We’ve been having a rocky ride over the last few weeks and many swing trading pundits are calling the end of the bull run. It is educational to remind ourselves of how markets develop. Especially in light of Mr Jesse Livermore’s remark when he said; “There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again and again and again.”
Market trends are generally considered to have three stages. In the beginning there is a good deal of disbelief that the preceding trend is over despite the gentle or not so gentle change in the markets. Then, as time passes and traders begin to see those higher highs and higher lows or vice versa then the realisation begins to sink in. Money begins to flow back into the markets.
The final stage is when everybody, but everybody is convinced that the market can only ever go in the direction of the current trend - and that’s when the money is made. By those swing traders who had seen the change coming and got in early and shortly afterwards by those with the skill to predict when the market is going to turn. Developing that swing trading skill is the most profitable application of any traders time.
Tags: Stocks & Trading