Most traders are often tempted to take trades when they find reasons to act that have nothing to do with market behavior. Because most traders have no trading plan, their operations have nothing to do with the results, and they don't know the reason for their operations. Most traders trade impulsively and then find reasons after the fact. Most of the reasons found after the fact are either used to explain their own transactions, or they are used to explain why they did not trade.
People trade to make money. To make money, a trader holds a position and holds it for a period of time before closing it out. When traders open and close positions, their actions affect the price, causing it to fluctuate. When traders are on the sidelines, they are waiting for an opportunity to open a position, and they can affect the price at any time. If traders plan ahead, and those traders make their plans public, then other traders can use those plans to know where the price is going to move. Of course, the premise is that they are telling the truth. Only a small number of traders make money consistently, and they generally don't disclose their reasons for trading.
In fact, traders who are confident in themselves, they know that their actions will affect price fluctuations, in order to reduce the impact of their own execution of trading plans, they are reluctant to let other traders know their plans. I didn't say that they deliberately disclosed their transactions after opening positions, so that other traders also opened positions, which caused the price to fluctuate in his favor. On the other hand, unconfident traders prefer to share their thoughts with others in the hope of gaining approval from others. So these after-the-fact reasons are just to ease the pain when you make a mistake, not useful information at all.
It is useful to understand that traders generally have a herd mentality , like a herd of fish or cattle. Traders join a group that sees a particular market situation as an opportunity. In doing so, their concerted action can tip the market's equilibrium, causing prices to move significantly in one direction or another. Various groups will enter positions when they think they will make money; they will close positions when they lose money or when there are better other opportunities. For example, floor traders are the most impatient, impulsive, and disappointed, so their price targets are small and their time frames are small. As a result, they are the most active, almost always doing the same trades at the same time.
Commercial traders and OTC traders are two different groups with different price targets and different time frames. Traders within these two groups will act in unison, and depending on their willingness to enter and exit trades, they will tip the balance of the market. You can tell what market conditions they like, you can tell what their beliefs are, and you can tell what market conditions are disappointing them. Once you know their characteristics, you can estimate their behavior and predict the direction of price fluctuations.
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At any moment, we are all interacting with the environment, expressing ourselves in our own way, and living in our own way. What we do at any given moment is our way of expressing ourselves in order to fulfill our needs, desires, and goals. Most people these days need more than just food and shelter, and meeting those needs requires money. People can earn money by exchanging goods and services, and those who create goods and services express themselves through a high degree of social division of labor. Because money represents how we express ourselves, we need money. All actions are ways of expressing oneself, and one must have money if one wants to express oneself. So at the most basic level of culture, money represents freedom, the freedom to express yourself.
The way each person expresses himself is unique, leading to complex systems of interdependence among people. In order to exchange goods and services, people must agree on the value of the goods and services, so that the exchange can take place. "Value" here refers to the relative importance or satisfaction of a need. The real value of goods and services is determined by economic principles of supply and demand. In psychology, the principle of supply and demand is formed on the basis of greed and fear. Greed and fear drive certain behaviors based on people's needs and assessments of the external environment. According to the different levels of people's needs and their ability to realize their needs, the prices of goods and services are different. That is to say, they judge the value according to the degree of their need for goods and services.Greed comes from beliefs of lack and insecurity, both of which can create feelings of fear. I define "greed" as the insatiable belief that more is always needed in order to feel safe and fulfilled. Regardless of whether this cognition is external or internal, people judge based on their own resources. If resources are scarce, people will feel fear and force themselves to compete for resources. The person who controls the resource takes the initiative. In order to make up for the shortfall, people will try to find ways to obtain resources. If two or more people share the same fear, they will compete with each other for resources.
If the supply of something is finite, then those who want it will compete for the resource. In competition they are willing to pay more resources (more money) than others to satisfy themselves. If there is more supply than demand, then there will be no fear of shortages, and people will hold onto their resources (money) to meet other demands, or wait for prices to fall.
At any given moment, whenever people feel unsafe, or feel in short supply, the prices of goods and services fluctuate. For those who need goods and services, price fluctuations are risk. What is risk? Risk is the possibility of losing personal resources (energy, money, etc.) in the exchange process or in the fulfillment of needs. Others view price fluctuations as opportunities. As long as people disagree on the value of goods and services, prices fluctuate, presenting opportunities for traders to make money while accepting risk.
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I define a transaction as an exchange of something of value between two parties in order to satisfy some need or goal. In the foreign exchange and futures markets, the goal of market participants is to accumulate wealth or preserve value. All traders, whether they are speculators or hedgers, trade to accumulate wealth, they just have different titles. The motive of the hedger is to preserve value, but in reality it is also to accumulate wealth. Hedgers transfer the risk to traders who are willing to accept risks and realize value preservation; traders who are willing to accept risks want to accumulate wealth through the opportunities created by price changes. For example, stock holders think that the value of the stock will not increase, or the risk of holding it is too great, and they will sell the stock. If they have other needs, they will sell the stock even if they think the stock will increase in value. The buyer (the person who takes the order) believes that the stock will appreciate in value. Because people trade to accumulate wealth, the buyer believes that the stock will increase in value.
Because the purpose of a trader is to accumulate wealth, we don't think people will enter a position believing that they will lose money. Because the goal of all traders is the same (to make a profit), we can say that two traders will only trade if they have opposing beliefs about future prices. Remember, for any price at any moment, someone wants to buy at that price, and someone wants to sell at that price. So, while a transaction requires both buyers and sellers to close at the same price, buyers and sellers have different views on future value. If, say, all stockholders believe that the stock will appreciate in value, they will not sell the stock. Is that true? When a holder sells a stock, it's because he thinks it's unlikely the stock will increase in value. Why do buyers buy people? To lose money? To make mistakes? Of course not. Buyers have the exact opposite beliefs about the future value of a stock as do sellers. Futures trading can better illustrate this difference of thought.
Academics tell us that markets are efficient, which means that traders behave rationally and have good reasons for what they do. Academics also believe that markets are fundamentally random, which seems to be in complete contradiction to efficient market theory. If you define rationality as doing things according to a specific method or plan formulated in advance, rather than randomly considering that irrational behavior is more predictable, then in fact the behavior of the market is irrational. If you want to learn to predict price fluctuations, you don't have to focus on the reasons. What you need to determine is how most traders view the external environment and the psychology of fear of shortages or missed opportunities.
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