mcx on this Website will be as helpful and profitable to you . I try to update and post new articles tips everyday. My motto is to encourage the traders, so that they should able to understand the technique views behind the moment of stocks. I have deeply analyzed with many technical indicator with parameter and added to my amibroker afl. And even taken backtest report which is never being implemented. Any of the analyst expect me. Seeing all this you may understand that my views is more technical than commercial. If you are profited by my views I fill happy.

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