MASTER-CLASS on PRICE ACTION TRADING.
An in-depth and detailed series on PA trading.
By the end of this series, you will master Price Action Trading.
Chapter 1- Price Market Psychology
A thread.
An in-depth and detailed series on PA trading.
By the end of this series, you will master Price Action Trading.
Chapter 1- Price Market Psychology
A thread.
Study- This thread will introduce the fundamental block of PA, Price Market Psychology.
How the market perceives the impact of news to influence the price is called Price Market Psychology.
How the market perceives the impact of news to influence the price is called Price Market Psychology.
We will be learning how Murphy, Fring, and others give importance only to price and nothing else.
According to PA, Price contains all the information needed to make a decision, and hence no other analysis is necessary.
According to PA, Price contains all the information needed to make a decision, and hence no other analysis is necessary.
Price Market Psychology 101
1. Prices are determined by people's perception of changing fundamentals.
2. The strength of a fundamental is limited to how much impact it'll have on people's psychology about the asset price.
1. Prices are determined by people's perception of changing fundamentals.
2. The strength of a fundamental is limited to how much impact it'll have on people's psychology about the asset price.
Explanation- The price of a freely traded asset is not determined by the news, but by the perception of the people about the impact of such news.
If the news can change the psychology of the market about an asset, only then will the price change.
If the news can change the psychology of the market about an asset, only then will the price change.
4. Assets are worth what people think they are worth.
5. The psychology leads to multiple perpetual conclusions from one participant to another, and hence a trend is formed. A price trend because the psychology of a market is overall the same and changes over time in a trend.
5. The psychology leads to multiple perpetual conclusions from one participant to another, and hence a trend is formed. A price trend because the psychology of a market is overall the same and changes over time in a trend.
Explanation- The value of the asset is what people think it's worth and the psychology of an asset's worth makes the trend.
This is why asset prices are not randomly scattered on a chart but in a trend.
This is why asset prices are not randomly scattered on a chart but in a trend.
6. An increase in earnings or market growth or technical advancements by a company/asset doesn't determine the trend of the price.
Only the perception of the market towards these changes determines the price.
More earning doesn't mean higher prices.
Only the perception of the market towards these changes determines the price.
More earning doesn't mean higher prices.
Explanation.
It doesn't matter if the revenue or earnings of a company is increasing or their technology is advancing.
The price of an asset only depends upon the perception of the people ie. Market psychology about an asset.
Examples below
It doesn't matter if the revenue or earnings of a company is increasing or their technology is advancing.
The price of an asset only depends upon the perception of the people ie. Market psychology about an asset.
Examples below
The price of Mcdonald's stock continued to decrease throughout the '70s.
At this time, McDonald's was booming, an increase in earnings, mass expansion of franchises.
Still, the prices decreased.
This means the market, didn't factor the revenues growth to be enough stimulus.
At this time, McDonald's was booming, an increase in earnings, mass expansion of franchises.
Still, the prices decreased.
This means the market, didn't factor the revenues growth to be enough stimulus.
The Price of Amazon took 10 years to come back to where it was in 1999.
Do you think in the time period 2000-09, Amazon was less technologically advanced than in 1999? No.
It's just that, the market perception about Amazon in 1999 was a lot higher than in the later years.
Do you think in the time period 2000-09, Amazon was less technologically advanced than in 1999? No.
It's just that, the market perception about Amazon in 1999 was a lot higher than in the later years.
Action, not just price.
Prices do not act as support or resistance. The structure and the path taken to reach there makes them a S/R.
For example, if a resistance is broken with low momentum and low volume, it's likely that it's not completely broken.
Prices do not act as support or resistance. The structure and the path taken to reach there makes them a S/R.
For example, if a resistance is broken with low momentum and low volume, it's likely that it's not completely broken.
The longer the time period or the duration of the chart, the better performance of the chart patterns.
The reason why longer-term trends have a habit of being slightly more reliable is that they are less subject to random noise and manipulation.
The reason why longer-term trends have a habit of being slightly more reliable is that they are less subject to random noise and manipulation.
The notion that the upwards movement of the price is because there are more buyers than sellers is not true. For any transaction to happen, there should be equal numbers of buyers and sellers.
The difference here is enthusiasm.
The difference here is enthusiasm.
What truly is happens is the enthusiasm of the buyers is more than the sellers for the price to move up.
There is more psychological enthusiasm to buy than to sell.
There is more psychological enthusiasm to buy than to sell.
This completes the Price Market Psychology. I have skipped the history as its not much relevant.
This will help you understand how price is the king and that's all you need to study.
This series will be better than anything on the market. Stay tuned.
Chapter 1 complete.
This will help you understand how price is the king and that's all you need to study.
This series will be better than anything on the market. Stay tuned.
Chapter 1 complete.
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