The
banks, institutions and the specialists have all the financial resources
to move prices up or down. Trillions of dollars are exchanged daily across
the world's stock, currency and commodity markets. Hundreds of millions
are spent analysing crop reports, business sectors and economic figures.
All other activity, including the combined trades of thousands of individuals
like you and me, represents only a tiny fraction of the money and resources
flowing in and out of the market on a daily basis.
You may think that's pretty obvious. But ...
Markets don't react to
professional activity the way you expect them to.
In every market, there's an
undeclared understanding amongst professional traders.
It alerts them to what the big money is doing. It's based around
observations surrounding volume activity and the effect this has on the
price and the spread.
To us
outside observers this activity normally goes unnoticed - an insignificant
and unexplainable blip lost amongst the 'noise' of the markets.
If you've ever watched the Dow or a stock price over any period of time,
you'll know that prices can fluctuate wildly. But there is logic behind
all this chaos and the professionals know the key to understanding that
logic.
They
know what the signals mean, yet only a tiny minority of non-professionals
know what's really going on.
As you'll see in
graphic detail later, knowing how to read the market will allow you to
take the professional's lead and boost your profits.
Understanding professional moves will allow you to uncover the true market
sentiment. It will give you a clear indication of which markets you should
hold positions in - whether buying or selling stocks, or going long or
short on futures.
You
see, no matter what they do, the professionals can never hide their true
intentions. They may be leading the market, but they leave tell-tale signs
for anyone with the right knowledge to follow.
It doesn't take a great leap of logic to see how you could use this information
to your advantage...
Ultimately it means that all other factors - including the fundamentals
of a company, the management, the strength of the dollar and interest
rates, simply aren't important in your analysis. Ditto for newspaper
financial columns, investment journals, broker recommendations and
television coverage.
The only
truly important consideration for you is what the professional money is
doing - that is the only thing that matters.
Here's
a famous example...
In
1992 the British pound fell so sharply that Britain was forced to leave
the Exchange Rate Mechanism (ERM). What do you think was behind this famous
fall? Yes, you guessed it, professional money! The money in question was
the Quantum Fund, run by the renowned speculator George Soros.
He and his analysts had spotted a potential weakness in the ERM. During
the weeks before the massive sell-off of the British pound, George Soros
was busy exchanging seven billion US dollars for German Deutschemarks.
When the time was right he moved in fast, selling the British pound. As
the pound fell the Deutschemark rose, creating huge profits for Soros.
As soon as news of this got out the other professionals followed suit.
The onslaught was overwhelming and too much for Norman Lamont, the then
UK Chancellor of the Exchequer.
In
an attempt to halt the slide Lamont resorted to selling some of Britain's
gold reserves. He put up interest rates three times during one day, but
this was still no match for the professionals.
Now, if a government can't beat the professionals, what hope do individual
traders have?
It's obvious that there's no way to beat the professionals or match
their financial might, but you can follow their moves. The professionals
can't disguise their true intentions. |
