«Overpriced or Just Right?»
Traders,
Have you ever looked at the markets and thought what makes it tick? Ya know, what causes it to go up and what causes it to go down? I gave this a lot of thought as a new trader and it became sort of an obsession to find out what makes the price action happen. I thought if I knew what made the markets go up and down that I can make huge profits and this new endeavor would be easy.
What I learned after many years is that knowing why the market goes up and down is only part of the winning equation. You need other parts of the process such as good money management skills and a solid understanding of probabilities as well as a huge dose of discipline. These other parts of the process only came to light after I spent much time studying the game and lots of practice that included many wins and many losses. This wisdom took time to show up and a lot of perseverance but before it came, I looked long and hard for lots of things that could explain what the markets were going to do next and this included many indicators and many systems that were supposed to hold the key to directional trading. As one can imagine most of these holy grails that I chased were extremely disappointing or actually downright garbage. I did learn that there was some merit in some of the things I found but that there was really no crystal ball for the markets and that the most consistent thing I found was things that represented overbought and oversold conditions.
There are many indicators like the Bollinger Bands or the RSI that show overbought and oversold conditions and these kinds of things can help with understanding why the market does what it does but it really doesn’t ever get us foolproof directional movement. The deeper meaning behind these indicators is that all things tend to revert to the mean given a certain period of time. This reversion to the mean is psychological in nature and that is ultimately what drives the markets. This may be market voodoo to some but it really does reflect the human element of trading and this is really one of the only ways to really understand how markets move.
So, if you are wondering how markets really move and want to understand whether something is overpriced or just right using techniques such as those mentioned above can go a long way to solving that question. You don’t really need a crystal ball one just needs an understanding of the markets and human nature and that can take you a long way down the trading path.
Video Of The Day: How to scale into a swing trade with a first triggers two OCO orders on Thinkorswim (TOS)
In this video, we will teach you how to scale into a swing trade with two entry criteria and 3 exit criteria in one order ticket a 1st triggers two OCO bracket orders using the TOS trading platform. This is a bullish Swing Trading plan with controlled risk and reward on $ETSY stock.
Chart of the Day: Apple Inc ($AAPL)
This chart of AAPL shows that the most recent price is getting somewhat overextended and is also seen by the RSI at the bottom of the chart and this overbought scenario could potentially lead to a reversion to the mean.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show Replay
If you missed last night’s episode where Coaches Emily Muiruri and Frank Martin talked about Developing a Moving Average System or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Trade Masters 7:00 PM EST
Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.
Trading Justice 488: Earnings Performance
Welcome to episode 488 of the Trading Justice podcast where Mark & Matt take a journey through the market skyline with discussions on the following:
- Earnings Season performance
- Sector roundup / rotation
- Ford stock discussion
- What does the market need for another breakout
- What to expect with the inflation reports this week
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Legal Disclaimer
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
