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1975, I had no idea what a candlestick was. Today I look only at charts using candlesticks! At the time that I was using trend lines, retracements, and bid/ask spreads, do you think more experienced traders were using candlesticks to their advantage? Of course they were. Now let me ask you a question. When I was trading Eastman Kodak, do you think I believed that I had some pretty advanced techniques at my command? You betcha! Was I making money? Sure I was! Could I have made more money if I had known about candlesticks? You bet! |
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Currently I use some pretty neat mathematical models to help me look at the markets. However, do you think that there are some other traders using techniques that I have no knowledge of? Of course there are. Can I make decent money trading commodities today using the techniques that I was using over 20 years ago? Sure I can. So what does this mean to you as a trader? What it means is that you must develop a way to see the price movement that you can relate to, in a very intimate and personal way. You must devise a model that allows you to determine if the market has continuity of bullish or bearish thought. Some of you are saying, "Great, just tell me what or how you can determine this!" Let me see if I can elaborate on it so that you can have a breakthrough experience. |
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What is a market? It is simply two individuals agreeing to make a transaction at a certain price. If you can imagine a wheat auction taking place with farmers and bakers present we can better understand how a market works. If the auction has not yet started, we will be unable to determine what the continuity of thought is in this instant of time. Once the auction starts and the first transaction takes place, we are still unable to determine what the continuity of thought is. All we know for sure is that we have a market as the farmer agreed to sell and the baker agreed to buy at a certain price. The farmer thinks the price will be lower in the future, and the baker thinks it will be higher. Now let us say that there is a second trade, and the price remains the same. Can we tell what the overall continuity of thought is now? Yes we can. The continuity of thought is that the supply meets the demand. We can say this because the price did not move. In other words, the expectations of the bullish bakers are being equally met by the bearish farmers. |
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Now there is a third trade, and the price goes up a little. What made it go up? Well, the expectations of the farmers might have changed so that they now think a drought could be coming. Consequently they will not sell at the lower price. However, perhaps the bakers thought that a drought was coming and decided to stock up before it actually arrived, driving up the prices. A third possibility is that the bakers had (or were expecting) a huge increase in demand, requiring more wheat. A fifth possibility is that the |
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