
Supply = Resistance = Sell
Demand = Support = Buy
Books teach how to trade based on chart patterns, indicators and oscillators on the chart, which can lead to faulty trading, as indicators and oscillators are very lagging. The problem is that these patterns are based on the premise that traders need a bullish picture to buy and a bearish picture to sell. In fact, an astute trader gets interested in buying well before pretty green candles appear on a chart.
The way to make money trading and human nature are inversely related. Majority of people are only comfortable buying if others have bought. They avoid taking risk unless others are willing to share the risk. Traders and investors tend to buy on good news and sell on bad news. Trust me, good news and nice comfortable green candles don't bring prices down to areas of support (demand), which is where the astute traders buy. Unfortunately, it usually is the bad news that tends to offer the low-risk/high-reward buying opportunities.
1 comment:
Hi Tony :
Very insightful. Thanks,
Tony Chai
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