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Price - Why It Matters


As I write my monthly blog... it's 11pm on a Monday evening... my girl is tucked up in bed and I have the Maltese Shitzu sitting on my lap... it's the height of Spring and tomorrow marks a rather large day (so the Media would have us believe anyway) - as Mr Trump is about to announce to the world what is going to happen to Iran.

With the threat of potential sanctions, and with my Brent Oil position dangling in the wind (like most of my followers and clients are aware) - I'm being inundated with Social Media DM's asking what is going to happen tomorrow and should they buy or sell positions.... or take puts or calls... 

My response has largely been of the short variety - how the hell am I supposed to know?

As a Trader taking a Trend based approach.... the 1 thing that I learned a LONG time ago... is whilst Technical Analysis can give us remarkable insight and it can help us to pinpoint low risk / high probability environments for taking a position.... I also know.... that Technical Analysis does NOT and I repeat NOT have a crystal ball to see into the future and the 1 thing that most well educated Trend Traders understand - is that Price will dictate the next move.

It's not R.S.I..... It's not Fibonacci Extensions.... It's not Simple Moving Averages........ the only thing that will drive Price IS Price - and this is what most Day Traders and Swing Traders etc fail to understand - and is also likely why 95% of Traders give up - not having an understanding of Price and the natural movement it takes... is simply the death for many a Trader.

There are graveyards full of the world's most educated Traders.... you know the ones... they all have their fancy degrees from the top business schools, they know the theory and they can explain all the Technical's backwards in 8 different languages...  they have Bloomberg playing all day every day... they react to all the minor news events.... they have 84 Indicators set up on their Trading Software and they will explain in great detail why their decision making is better than every one else's.

So why is it these guys also give up and can't sustain profitability? I've met these guys... I've met MANY of them in London.... it's crazy to me that they choose to ignore the elephant staring them in the face... and they can't understand why they can't make a consistent profit....

I'll tell you why.....

They simply don't understand Price... yup....there.... I just said it....

What they attempt to do, is pick tops and bottoms of price.... Warren Buffet given up a LONG time ago trying to pick tops and bottoms.... so why should we take a different view... and why should we take a short term approach where we already know that 95% of Traders simply give up because of the short term short sightedness?

On the flip side of that... those that are educated by me.... are all likely fatigued by me uttering the words "Natural Movement of Price".... not because it's not relevant.... but because they all now have the same understanding that I have (I've drilled it into them that much) and we all know that the movement of Price is never straight up for 10 days in a row.... to think that it does is crazy.

By understanding that we are dealing with price movements... we already know the market goes up and down (this is not rocket science)... and when we identify low risk : high probability entry environments into the Market - our job is to simply manage the position accordingly.

If we are choosing the correct stock - we know it is going to advance more days than it will retreat - so why should we sell our position just because price advances for 3 days and jumps $10 and then has 2 days to the down side to the tune of $5 (which is usually reflective of the overall market) - why would we exit when we can see that over 5 days we have a net $5 gain?

Does this make sense? Has a Light bulb gone off in your head yet?

If a stock advances $5 in a week... where will it be after 15 weeks? This is the very question we must consider.... this is what generates incredible % returns and is one of the many reason why I have such success in the Markets.

Technical Analysis obviously comes into play.... but once you've entered into the Markets - you're sole job is to manage that Trade and extract the MAXIMUM amount of profit as possible....  and in order to do that... you must understand the natural movement of price and understand the function of time in the Markets.... both are incredibly important we must combine this with Technical Analysis to know when to exit.

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Sam McCallumComment