See the above picture and understand the different market phases. I truly believe this is how all market works in the big picture. Of course, this will help midterm - longterm investors a great deal if they are able to see the market in a bigger context, as for being a short term trader, it's a whole new different ball game. Market phases are easy to identify in hindsight. But how do you identify them as they are developing? The art of distinguishing real-time market activity is more than a matter of drawing trendlines or using indicators on a chart. It takes time to acquire this skill, just as it takes time to learn to read an X-ray or master chess. With practice, however, you recognize the signs of balance and imbalance—perhaps the most essential element of successful trading. It’s easy to lose yourself in short-term minutia, which can cause you to lose track of the longer-term auction, therefore it is always advisable as a trader to see the bigger picture first before micro in into the context of fine details such as price, support/resistance, timeframe etc..
Have you ever wonder how does buying looked like? It all starts with accumulation, then markup, and finally climatic markup where prices are rising non stop. Envisage yourself when you were a baby, as you grew you first learnt to walk, then run and finally sprint. How do you identify buying in the bigger context? Buying is like climbing stairs step by step. This step by step climbing in the bigger context is accumulation. The market is climbing step by step until all the selling is absorbed and finally it's time to allow prices to sky rocket. Is buying the same as selling? The answer is NO. Buying takes time where selling takes speed.
Selling is the opposite of buying. Selling not is climbing steps by steps. Initially, during the distribution phase, the market needs time to slowly transfer the stock from the hands of the strong holders to the weak holders. Once the transfer process is completed, speed of selling sets in. Selling is a complete flush down of weak holders to scare them to liquidate their holdings. The rallies during the selling phases are mostly short coverings with some weak demand. Wouldn't you be scared when you hear bad news and prices are falling everyday? Do you dare to enter the market and buy? That's the purpose of the big operators, scaring the public and knock them off. Think of selling as a huge waterfall from the mountains. Of course, the market will come to a time where real strong demand sets in and for the market to rally again, it would require to absorb all the selling bit by bit before the bears turned bulls. This is how the analogy of Stairs vs Waterfall come about. Think about it.
Ronald K
