Penny Stocks and Forex: Similarities and DifferencesBringing together the two distinct worlds of penny stocks and forex trading requires a comprehensive understanding of the unique characteristics of each of these investment opportunities. The article discusses how the speculative nature of penny stocks compares to foreign exchange trading, helping traders gain a better understanding of the opportunities and challenges of the two markets.
Understanding Penny Stocks
While looking for the best penny stocks to purchase, traders approach this segment with a balanced perspective and conduct thorough research.
What Are Penny Stocks?
Penny stocks are shares of small-cap companies trading at a low price, typically below $5 per share. They distinguish themselves from larger stocks by their market capitalisation, which is usually below $250 or $300 million. The top gaining penny stocks today are typically found in industries characterised by small, emerging enterprises, such as technology, biotechnology, renewable energy, mining, and pharmaceuticals, where companies seek capital investment to fund early-stage development and growth initiatives. Penny stocks are often associated with the term "Pink Sheets'', which originated from the practice of displaying price quotes for stocks traded over-the-counter on pink-coloured sheets of paper.
Where Are Penny Stocks Traded?
The top trading penny stocks can be found in the over-the-counter (OTC) market, which serves as a decentralised space where securities are traded directly by a network of dealers. It’s unlikely you will find them on large stock exchanges; however, there are exceptions.
As companies traded in the OTC market are subject to less strict reporting requirements, it’s vital to be careful when choosing a platform for penny stock trading and investing.
The requirements for filing financial information to regulatory authorities play a crucial role in choosing a trading platform. Marketplaces such as OTCQX, within the OTC Market Group, attract companies committed to transparency and stringent disclosure standards. In contrast, the Pink market attracts some of the best penny stocks for day trading, being a more speculative and loosely regulated tier and allowing securities to trade while complying with few financial standards.
Major Driving Factors and Risks
Penny stocks are notably influenced by speculation, with their prices being highly sensitive to perceived opportunities for quick and substantial returns. Associated with small, less-established companies, for which financial data is often scarce, penny stock prices may surge unexpectedly on news about the company's progress, such as product launches, partnerships, and financial results. However, this news is frequently manipulative and part of so-called 'pump and dump' schemes, where prices are artificially inflated and shares experience enormous price fluctuations.
Another significant consideration in penny stock trading is dilution. The number of outstanding shares may escalate due to mechanisms like employee stock options, share issuance for capital raising, and stock splits. When a company issues shares to secure capital, a common necessity for small enterprises, it often leads to a dilution of ownership percentages held by existing investors, which exerts downward pressure on the share price.
How Do Penny Stocks Compare to Forex?
Below, we discuss various aspects in which penny stocks and forex trading can be compared to each other, helping traders find out whether penny stocks may be recommended for their trading profile.
Risk Level
Penny stocks present unique risk factors. These include high volatility, limited liquidity, the potential for fraudulent activities, and a lack of comprehensive information. A thorough examination of these risks is essential for investors trying to capitalise on price fluctuations of some of the most volatile penny stocks. Forex trading, on the other hand, comes with its own set of risks, including currency fluctuations, geopolitical events, and the leverage-induced amplification of losses.
Potential Returns
Penny stocks may have huge potential and deliver potential returns due to their low share price if the market moves favourably. However, this is not always the case; a low price doesn’t guarantee a future surge. The higher potential returns come with increased risk, and investors must carefully analyse each individual asset, especially in regard to the lack of historical performance data for some emerging stocks. Forex trading also offers the potential for benefiting through currency value fluctuations. Leverage in forex can amplify returns, but it also magnifies losses.
Liquidity
Penny stocks often face challenges related to liquidity, as their lower market capitalisation can result in fewer buyers and sellers. Forex markets, on the other hand, are known for their high liquidity, given the vast number of participants involved, including major financial institutions and central banks. Contrasting liquidity in penny stocks with forex emphasises the different trading environments and potential impact on trade execution when defining the best way to trade penny stocks.
Accessibility and Learning Curve
Penny stocks are considered accessible for traders and investors with any level of experience due to their low share prices and the lower level of initial investment that their trading requires. However, investors need to get familiar with the challenges associated with investing in smaller, potentially volatile companies. Forex trading, with its complex currency pairs and market intricacies, has a steeper learning curve. Novice traders entering the forex market need to invest more time in understanding the currency movements, economic indicators, and geopolitical factors influencing exchange rates.
If you want to compare penny stocks and currency pairs, you can visit FXOpen’s free trading platform, TickTrader.
Are Penny Stocks a Good Option?
While the desire to find the best penny stocks to buy today may be the driving force behind many one-time trading decisions, trading penny stock CFDs may offer better opportunities. CFD trading allows you to take advantage of the rise and fall of a stock price and use effective risk management tools, including stop-loss orders.
Diversifying a Portfolio: Diversification helps spread risk and can contribute to a more resilient strategy, especially when different markets may respond differently to economic events.
Capitalising on Stock-Specific Events: Forex traders can leverage their existing skills in analysing global events and apply them to individual stocks, taking advantage of price movements triggered by earnings reports, product launches, or other company-specific developments.
Exploiting Correlations: Identifying positive correlations between certain currencies and penny stocks from specific sectors or industries can potentially amplify returns during favourable market conditions. Negative correlations can help hedge risks.
Conclusion
While forex and penny stock markets share commonalities in terms of the potential for high returns and the necessity for risk management, they diverge significantly in their market structures, liquidity, and regulation. Traders must weigh all the relevant factors to navigate these distinct markets effectively. Looking for trading opportunities? You can open an FXOpen account and apply your trading strategies to over 600 markets.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Pennystocks
Why Penny Stocks is a Trader's NightmareLet me start off and say.
Penny Stocks have a lucrative and solid place for investors who buy and sell shares.
But not just any investors.
Well informed, researched, savvy and highly understand fundamentals.
Penny stocks for a trader though – Ah no!
Those shiny little nuggets of the stock market that promise vast riches for a small investment, can often turn into a trader’s worst nightmare.
Here’s why…
Reason #1: The Roller Coaster Ride: High Volatility
Penny stocks are notorious for their high volatility.
One day they can skyrocket and plummet the next.
These stocks are like riding a financial roller coaster without a safety harness.
No matter where you put your stop loss, it can trigger within a second.
And this extreme price fluctuation, can be dangerous for traders.
The unpredictable nature, can lead to rapid and substantial losses.
Reason #2: Stuck in Quicksand: Low Liquidity
Volume is another caveat.
Liquidity refers to the ability to quickly buy or sell (flow in and out) of a stock without significantly impacting its price.
Penny stocks often lack this characteristic.
Some penny stocks volume is SO low, that it can take months or even years to move in price.
This means, once you’re in, you might find yourself unable to exit your position.
Instead of flowing in and out of a trade (like a blue chip), you’re stuck in quicksand. Quite the oxymoron!
Without a healthy volume of trades, penny stocks can become a trap, a nightmare for any trader.
Reason #3: Walking a Tightrope: High Chance of Bankruptcy and Liquidations
Investing in penny stocks is akin to walking a financial tightrope.
These companies are often at a higher risk of bankruptcy and liquidation.
This is because of their lower levels of regulation, credibility and inherent instability.
And the issue with a less regulated penny stock company, is that it allows for less transparency.
This makes it difficult for investors to drill into the true company’s health.
The high risk of bankruptcy further amplifies the nightmare.
Reason #4: Battling with Giants: Lacking the Strength of Blue-Chip Companies
Penny stock companies are typically not well-established businesses.
They lack the strength, stability, and track record of blue-chip companies.
And without you doing the right research, it can leave them susceptible to market fluctuations and economic downturns.
Investing in these companies can feel like bringing a pebble to a boulder fight.
You’ll struggle to hold your ground amidst giants.
Reason #5: The Race to Zero: The High Failure Rate of Penny Stocks
It’s an unfortunate reality.
Most penny stocks are more likely to crash and burn than to soar.
Because of their weaker fundamentals and instability, they are more likely to head to zero – than a blue-chip company.
So let’s sum up the reasons why penny stocks is a traders nightmare:
Reason #1: The Roller Coaster Ride: High Volatility
Reason #2: Stuck in Quicksand: Low Liquidity
Reason #3: Walking a Tightrope: High Chance of Bankruptcy and Liquidations
Reason #4: Battling with Giants: Lacking the Strength of Blue Chip Companies
Reason #5: The Race to Zero: The High Failure Rate of Penny Stocks
If you’re a savvy investor or you have someone great to follow, go for it.
But I’ve warned you about the dangers for a trader.
5 DANGERS of Trading Penny StocksJust so you know.
I believe if you’re following a world renown and successful Penny Share expert, you’re in good hands.
They are able to spot low risk investments and guide you through the process of owning great Penny Stocks.
But as a trader , who only looks at charts – THIS IS DANGEROUS TERRITORY.
Remember, Penny Shares are high risk, high volatile, low credible companies that are LOW prices i.e. Under $1.00.
And so, I just want to write as a trader point of view five key reasons why penny stocks can be dangerous to traders.
DANGER #1: High Volatility (Jumpiness)
Penny stocks are notorious for their high volatility.
These stocks tend to experience rapid and drastic price fluctuations, often without apparent reasons.
I’m talking about companies that can jump 10%, 30% and even 70% in a day.
The lack of stability and price predictability can make it very difficult for traders to make informed decisions.
Sudden price jumps or drops can result in significant gains or losses within a short period, amplifying the risk factor.
And if you place your stop loss within a tight range, there’s a bigger chance you’ll get stopped out.
DANGER #2: Low Liquidity (Less Volume)
Think of Liquidity like the flow of water.
It tells you the ease of being able to BUY or SELL a market, without impacting too much of the price.
Once again, we look for low to medium volatility.
Penny stocks typically have low liquidity due to limited trading volume.
With fewer buyers and sellers in the market, it can be difficult to execute trades at the prices you want.
And this leads to slippage and even higher transaction costs.
Also, low liquidity may also prevent you from even entering or exiting your positions quickly.
And this can even TRAP you in an unfavourable market environment for an extended period of time.
DANGER #3: Not Established Businesses
Penny stocks are often associated with small, early-stage companies that are not yet established in their respective industries.
These companies may lack a proven track record, have limited financial history, and face various operational and market risks.
So if you want to invest in these type of companies as a trader, it’s better you do it with fundamentals, research, business models and future prospects.
If you do it purely on speculative purposes, this could be very risky for your portfolio.
DANGER #4: More Likely to Head to Zero
Yes all trading requires levels and degrees of risk and rewards.
But it is not worth it, if some petty company is doing really badly and is showing signs of going to 0.00.
Penny stocks are more susceptible to declining in value and potentially heading towards zero.
I mean, South Africa has witnessed instances where penny stocks have experienced substantial losses, which took out a ton of investors.
For example, companies like African Bank Investments Ltd (ABIL) and Oakbay Resources and Energy Limited serve as cautionary tales, where investors lost huge amounts as these companies approached or reached bankruptcy.
Talking about bankruptcy.
DANGER #5: High Chance of Bankruptcy and Liquidations
Penny stocks are also more likely to go bankrupt or get liquidated compared to a Blue-chip stock.
This is because of the nature of the companies, the inexperience, the lack of funds and structure, as well as its credibility.
Financial instability, mismanagement, or unfavourable market conditions can lead to the collapse of these businesses.
We saw this also in South Africa with the liquidation of Sharemax Investments and the bankruptcy of Pamodzi Gold Limited.
This lead investors with little to no value for their investments.
So remember this as a traders
We want low volatility, high liquidity (volume), credible companies with great reputations, track record and credibility. And we want attractive charts that work with our trading strategies.
If you want to be a savvy Penny Share investor that's fine.
But as a trader, I have given my precautions.
TBLT A Lesson Learned Last week around this same time I posted an idea on TBLT asking how traders get trapped in these gaps . I had just started to study gaps so this actually played out perfectly and answered my own question.
I wanted to know how traders get trapped in these situations where you go into the weekend confident in your decision, only to watch everything come crashing down on you Monday morning. The way this played out couldn't have been more perfect.
TBLT is considered a penny stock for those of you who are also new to the market, and not totally hip on your terminology yet. Any stock share with a price of $10.00 and below is considered by most professional traders to fall under the penny stock designation.
Penny stocks are considered extremely volatile in the trading community for many reasons; one example being that the low Market Cap of these companies, and the low share price make these prime candidates for pump and dump schemes. Penny Stocks are also at higher risk of having trading halted by regulators during an active Market session. This can lead to substantial losses. There are plenty of other reasons that make them a high risk, but these two are most important in my opinion.
Now that you have the back story, I'll make this part short and sweet. What went wrong was the perfect storm of me dabbling in an extremely volatile asset class, not following my trading plan by setting a stop loss to mitigate my risk if things went in the opposite direction; which is exactly what happened, and buying so close to an Earnings report that ended up being less than stellar. ( That last part about the earnings report was actually a surprise to me. They are a small company, but they had great numbers with their online sales, and the tools are decent. I actually use some of them ). Anyway, it's all relevant to what led me to enter the trade, so that's why it's here.
I used multi timeframe analysis of the Daily & 1 hour time frames for this particular trade. I entered using the hourly candlestick pattern and bought on the open of the one hour candle.
I apologize for the unprofessional graphics, but I'm limited to an Android phone for all of this. I will see if I can edit this on a PC when I get the chance so I can add the other graphic. I have the Daily & 1 hour charts marked up, but I could only capture screenshots due to being limited to my mobile device.
Back to business :
As the old saying goes ; A picture tells a thousand words. My Swing Trade has now turned into a longer term hold tying up capital and leaving me in the red for the time being. I hope this helps other new traders understand that technical analysis is an extremely deep subject, and that sticking to your plan is of the utmost importance. If I had done this properly , I could be buying the dip, or moving on to another trade instead of holding a bag.
Leave a comment below, and let me know what you think about my explanation. Let me know if this has ever happened to you? Thankfully I did stick to only investing a small percentage of capital per trade, so it's not all bad news.
*Not financial advice. For educational and entertainment purposes only.
What is it that's stopping you from becoming a better trader?In this video, I touch more on emotions and how an "average trader" approaches the markets.
I believe that we as traders get the wrong impression on how to read a chart. I feel that most traders have a strong tendency to make trading more complicated than it needs to be.
I've traded with so many strategies out there and I always tried to search for the next best thing. But the one thing that I made complicated was figuring out how to park my cash and let it work for me by following the right side of the trend.
The market is nothing more than buyers and sellers and our job is simple... Make sure to be on the winning team. One of the most common things told in the educational side of the markets is,
"The trend is your friend." - (THE MOST VALUABLE GOLDEN NUGGET")
I strongly believe that we focus on an exact price entry combined with so many other trading routines and in the long run, it just makes trading complicated for most.
You need to stay patient and let the trends play out. Filter out the noise, Take a break and let the bigger picture unfold. The confirmation will come when it is ready.
Don't put a price on it.
Don't put a time on it.
Just let the market breathe and take what it gives you.
Take care,
So, How Does Whales Actually Works?Accumulation Distribution
Pump Dump
No, whales don't day trade. Whales timeframe are years.
Whales will spend YEARS accumulating the asset.
Whales will WAIT patiently for the RIGHT TIME.
Whales will spread FUD to ensure weak hands sell.
Whales have all the money and capital to accumulate and hold.
Whales will pump and distribute the price AS HIGH AS possible to retails and suckers.
Whales own MAJORITY of the supply of an asset/stock/crypto.
Whales has always been there.
Without Whales, there is NO LIQUIDITY.
Whales provide LIQUIDITY so that the price doesn't move out of the range they want.
Whales has been operating financial market for years.
If anyone still don't believe this, I am sorry, nothing can be done anymore. There are hopeless and continue to be the slaves of this system and be the victims.
Regards.
Don't bother to reach out to me.
🥇 How We Use Our Strategy With Split Times. (Trading Strategy)👋 Hello, I hope everybody is having an awesome week with their trades! 😁
We here at MLT | MAJOR LEAGUE TRADER want to walk you through our time split system with the crossover strategy and the ema dots indicators. Let's take a look...
So what we will be using in this example today is USO (United States Oil Fund)
Top chart (12 Hour Timeframe)
Bottom chart (1 Day Timeframe)
All markets have trends and at the end of the day your job as a trader is to play the accumulation or the distribution zones aka turning points in the markets to ride the next trend. We use this color coordinated system to help identify when a turning point is taking place in whatever market it is that you're trading. You can apply this method to any chart timeframe. If you want to scalp the 30 min, then you would have a 30 min chart and a 15 min chart. Split the gimeframe that you are focused on playing. We use the split time for an earlier confirmation play to lead into a larger timeframe to secure that early entry for the bigger swing to confirm and play out. We also will use the split time to exit the trade when we get the sell confirmation. (Long / Short | Buy / Sell)
Now let's talk about the process...
Green represents an uptrend.
Red represents a downtrend.
When the 12 hour timeframe on top closes we will get either a green or red candle / ema dot close.
Same with the daily chart on the bottom.
Simple...
So what we look for is the early entry on the 12 hour. We want the candle to turn green, preferably a doji. (Candle that looks like a plus sign, tight price compression)
We want it to close green candle and all 3 dots below to align green with the close. If only 2 dots out of the 3 are green we do not enter! Same concept for red.
We will get the signal for a buy on the 12 hour before we do on the daily meaning that we will secure a better entry price vs just using the daily by itself.
Once you get confirmation on the 12 hour we hold that position and set a tight stoploss in case if it was to sell off. Once you take the buy you place your stoploss, diversify your funds and let it play out. If you get stopped out than you get stopped out. Take the trade and let it play out. As the 12 hour begins to close every 12 hours you will either see it start to form bigger green engulfing candles which shows buyers are pushing up the price, which is a good sign for your buy or you will start to see it shift towards going red which would obviously represent a sale or a short position.
Your job is to play the turning points in the markets and play that turning point range till you capture the next move. Markets go up and down, they don't stay sideways forever. Risk a little on stoploss in the range play and ride the next long term move. Trading is a game of probability and risk management. Even if you don't understand structure, support and Resistance or all the more advanced tools of the trade this will help make it easier on you to understand as a trader. SIMPLE IS BETTER! 👍
I have drawn vertical lines to represent where the buys and sells all lined up from the candles to the dots. Those are your opportunities to enter on the 12 hour.
Now if you look below you see that the daily actually stayed green from the very start of the first trade taken at the bottom of the trend on the 12 hour. The dots on the daily never closed red until the very top of the trend where we finally got all red to line up. That's another option to consider. You can use the split time to take more opportunities and trades for potential of trend changes. Or you can buy the first line up on the 12 hour and hold it till the daily is actually aligned red for a much larger swing trade position. If you did the second option you would of generated around 50% in gains from just one trade!
I hope this helps anybody that is struggling with trading and wants to learn how to get early trend confirmation on a specific timeframe that you want to trade. Swing trade or day trade any market with this strategy!
You can message me if you have any questions that you would like to ask. Please don't forget to smash that like button! ✌😁✌
Have a great day, Take Care! 🍻🍻🍻
🥇MLT | MAJOR LEAGUE TRADER
The Money Making System! (BTC)Hello all, I would like to walk you through our system if you're curious to know how we look for easy buy and sell signals.
The top chart is the Crossover strategy that we provide in our course.
The bottom 3 charts are the ema dots a custom tool created by MLT.
We have different settings applied to the bottom 3.
What we really want to look for is when all indicators are aligned with all colors firing the same for a buy or sell entry.
It's as easy as that! This works perfectly with high liquidity assets in any market.
You can use this system for daytrading and swingtrading, be aware though that this does work a lot smoother with larger timeframes for good size swings.
Spend less time trading and look for the colors to match.
You can check out this indicator in my scripts.
I hope we can help you become a better trader with our custom trading system, tools and strategies today!
Message me if you have any questions, thanks for your time.
Have an awesome day! 😁✌
🥇MLT | TRADE LIKE A PRO
How Smart Money and Whales Operate (Egretia Crypto Example)When trading illiquid and small cap stocks or crypto, it is better for you to throw away all your Technical Analysis and Elliot Wave, because it doesn't matter.
Financial market has always been manipulated and continued to be manipulated by different types of whales.
Whales love and like to play with retail pyschology and they are WILLING TO DO anything in order to make sure that they are MAKING IT BIG while everyone lose everything.
Even if that means that dropping the price of the asset 99%, lets it be, whales will do WHATEVER they want and can.
I have seen a penny stocks that drop 99% just to go up 100x.
This is how the financial market works.
I am not advocating this kind of manipulations and I am not endorsing any of this actions.
If you think investing or trading is easy? Just think again.
The only way you make money in financial market is for you to follow that the whales are doing instead of doing what every retails are doing.
Human greed can not be eliminated. Even regulated stocks are subjected to these kind of manipulations. Just expect much worst outcome from UNREGULATED crypto exchanges.
Regards.
Bitcoin slow pathetic gains [Dead stock bounce strategy]Here is a new example of the Baggy dead stock bounce strategy (I linked my previous posts on this at the bottom of this idea).
So many people getting all excited by their beloved mlm greater fool fiat currency (lost its trendline btw, barely hanging on now), 300% in 200 days if you bought the bottom and sold the top? LOL don't make me laugh.
People are chasing casino gains, trying to get rich overnight. Something like this WILL LITERALLY MAKE YOU RICH OVERNIGHT.
Gosh.
Now I do not now if some institution decided to buy, or if it's just the typical baggy dead stock bounce sucker rally (on dried up volume, on a dead stock dead for months or more). But did it rip up.
I am not a stock expert but I follow this kind of things, and it really interests me.
The only difficulties are:
designing something that alerts you to this...
backtesting this a bit
setting a stop loss that makes sense
getting out when the sucker rally is over
not getting out too early
not fomoing in if you miss it
not going too big in
not putting a gun in your mouth and pulling the trigger "out of curiosity"
idk the last line isn't even the most obvious and easy one, these "difficulties" are really so simple... Only the backtesting and getting alerted to this will take time & effort.
Most retail can't do all these extremely simple rules like not fomoing in but it is not because it is hard, it is because they are absolutely awful.
It's really easy.
I already have my hands full my my currencies & hard commodities, but someone that sya only trades Bitcoin could look into this.
Really looks like the quick way to riches. I don't know how often those appear, and how many end up bad.
But when it goes up 1 zillion %... Clearly 1 winner will wipe out so many losers anyway, as long as your are not so handicapped that you panic sell early.
I do not know the story behind this company, I have no idea what this is all about, all I know is shorts covered or someone pumped it for whatever reason and suckers got excited by the big green candle and fomo'd in.
Lmao what the company does has absolutely no importance, this is a pure scam strategy, taking money from fomo suckers that have no idea what they are doing, simply by being a solid trader.
The baggy dead stock bounce strategy: Best performing assetHere is a new example of the baggy dead stock bounce strategy I posted about 2 months ago (link in related ideas).
MoviePass went up 777%.
Gambling idiots getting excited buying after it goes up hundreds of percent in a few days.
Volume is a few dozen or hundred grans a day, which is more than enough for most people.
As soon as it breaks a new high it explodes up.
Who is buying? Maybe gambing idiots that think the stock is going back to ath one day. Baggies "averaging down". "Investors" that lost everything and try making it back speculating (good luck with that). Or "students" following a "penny stock educator" that plays pump and dump with this crap, and they are actually stupid enough to think the thousands of them are all going to make money and scam someone, who would be losing money while they make money? No idea. Their imaginary friend maybe?
Where to get out thought?
Richard Wyckoff Understand How Whales Operate MarketThis is not myth.
This is a real story.
This is a Malaysian stock that was manipulated by some people who is expert at manipulating stock market and others.
Operators and whales exist in every market, Nasdaq, OTC, Crypto, Penny Stocks, Global Stock Markets, etc.
Richard Wyckoff seems to understand the mechanism of how this works.
Let's look at Wyckoff has to say.
school.stockcharts.com
Wyckoff proposed a heuristic device to help understand price movements in individual stocks and the market as a whole, which he dubbed the “Composite Man.”
“…all the fluctuations in the market and in all the various stocks should be studied as if they were the result of one man’s operations. Let us call him the Composite Man, who, in theory, sits behind the scenes and manipulates the stocks to your disadvantage if you do not understand the game as he plays it; and to your great profit if you do understand it.” (The Richard D. Wyckoff Course in Stock Market Science and Technique, section 9, p. 1-2)
Wyckoff advised retail traders to try to play the market game as the Composite Man played it. In fact, he even claimed that it doesn't matter if market moves “are real or artificial; that is, the result of actual buying and selling by the public and bona fide investors or artificial buying and selling by larger operators.” (The Richard D. Wyckoff Method of Trading and Investing in Stocks, section 9M, p. 2)
Based on his years of observations of the market activities of large operators, Wyckoff taught that:
The Composite Man carefully plans, executes and concludes his campaigns.
The Composite Man attracts the public to buy a stock in which he has already accumulated a sizeable line of shares by making many transactions involving a large number of shares, in effect advertising his stock by creating the appearance of a “broad market.”
One must study individual stock charts with the purpose of judging the behavior of the stock and the motives of those large operators who dominate it.
With study and practice, one can acquire the ability to interpret the motives behind the action that a chart portrays. Wyckoff and his associates believed that if one could understand the market behavior of the Composite Man, one could identify many trading and investment opportunities early enough to profit from them.
My Personal Notes:
- Accumulation occurs during bear market and when market is so boring where retail traders will sell all of their holdings.
- Whales or Composite Man will often test the market to see whether supply is still there or not.
- Whales or Composite Man needs to have strong reasons or strong "campaign" in order to distribute their holdings to the retails.
- Distribution often happens at super fast pace that anyone who has left the market will end up buying at much higher prices.
-When everyone is super bullish on the market, that's when the whales or composite man dumps their holdings and exit their market.
-Market will crash and proceed into the next phase of "accumulation" and the steps or history repeats.
-Another important things to know, Whales and Composite Man don't only control one asset/stock/crypto, sometimes they will control and manipulate a group of stocks/cryptos based on their theme and fundamentals.
-So, the whales will group stocks/cryptos into category. That's why sometimes you can see some stocks or cryptos moves together and have very strong correlation.
-In summary, I can say that everything in financial markets are controlled and manipulated by the big guy. How big is the guy depends on the liquidity and how big the market are.
- Dow and S&P 500 stocks are manipulated and controlled by the feds and big banks while the smaller penny stocks/crypto are mostly controlled by fund managers.
If you don't believe in this stuff, I don't have time to convince you, continue worshipping your Technical Analysis and your Elliot's Wave.
Regards.
Hybrid Analysis (RTI.TSXV)Overlaying fundamental factors on technical information (known as hybrid analysis) allows for analysts to understand what moves the market.
Hybrid analysis is useful in particular when it comes to stocks and options (as opposed to currencies and futures) as direct links can be more easily drawn between stock price and fundamental factors. When used in penny-stocks, knowing what moves the market is key to making rewarding trades whilst minimizing risk.
Hybrid analysis requires good understanding in the economic factors that move the market, knowledge that is often overlooked by retail analysts.