Economy in a nutshell
The market moves in waves every single day, week, month and year. These waves exist because of the invention of allowing people to borrow money. Money they don't have. When the economy is optimistic, interest rates are low and people are more tempted to buy. When someone is eager to buy it's someone else’s income. His income grows and he is eager to spend more as well. This results in an economic growth. This also works the opposite way. When interest rates are high, people are less tempted to buy and that means that somebody else has a lower income. He eventually has less to spend and this will result in a recession.
Riding the small waves
The market moves in cycles day in and day out. What goes up will come down. And what is down will eventually go up. But how do we know when prices tend to go up higher and when do we know prices want to go further down? The most basic thing you need to know first is that a price most of the time wants to test out a previous high or a previous low and surpass that level of price. Support and resistance are great tools that indicate if a price is going to reverse!
When a price has hit a resistance it is likely to test that high out again. When people are optimistic they can penetrate that resistance and go for a new structure high. When price comes down, the previous resistance becomes now a support. When a stock is very trending and people are optimistic you can see a series of breakouts to the upside and resistance will keep becoming support. At a certain point the market has to come down and breakdowns will occur. At this point support will become the new resistance and creates a down trending market.
Trading vs investing
The main difference between trading and investing is that trading is primarily focust on short term waves and based on technical analysis. Investing is most of the time focust on fundamental analysis and making profit on bigger waves in the long-term with stocks that often offer dividends. Riding the short term waves can be very lucrative, but can also be very stressful since it's difficult to handle every fluctuations of the market that goes against you. Day trading can be done on a 1 minute to 15 minute trading chart, while long-term investors look at the overall market.
At www.tradingview.com you check any stockmarket and draw some lines for yourself to see how support and resistance work!
Again, I’d like to point out that i keep my educational posts as short as possible.
Don't forget to leave an upvote and follow if you enjoyed my content :)
Best regards,
Sem
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STOPPrice is like date. it repeats. We should be patient
Well said man :)
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Nice post. A lot of people don't understand this. I knew last year it would be a repeat of 2013-2015 on a diff level.
And you were right about it :)!
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