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The Yin and the Yang of Markets
I am reading a fantastic book on trading, first published in
1924, by Richard D. Wyckoff, titled "How I Trade and Invest in
Stocks & Bonds". Although most of the examples in the book
pertain to stocks, the insights into the nature of trading are
relevant no matter what instrument you choose to trade.
I am particularly drawn to the authors' appreciation of the
ebb and flow nature of markets and how this perspective can be
used to great effect.
"It is difficult to over-emphasize the importance of studying
the technical position, particularly when making a speculative
commitment. Many people may say, "What is a weak or a strong
technical position?" My reply is, in brief, that a stock is in a
weak technical position on the bull side when it has been
purchased and is held by a large number of outside speculators;
when most of these are looking for a profit; when the price of
the stock has advanced to a point where no further buying can be
stimulated for the time being. It stands to reason that when
buying power is exhausted a stock must decline, no matter how
strong its finances, management or earning power."
"On the other hand, a stock is in a weak technical position on
the short side when the bears have exhausted their ammunition by
selling all they can afford and when the buying power of
investment and speculative purchasers is such that it resists the
pressure of the bears; in other words, when demand overcomes
supply. The weakness in such a position is found in the fact that
all those who are short are potential bulls; they must, sooner or
later, cover their commitments in order to close their trades.
They do not wish to remain short indefinitely."?. "Bears, after
they have sold short are an element of strength, not of
weakness."
Perhaps the nature of all markets is best described by the
Chinese Yin Yang symbol.
In every bull move, and in every bear decline, are the seeds
of their own destruction.
Malcolm Robinson
LIFFE Pit Trader & Electronic Trader
InstinctiveTrader.com
MORE RESOURCES updated Tue. September / 26 / 2023
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