The end-point or the goal of every trader is to attain a state of profit optimization.
In the midst of all the technical, fundamental, seasonal, sentimental, or other kinds of analysis out there, the trader seeks to beat the market and increase their account portfolio. But what really matters while trading the market? And what mental disposition is necessary to experience success at a sustainable level?
The ability of traders to relate to the market as a less complex entity is key to success. I do not rule out the fact that the market can be complex and dynamic by its very nature, but it is the responsibility of the individual traders to create simplicity out of every market’s complexity.
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The Simple Nature of the Market
The market is simply a meeting point between buyers and sellers. Transaction prices tilt in the direction of the greater force. Where the price goes is defined by who has the most force in terms of liquidity.
Liquidity is simply money, and where liquidity sits is where the market goes. I will also point out quickly that liquidity is not dependent on the number of traders who decide to take either the demand or supply side. A single hedge fund with a huge pool of liquidity large enough to surpass the “herds” is enough to move the market.
When you understand this reality, you will have a simple approach to trading and only seek to spot market behaviors that point to the fact that “the big boys” are in the game. The “big boys” are simply those who hold large funds and are able to move the market in any direction.
Buying When Prices Go Up and Selling When Prices Go Down
It is very difficult to simply buy when prices are rising and sell when prices are falling without a pure attitude toward the market. Debugging your mind from the clutter of too much market information, analysis, or even “the herd’s view” is the key to trading with simplicity and without confusion.
There are lots of views and opinions about how the market moves and how price action should be interpreted. You must define your own paradigm for interpreting market behaviors; this is what makes for your own simplicity and blocks your mind from seeing other factors that may be confusing to you.
Creating a System and Building Profitability
The next phase after creating a winning mindset is creating a good system that you know inside and out. You should be able to understand and communicate this strategy with such dexterity and simplicity that it becomes your own system niche.
Sometimes, it is necessary to modify complex trading systems to suit your personality for profitability. A good understanding of a system is the gateway to consistent profitability. This becomes your unique approach to the market whenever you sit before your chart, and nothing else matters; no system elsewhere matters no matter how it generates profits for those who trade with it.
Summing Up
You should make it a commitment to interpret and trade the market with such simplicity that it seems like the market has no feature of complexity.
Whenever you sit to trade, start by asking yourself the simplest way to interpret price action based on your already-developed system, and you will be good to go.
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