Читать книгу How Not to Lose a Million Dollars in Stocks - Melvin Hirsch - Страница 3

Perhaps a course in psychology would be more beneficial in predicting stock prices than studies in financial analysis. Try to get into other investor’s brains. Try to imagine what they are feeling as the price of their stock goes up or down. Mixed passions of fear and greed will oscillate thru the investors head as the stock prices vacillate up or down. Imagine the joy as the price goes up, and up, and up. What is motivating the investor not to sell and take a profit –greed. The investor is frothing with greed to make more, and more and more.

Understanding investor motivation at any moment is the key to successful stock market investing. Assume an investor purchased a stock at $50. The stock then goes up to $52 is he likely to sell? Absolutely not, then the stock goes to $54, now what does the investor think? He is hungry for more, get inside his brain. Tragedy then strikes and the stock declines back to $52, does he sell, no he expects the stock to go back up. Then the stock declines back to his cost at $50 does he sell, absolutely not. He has tasted a profit and is not going to sell and take a loss. Multiply this investor by thousands of other investors that also bought in the trading range at $50 and a “resistance” line has been created.

Why did the stock go down from $54 to $50? There were some traders more interested in a quick profit, so they sold. Here you have a perfect example of the short cycle (wave) colliding with a longer term cycle (wave) creating turbulence. Remember those waves at the beach. A“support” level has been created at the line of “resistance”.

Let’s give some names to trading patterns as they are as basic as A, B,Cs and are the building blocks to understanding price movement in the market and thus the ability to profit. Start with the area where the stock was initially purchased. This may be a period where stocks trade in a fairly narrow range for a period of days, weeks or even months. This trading range can either be an “accumulation” range or a “distribution” range. An “accumulation” range is where investors, probably thousands of other investors, are accumulating whatever stock is offered to them and will hold their positions anticipating a move up. A “distribution” range is a trading range where investors who own the stock are unloading their positions to whomever will buy their shares anticipating a move down in the stock. A temporary balance of buyers and sellers anticipating movements up or down creates the “trading range”.

Now, let’s take the reverse. A trader buys a stock at 50 in a trading range between 49 and 51. The stocks break down thru the range to 48. Does the investor sell? Probably not, he hopes to at least break even on a recovery. A further move down to 46 reinforces the investors feeling that he is desperate to get out hoping to break even on a recovery.Fear has become king and the investor just wants to break even and get out. Then the stock retraces back to 50. Now the investor sells relieved, to break even. Multiply this by thousands of other investors that purchased in the trading range at 50 and a “resistance” line is created.

To review a few of the most basic and most important concepts discussed:

TRADING RANGE – this can be:

ACCUMULATION range where traders are purchasing stock anticipating a rise

DISTRIBUTION range where traders are selling stock anticipating a drop.

How do you tell whether a trading range is an area of accumulation or and area of distribution? Later, various analytical tools and concepts will be presented that will help point you in the right direction, but bear in mind there is no substitute for experience and this is not a pure science. If you are right more than wrong you should be a winner.

SUPPORT level is a level at which traders will buy whatever shares are offered making further declines unlikely

RESISTANCE level is a level at which traders will sell whatever than can making further movement up unlikely.

There is one indispensable tool – stock charts. A simple bar chart just showing daily price bars indicating high, low and close is all that is necessary. A daily volume chart would be helpful but not essential. These charts are readily available on-line free from numerous sources or they can be obtained from various services. The charts can have various technical enhancements but none are essential.

I know this is difficult to comprehend, particularly if you have been educated in financial analysis. You have to step outside the box and enter another world where you become an observer of what others are doing relative to any particular stock. You do not have to know anything about the company; not what business they are in, not what they are earning, not what there balance sheet or debt may be, not even the name of the company.

How is this possible – PATTERN ANALYSIS. It is almost inevitable that investors will create specific price patterns that will foretell future price movement. This is not a scientific certainty but more of an art. As with any art it is subjective, different people may have different interpretations. Study and experience will improve interpretation, as will study of any art. Maybe your initial chart analysis will reveal nothing comprehensible or maybe your initial studies will have the opposite reaction, a feeling that you have a clear picture. Somewhere in-between is probably reality. This book will introduce you to patterns that will give you clues to future price movement. These patterns are the result of buyers and sellers interacting similar to wave movements. It is only necessary to recognize these patterns regardless of the underlying causes in order to predict future price movement.