Part 2 here is all about CONTROL.
As I said in part 1, people tend to equate green candles with buying and red with selling but the default coloring is wrong and does not reflect the actual actions of smart money.
Like color, a common misconception is that if the day is red and way down, people are selling off. The reality is most of the time the market is down because buyers are in control.
Think about the stock market the same way you might think about a housing market for a moment. Have you ever heard "it's a seller's market" or "a buyer's market"? What's going on in those markets? Usually in a sellers market, the homeowner lists their house, gets a ton of bids, and chooses the highest bidder. They may even decide they listed too low or change their mind. In a buyers market they may not be so fortunate to get a lot of bids and the bids that come in may be below their asking price. Depending on their motivation, the homeowner in a buyers market might sell for below their asking because they are in a dire situation where they need the money or are spooked that prices are going to continue to fall.
In a lot of cases, that's not too far from stock markets. Think about the last month or so with the COVID-19 pandemic and look at this chart-
Who's really in control here? You always hear people saying, "Sellers at it again" when we have these -7% trading halts. The reality is closer to this though, who really wants to BUY in a time like this? Sellers have lost control. Through much of the crash you could not sell your shares for yesterday's price because the buyers on the other end of the table said no thanks, I think I can get a better price to buy at later.
Here's an example of the December 2018 correction and some insight as to the balance of control-
Until you understand it better, thinking of control and phases this way seems counter-intuitive. Why is the price RISING if people are SELLING? Or why would price be FALLING if we're supposedly BUYING? I like to look at it in terms of these phases (on main chart)-
Buyers Collect -> Chase -> Sellers Profit -> Panic
Most of us are dumb money, retail traders. Oh, and we're HUMAN. We struggle emotionally with harvesting profits because we get greedy and our heart starts pounding when we see heavy volume and giant red candles.
Combining color and control on a couple intraday examples-
As I said in part 1, people tend to equate green candles with buying and red with selling but the default coloring is wrong and does not reflect the actual actions of smart money.
Like color, a common misconception is that if the day is red and way down, people are selling off. The reality is most of the time the market is down because buyers are in control.
Think about the stock market the same way you might think about a housing market for a moment. Have you ever heard "it's a seller's market" or "a buyer's market"? What's going on in those markets? Usually in a sellers market, the homeowner lists their house, gets a ton of bids, and chooses the highest bidder. They may even decide they listed too low or change their mind. In a buyers market they may not be so fortunate to get a lot of bids and the bids that come in may be below their asking price. Depending on their motivation, the homeowner in a buyers market might sell for below their asking because they are in a dire situation where they need the money or are spooked that prices are going to continue to fall.
In a lot of cases, that's not too far from stock markets. Think about the last month or so with the COVID-19 pandemic and look at this chart-
Who's really in control here? You always hear people saying, "Sellers at it again" when we have these -7% trading halts. The reality is closer to this though, who really wants to BUY in a time like this? Sellers have lost control. Through much of the crash you could not sell your shares for yesterday's price because the buyers on the other end of the table said no thanks, I think I can get a better price to buy at later.
Here's an example of the December 2018 correction and some insight as to the balance of control-
Until you understand it better, thinking of control and phases this way seems counter-intuitive. Why is the price RISING if people are SELLING? Or why would price be FALLING if we're supposedly BUYING? I like to look at it in terms of these phases (on main chart)-
Buyers Collect -> Chase -> Sellers Profit -> Panic
Most of us are dumb money, retail traders. Oh, and we're HUMAN. We struggle emotionally with harvesting profits because we get greedy and our heart starts pounding when we see heavy volume and giant red candles.
Combining color and control on a couple intraday examples-
