28 May 2014
Moses Stock Corner – Market Cycles
Thought and Notes of Trading – Market Cycles – Trader Psychology
Price actions move in cycles; up and down movement, but not in regular sine wave. Price actions do not repeat in the form can easy predict, however the price actions shows clean up and down movement. The cycles occur due to change in momentum. The price actions momentum runs in one direction (example rising) for sometimes until the strength exhaust, the price actions stop in this case stop rising and continue or turn the other way.
Market rise because traders believe the price should be higher. The sellers are less willing to sell at the current price, and buyers are willing to pay at a higher price. At some point, the buying pressure dries up, the potential buyers are no longer willing to pay at higher prices. The anxious buyers who once were willing to buy at higher prices have bought all the stock they needed. The market leaves only those buyers who are more patient, willing to wait for a better opportunity and are not willing to pay at market price; market order.
All the anxious buyers have gone; the good time has ended for sellers. For example, at point B the buyers stop buying at the high price, the sellers now faced with a choice, either they can wait for higher prices or they willing to sell at a reduce prices. Potential sellers are those whom have bought much earlier at a good price. They are willing to sell for significant profit. Other sellers are those begin to panic and want to sell, not wanting to wait. The price starts to drop when the sellers continue to sell.
Market Cycles – Traders Psychology
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The price dip starts a downward momentum continues until the nervous sellers have sold all their stock. At this point, the buyers who have waited for the price to come down start to buy, at some point the balance reach, the price stop falling. The price starts to rise, the downward momentum stop, for example at point C.
The rising price cause some buyers to worry, they want to buy when the prices are relative low because of the recent rise. Some of the buyers buy because they missed the previous round; they have lost out the last potential profit. This goes on, the market forms a clear up and down.
Thanks for visiting the site. As traders you need to manage your emotions, trader psychology.
Moses
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