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A Winning Trading Method is Really All About this…..

  
  Education
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eagle-newSuccessful trading is the attempt to be on the right side of the flow of capital. Each change in price happens with a new agreement between the current buyer and seller. Buyers and sellers are always equal for a transaction to take place, the cause of movement is determined by whether the buyers want in more than the sellers want out. Prices moves when capital flows into and out of a market, and inflow pushes up prices because demand becomes more than supply, price discovery happens to find out what sellers are willing to take to sell their position.

Many crazy over bought or over sold trends occur because one side has little pressure on it, position holders, shorts, or buyers sit tight as a trend accelerates. Equity markets rise when new money has to enter to be put to work but there is little interest at selling due to position holders sitting on winning positions.

Price resistance on a chart is caused by simply being the place that current holders are taking their profits. Price support happens at the price that people on the sidelines are ready to get back in at. These are simply spots where capital flows in and out. (more…)

The Secret to Trading Success

  
  Education
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secret1The most important thing you must learn in every market cycle  is where the money is flowing. It is flowing into the companies where the earnings are growing. As long as mutual funds have capital in flows instead of net out flows then they must put new money to work investing in stocks. If you want to make your job as a trader much easier then find where the flow is going. Mutual fund managers can not go to an all cash position they can only move money around. A bear market sinks most stocks because managers have to sell everything to raise money to redeem shares. In an uptrend they have to buy stocks with the incoming money flows. Where does this money go? It goes into the sectors and stocks that are in favor due to increased earnings in a sector and individual stocks that are dominating their sector and changing the world in the process. You want the leaders not the has been. You want the best the market has to offer. Where are consumers dollars flowing into? That is where the money is going. What companies have the best growth prospects? The stock can only grow in price if the underlying company does. Mutual fund managers are the biggest customers in the market when they start buying a stock that increases huge demand and price support.

Your job is to follow the big money, shorting in bear markets, going long in bull markets. Following the trend of what is in favor. Do not fight the action, flow with it.

Quit having opinions and start being a detective looking for the smart money, the fast money, the big money and where it is going now.

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