9 Truths About the Markets

1. Only price pays™

I’ve been saying this for nearly 30 years—it’s good to now see others repeat it.

My mantra started as a reminder to myself not to get caught up in the news, stories, and constant hype in the stock market.

All too often, I’d read some great news about a stock, buy it, then not sell when price declined, due to a misplaced confidence that it’d recover when the market realized how good the news was.

This mistake cost me a lot of money early in my career, and I vowed to sell when price action tells me to.

Ultimately, price is the only thing that determines success or failure in the markets.

2. Simplicity is the market’s greatest disguise

By extension to point 1, traders get hung up on the wrong things.

People tend to clutter their charts with unnecessary indicators and oscillators to conduct ‘advanced’ technical analysis. Having a pet indicator or two on your charts is fine, but don’t forget how all indicators are derived from price action.

Keep it simple. Focus on price.

3. Risk management is job #1

Many traders aren’t methodical about risk management, with a proper strategy.

Risk management needs to be part of your DNA. And it takes a while to get there. But you simply can’t have any emotion about cutting losers—because you realize that cutting them will save you a whole lot of money.

Losses are part of the business. That’s a fact.

But if you can keep your losses small and have a strategy for holding onto winners, you will come out ahead in the long run.

4. Technical analysis can be self-fulfilling…

…and that isn’t a bad thing.

Think about the 50 and 200 DMAs. Why do you think these moving averages tend to act as support or resistance?

When a stock pulls back to meet a rising moving average:

• Profit-takers slow down selling

• Short sellers not only cease to short, but also start covering their positions

• Longer-term holders of the stock place bids, hoping to add to a winning position

• Sidelined cash comes into the market, looking to buy at a ‘smart place’

These all boil down to less supply and more demand at this level.

Understand the psychology of the various market participants, so you can anticipate their actions and formulate a low-risk strategy at these ‘levels of interest.’

5. The trend really is your friend

As I always say:

• Stocks in uptrends are innocent until proven guilty

• Stocks in downtrends are guilty until proven innocent

I don’t make the rules—don’t shoot the messenger.

But fact is that in an uptrend, the sum of the rallies is greater than the sum of the declines, and in a downtrend, the sum of the declines is greater than the sum of the rallies.

So, don’t buy into the hype of the Wall Street marketing machine. While the stock is declining, buying the dip is a losing strategy. You’ll have plenty of time to buy the stock as it recovers and goes higher.

Wait for the resurgence of momentum—it’s better to be late and right than early and wrong!

6. Volume is important

Studying volume reveals the urgency of buyers and sellers.

But volume alone is never a reason to take action.

You can’t take volume to the bank. No one asks whether you made your first million on light or heavy volume. And you can’t justify losses by saying: “But I was on light volume!” Again, only price pays.

7. News and fundamentals do matter

Only a fool says that fundamental analysis (or technical analysis) has no value. You limit your success by discrediting any analysis style used by many market participants.

I’m a short- to intermediate-term trader. Most of my work is based on price analysis—but I’m aware of what news acts as a price catalyst.

The danger lies in believing your opinion of a news event is more important than what price action says. I’m only interested in how price action forms a consensus based on all views and how they position themselves in the markets.

How are those opinions valued in the market? That’s what I care about.

Lose your opinion, not your money.

8. This business attracts all kinds of characters…

…both good and bad.

Over the years, I’ve befriended many people I met on StockTwits and 𝕏. These are good, honest, hardworking people who truly care about others. They mean well and genuinely want to help.

Unfortunately, this business also attracts many charlatans. These people are easy to recognize, as they tell you that their secret systems will make you rich.

Steer clear of these people—anyone who tells you trading is easy is a liar!

9. You need to work hard to succeed

This is no different to any other worthwhile endeavor.

I continue to be amazed by people who think they can join the Alphatrends community (or any other trading service), then get told what to do to find success.

Regardless of their origin, I always encourage you to make ideas your own.

For example, I may outline parameters for a specific trade idea, but those won’t be appropriate for everyone. Maybe you don’t like to trade stocks above or below a certain price level. Maybe you want to place a wider stop than suggested.

You must take personal responsibility for your decisions—which requires you to truly understand the basis of the idea and determine whether it fits your personality and timeframe.

I don’t pretend to have all the answers…

…but I do have a lot of experience and knowledge, which I try to share in an unbiased way. Whenever I share some analysis or an opinion, I hope others can find value in them.

Trade well and enjoy life!