Before you start ur trading, you should be know about Market. But don’t you thing that market is easy to defeat or the market is difficult to defeat. You must understand that market is same with your mind. Make your mind to think that market is simple not Easy (see my first article). For example, please see this explanation about that.
The markets are not mysterious and unfathomable. The primary purpose of any market is to ration, at a reasonable price, existing and future supply to those who want it the most. You trade almost every minute of your life. Profiting in the markets is much easier when you really understand the underlying structure. To keep it as simple as possible, take the Flintstones as an example. You remember Fred Flintstone, a rather rough and outdoors kind of guy, and his more domestic next-door neighbor, Barney? Fred sees himself as a macho he-man who likes to hunt dinosaurs. One day he goes out and kills a big something-a-saurus even though his freezer is already full of dinosaur burgers. Barney does not enjoy hunting and killing but he likes eating dinosaur Whoppers®. Barney prefers to sit around his backyard whittling wood and making clubs. Fred rarely takes time to make his own clubs.
Fred wanders over to Barney’s backyard and gets an idea. Why not swap Barney a couple of platters of dinosaur burgers for that new club he is finishing. So he puts this proposition to Barney: “Barney, I’ll give you two platters of dinosaur Whoppers for that new club. How ’bout it?” Barney says, “Okay, you got a deal.”
Fred and Barney have just created a market. It is just that simple! Both Fred and Barney valued what they wanted more than what they had. To Barney the burgers were more important (valuable) than the club he was making, and to Fred the club was more valuable than the burgers.
“All Markets are Created When Two or More People Have an Equal Disagreement on Value and an Agreement on Price”
When you bought your last car, the car was worth more to you than the money used to pay for it. However, to the person who sold you the car, your money was more valuable than the car. You created a miniature market when you made your deal. We buy bonds when we would rather own the bonds than the money we are paying for the bonds. Our fantasy (trading is a fantasy game; more about this later in the introduction) is that the value of the bonds will go up relative to the dollar. We bought them from some unknown trader who was just as confident that their value was going to go down. We have a real disagreement on current and future value, but we agree on price.
Every market in the world is designed to ration or distribute a limited amount of something (whether it be stocks, agricultural products, currencies, dinosaur clubs, or whatever) to those who want it most. The market does this by finding and defining the exact price where, at that moment, there is an absolute balance between the power of those who want to buy and those who want to sell.
The stock, commodity, bond, currency, and option markets all find that place of balance very quickly whether they are using open outcry or computer balancing. The markets find this place before you and I can detect any imbalance and before even the traders on the floor become aware of any imbalance. If the preceding scenario is true—and it is—then we can come to some very simple and very important conclusions about information that is distributed through the market and accepted without question. (Trading Chaos- Bill Williams.
The markets are not mysterious and unfathomable. The primary purpose of any market is to ration, at a reasonable price, existing and future supply to those who want it the most. You trade almost every minute of your life. Profiting in the markets is much easier when you really understand the underlying structure. To keep it as simple as possible, take the Flintstones as an example. You remember Fred Flintstone, a rather rough and outdoors kind of guy, and his more domestic next-door neighbor, Barney? Fred sees himself as a macho he-man who likes to hunt dinosaurs. One day he goes out and kills a big something-a-saurus even though his freezer is already full of dinosaur burgers. Barney does not enjoy hunting and killing but he likes eating dinosaur Whoppers®. Barney prefers to sit around his backyard whittling wood and making clubs. Fred rarely takes time to make his own clubs.
Fred wanders over to Barney’s backyard and gets an idea. Why not swap Barney a couple of platters of dinosaur burgers for that new club he is finishing. So he puts this proposition to Barney: “Barney, I’ll give you two platters of dinosaur Whoppers for that new club. How ’bout it?” Barney says, “Okay, you got a deal.”
Fred and Barney have just created a market. It is just that simple! Both Fred and Barney valued what they wanted more than what they had. To Barney the burgers were more important (valuable) than the club he was making, and to Fred the club was more valuable than the burgers.
“All Markets are Created When Two or More People Have an Equal Disagreement on Value and an Agreement on Price”
When you bought your last car, the car was worth more to you than the money used to pay for it. However, to the person who sold you the car, your money was more valuable than the car. You created a miniature market when you made your deal. We buy bonds when we would rather own the bonds than the money we are paying for the bonds. Our fantasy (trading is a fantasy game; more about this later in the introduction) is that the value of the bonds will go up relative to the dollar. We bought them from some unknown trader who was just as confident that their value was going to go down. We have a real disagreement on current and future value, but we agree on price.
Every market in the world is designed to ration or distribute a limited amount of something (whether it be stocks, agricultural products, currencies, dinosaur clubs, or whatever) to those who want it most. The market does this by finding and defining the exact price where, at that moment, there is an absolute balance between the power of those who want to buy and those who want to sell.
The stock, commodity, bond, currency, and option markets all find that place of balance very quickly whether they are using open outcry or computer balancing. The markets find this place before you and I can detect any imbalance and before even the traders on the floor become aware of any imbalance. If the preceding scenario is true—and it is—then we can come to some very simple and very important conclusions about information that is distributed through the market and accepted without question. (Trading Chaos- Bill Williams.
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