Shadow

The invisible hand of the market

Almost none of the retail traders can clearly explain what support/resistance levels are or how they work. Despite this, trading with them is one of the most popular strategies, regardless of the market.

Let's play the game

We assume that playing the stock market has a zero sum – your profit is someone's loss. (In fact, it is a little worse, because taking into account the commissions and spread we are dealing with a negative sum game.) So we open the chart, draw an arbitrary support line, open a long position and earn. But at whose expense?

The answer is that at the expense of people who do not know the concept of support/resistance. However, the truth is different, the concept of the lines from which the course bounces is the first thing that people with almost zero experience who wanted to play on the stock marketcome across. So if 99% of them know the support/resistance strategy, almost everyone should earn money.

However, reality shows that 95% of market participants will never know how to make money on the stock market and will never come out on top.

How stock market sharks are doing

Now imagine playing chess. You don't have much of a clue about them. You will play with a world champion, who in addition will have knowledge about when and what move you will make. Not possible? Well, this is what the competition of the so-called. "smart money" – all financial institutions that have a real impact on the price with the average retail trader.

So, if you want to trade the stock market, you need to have a thorough understanding of the logic behind the behavior of the price. It cannot be replaced by any miraculous strategies and increasingly advanced stock exchange platforms.

Author

  • Trainer in the field of finance, as well as a manager and speaker. She enjoys the development and success of her colleagues. He describes himself as an active, dynamic and organized person. Diagnoses the financial problems of his clients. After work, he rides a motorcycle and sails.

Leave a Reply