| It usually turns out that doing things as simply as | | | | 5. Sellers Have Control with Falling Tops |
| possible is better than allowing intricacy and details to | | | | Whenever you see highs of counter moves falling |
| complicate our lives. Simple strategies give us the | | | | from left to right over a period of time on the stock |
| opportunity to sort things at a basic level and know | | | | charts, you'll know that the market is being controlled |
| them from the inside out. Based on this easy | | | | by the sellers. If you want to be successful when |
| principle, here are 10 very simple things that every | | | | shorting stocks, wait for a time when the sellers are |
| investor needs to know about the stock market: | | | | controlling the market. |
| 1. Moves and Counter Moves Determine Price Trends. | | | | 6. Uptrends: Slow Starts and Quick Ends |
| When a stock either goes up and remains there | | | | It takes a while for a bull market to develop, due to |
| without going down for a period of time or goes | | | | the skepticism that is inherent amongst investors. |
| down and remains there, it is considered to have | | | | Eventually people will start to gain the confidence |
| made a move. After the move occurs, if the stock | | | | they need to start investing, and the trend upwards |
| price moves in the opposite direction again but not as | | | | will pick up. The end comes quickly, however, |
| far as it moved the first time, that's considered a | | | | because when too many investors start buying a |
| counter move. Uptrends hook up with the bottoms | | | | stock, the price will skyrocket to irrational levels that |
| of counter moves while downtrends are at the top | | | | will force an immediate downward trend to correct |
| edge of counter moves. A stock trend happens in a | | | | the situation. |
| series of moves upward interspersed with smaller, | | | | 7. Downtrends: Quick Starts and Slow Ends |
| shorter counter moves downward. While this trend is | | | | As stated above, downtrends start quickly as a way |
| occurring, investors are able to draw a line between | | | | of correcting irrational prices. Luckily, however, the |
| the lows created by the counter moves and still see | | | | downtrend will moderate over a period of time as |
| the line slant upwards overall. | | | | the trend flattens out and more rational pricing |
| 2. Inevitable Changes in Irrational Valuations | | | | appears. What started as a deluge ends with a trickle. |
| Stock prices that are much higher than the estimated | | | | 8. Give Trends a Chance to Reverse Themselves |
| earnings potential of the company are known as | | | | When the market starts showing irrational behavior, |
| irrational valuations. What the market strives to do is | | | | investors get nervous. They realize that something is |
| determine what a company's future worth will be. | | | | going to change in order to correct the problem. It's |
| Therefore, rational stock prices are based on what | | | | always wisest to give trends a chance to reverse |
| the future earnings expected of a company are | | | | themselves before selling. After all, it only takes a |
| presently valued at. When stock prices are irrational, | | | | few seconds to sell when you execute a stop loss |
| you can expect them to change as the behavior that | | | | order, while trend reversals will take considerably |
| caused them is modified. | | | | longer to start. |
| 3. Sometimes Irrational Behavior Lasts Longer Than | | | | 9. Avoid Stock Information that is Already Public |
| You Can | | | | Never forget that by the time a company makes an |
| Short term mistakes happen in the pricing of stocks. | | | | announcement that their business fundamentals have |
| Although the market is usually very efficient in the | | | | changed, the knowledge has already been acted |
| method it uses to set prices, don't take this to mean | | | | upon by those in the know. Positive public information |
| that prices will always be set correctly. Prices are | | | | always results in a stock price surge as less-savvy |
| often based on the emotions of the investors which | | | | investors rush to take advantage of it, but it's really |
| are never rational as far as stock trading is | | | | already too late to cash in big by that time. |
| concerned. If the market stays irrational for a longer | | | | 10. Abnormal Activity Means Something is Taking |
| period of time than expected, all of those who have | | | | Place |
| invested in a stock stand to lose. The wisest course | | | | In order to score big in the stock market, you must |
| of action is to go with the flow of the market, | | | | trade on information that hasn't yet been made |
| because it will always be right. | | | | public. Do your research and act on inside knowledge. |
| 4. Buyers Have Control with Rising Bottoms | | | | Every company has people who know what's going |
| Counter moves that rise left to right over time on | | | | on prior to the information being announced publicly, |
| the stock charts are indicative that buyers are | | | | and when they act on their knowledge, it shows up |
| controlling the market. If you wait until such times | | | | as abnormal trading activity which you can use to get |
| when the buyers are in control like this, you will have | | | | in on the action. |
| much better success with the stocks you invest in. | | | | |