How Does Share Market Works? True Reality of 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.
True Reality of Markets:
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. And we risk our hard earned money with those things.
Indicator Based Technical Analysis:
The indicator based TA signals and price patterns are illusions. These are only effects. The cause is something else. Then what is the cause? Price .Indicators and patterns are derivatives of the price. Then the price is the cause and TA patterns the effect. So we need to focus on price.
Order flow Moves the Market:
Do not reach a conclusion so fast. Price is another effect and there is something that makes prices move in markets. What is it? 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 the 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, the price will move up when they start lowering their offers price will start moving down.
What Moves The Order Flow:
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.
What is Trading:
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.
Fear And Greed In Action:
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.
Finally, How Does Share Market Works? True Reality of Market. Fear and Greed drives the market movement.Now you know it. Fear is much more powerful emotion than greed.