Gaining psychological insight into the nature of the trading environment.
What do you think about the market environment? Do you truly understand how the trading world operates? Have you mastered the ability to distinguish between your everyday environment and the trading environment?
This series’ objective is to give readers a thorough understanding of the psychological aspects of the trading environment. Because the trader is now familiar with their operating environment, there won’t be any forced awareness or surprises while engaging with the environment, which will increase efficiency and effectiveness.
The Market is Always Right
Many traders are yet to come to terms with this truth: the market is always right and can do whatever at any moment.
These traders always make attempts to control price action at their own peril. The truth remains that the market is king and does what seems right to it at the time. Anyone who intends to succeed in this environment must learn to follow and not seek to lead.
Oftentimes, we hear nuggets like “the trend is your friend until it turns” and the like; all these are pointers to the fact that the market is not designed to be controlled but followed. Everyone who has violated this principle has been burned over time.
What Really is the Market?
By definition, a market is a fair transaction between buyers and sellers. In essence, without two traders, there is no market.
Market-making is simply offering an object of exchange without which a transaction does not exist. In trading, once two traders choose to buy and sell respectively at a price point, they have made a market. The result of their action is determined by the number of traders who also believe in either a buy or a sell trade. The greater force determines the market’s direction.
Except you have a large amount of equity to override all other traders’ funds put together, you will not be able to change market direction for a significant amount of time. The market, therefore, is a force of traders who believe that prices will either trade higher or lower.
Why Fight a Needless Battle?
If you have a good grasp of what the market truly means, then you will see that no single trader can control price direction for a long time. There are new participants with relatively new and different belief systems, creating price fluctuations and hence defining a new force.
It behooves the trader to re-access the current market happenings and flows with the prevailing force in the market. A trader who has learned not to fight needless battles with the market always flows with the trend and knows when to make a U-turn.
