Happy Tuesday! Apple shared some updates to their previous generation iPhone and called it iPhone 12. The overall event was a disappointment to many.
If you have observed special events recently, you’d notice steady and dramatic climbs when approaching the date.
On the date, you’d notice a sharp sell-off, when traders take their profits before the event.
If there has been a tremendous amount of hype coming into a special event, the above typically describes the outcome even more.
Often, what you’ll also see is that institutional and “savvy” traders initiate these chain of events.
They sort of call the shots as to the direction of the stock, knowing that they will buy and sell by trapping the retail trader who is trading on limited information and resources.
As time goes, retails traders with enough experience and pain along the way, learn about these unwritten rules of playing in the stock market.
No one can sit you down and teach it to you, the market does a better job at that.
So initially most novice traders lose money, especially if they have made larger bets.
Without an understanding of the culture of the stock market, novices are at a huge disadvantage. Most assumptions are rarely true under ideal conditions, in fact, most outcomes are surprisingly not what people predict them to be, which sort of speaks to the nature of human beings.
You and I being one of those, we need to think like how the other players are probably going to think. We need to place ourselves in their shoes and make educated guesses about what they will do.
For instance, if a stock is growing rapidly and doesn’t see much resistance, then it’s a signal for you to consider a reversal — remember that fundamentally, stocks usually do 3 things:
Go up, down, or move sideways.
Which means for you, there is a 33% chance that you will predict correctly.
