Thursday, December 2, 2021

Flying Experience ..... and ........ Applying to financial markets.

Market is PERCEIVED to be a complex subject although it is NOT. The approach to handle market actions is best to use our daily experience. 

Market moves from one destination to the next just like the transportation system. I like to use the analogies of aeroplanes and ships with sails.   

The Captain of the vessels (planes/ships) will have a map of the routes and the path can change due to weather. The market trend is no different and similar. The only different that I am aware is the route map for transportation is fixed from the start to destination BUT the destination is NOT fixed when we refer to financial markets.

The ships/planes has a navigational map to denote the departure and arrival BUT the market has NO arrival indication !!! The only way understand the ARRIVAL destination is AFTER it has arrived.

Both market and transportation system share ONE common trait, they in general have to slow down to "land" for arrival. On rare occasions the market will arrive suddenly and depart abruptly.

Navigating  the financial markets share the traits of ships/planes but the map routes is NOT fixed. BUT we can work on systematic plans to track the trend path to provide clues the "arrival" and "departure".

There are 3 parts to a market trend path.

1) Starting of a new trend is also Ending of old trend

2) Growth state

3) Ending of the existing trend is also the Starting of new trend.


My approach to developing MY system is to detect potential changes to 1) and 3). 

If I intend LONG and SHORT, I need to ensure my 1) and 3) are reliable and consistently accurate. 

As long as my "system" do not flash 1) and 3), it by default it has to be in 2)

 

I do not want to be in a predicament of shorting the market when the downtrend is ending (1) and when market is rising (2). I want to be shorting when the uptrend is ending or after the up trend has ended and the new down trend has confirmed (3)

 

The same applies to the reverse when I do not want to be in a long positions when falling or my system did not flash any warning the down trend fall is ending.

 

What about "positive" news in a downtrend? As long the LOW final destination has not reached, the news only can cause temporary rebound.

What about "negative" news in an uptrend? The input can only provide temporary retreat before the TOP

 

NEXT UPDATE ..... How to allocate your resources when you do not have a system for 1) - 2) - 3)                      

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