If you visit Kerala during monsoon season ,you can find many hawkers
from North India selling blankets and sweaters.They come in groups and
sell their stock door to door.They follow a unique selling strategy. First
Some of them will go to the villages and quote shockingly high prices
for their products.They wont reduce their price and will not be able to
sell much.
After a few days another group will come. They will move down the price and convince villagers that they are selling at a discount because the season is over and they have to go back to their native places.People think this price as bargain comparing with the old price and happily buy out.
This behavior is called Anchoring in behavioral finance.Investors are anchoring when they buy a stock that has fallen a lot without a second thought. They are mentally anchored in the price it was trading before the crash. That makes the present price look like a bargain. Such Anchoring could be injurious to your financial health
Price action trading works because of Anchoring. Traders notice the price levels where the market turned earlier and act there again.These are the ideal locations to initiate trades with the lowest risk.Decision Points and Flip Zones are nothing but anchoring points.
Half of the battle is won if you know where to initiate the trades.
After a few days another group will come. They will move down the price and convince villagers that they are selling at a discount because the season is over and they have to go back to their native places.People think this price as bargain comparing with the old price and happily buy out.
This behavior is called Anchoring in behavioral finance.Investors are anchoring when they buy a stock that has fallen a lot without a second thought. They are mentally anchored in the price it was trading before the crash. That makes the present price look like a bargain. Such Anchoring could be injurious to your financial health
Price action trading works because of Anchoring. Traders notice the price levels where the market turned earlier and act there again.These are the ideal locations to initiate trades with the lowest risk.Decision Points and Flip Zones are nothing but anchoring points.
Half of the battle is won if you know where to initiate the trades.
Thank you for flip zone explanation, had gone long on Nov 22 at point A got stopped out.
ReplyDeleteRajesh
ReplyDeleteThe whole method is built around price flips.Don't ignore it
ST
Do you consider bar volume in your trading?
ReplyDeleteAugu Bhai
ReplyDeleteOnly for BOF
More volume means very large number of traders will get trapped and will be forced to reverse their trade
ST
hi
ReplyDeleteI have a doubt regarding trading bof,suppose there is IR low and high formed and we take the bof of IR low,price goes to IR high pulls back then breaksout..how do you come to know whether its a breakout failure of IR high or a pullback?
Akshay
ReplyDelete"how do you come to know whether its a breakout failure of IR high or a pullback?"
Sorry, I could not follow your question properly. If price goes above IRH and fails to maintain that level it is a BOF. Price may just test the level, pullback and attempt another breakout,which may or may not succeed
ST
hi
ReplyDeleteDo you use volume spread analysis ..?What are your views on it?
Akshay
ReplyDeleteNO. I have not learned it.
ST