As a self-proclaimed bounce specialist, or how my teammates like to call me, “bounzerizt,” most traders ask me, “Sir how can you be so good at picking the bottoms? What is the secret?”
To the best of my knowledge, I don’t have any. What you know about trading more times than not are the same things that I know. See, I don’t really consider too much variables before I enter a trade. When I see a signal, I execute with no questions asked. People who know me always hear me say, “execute now, ask questions later.” because that’s how I think it should be, trading without hesitation.
My philosophy is this: fundamentals don’t necessarily matter, technicals don’t necessarily matter. What matters is the crowd psychology manifested through price action.
Cliché as it may seem, but I believe that Price Action is King. Some of you may argue, “isn’t price action a part of technical analysis?” and I would respond, “I don’t think so.”
Technical Analysis for me falls under the belly of price action and not the other way around. Phrasing it this way makes it clear that price action towers over technical analysis.
I know you think that sounded weird but don’t worry, most people do. My thoughts have always been plagued by criticism and skepticism not only from beginners but also from experts in the field. The very main reason is the counter-intuitiveness and seemingly illogical ideas that I present. Most of the ideas I say contradict common knowledge yet agreeing with it at the same time. I don’t have any words, but I think this may describe it lightly—paradoxical.
Now, going back, how the heck do fundamentals and technicals seem to not matter in my eyes? Let me tell you what I think about them.
Fundamental Analysis or Fundamentals is anchored to the idea of valuations. Using balance sheets, cash flows, or whatever, fundamental analysis aims to give intrinsic value to the company. The calculated “value” of the company then gives the analysts an idea of the cheapness or expensiveness of a stock.
On the other side, we have Technical Analysis or Technicals. Technical Analysts use various mathematical indicators like RSI, Stochastics, Moving Averages, and artistic models like, Harmonics, Elliott Waves, etc. to tell whether the price will go up or down in the future.
You might ask what kind of trader am I between the two—I am neither.
See, both fundamentals and technicals suffer the same fate. They aim to PREDICT what is about to happen, they predict future prices of stocks based on their calculations. They are trapped in the future where they think price will be. They seem to be disconnected from the present moment.
“WhAt dO yoU uSe Th3n?!”
What I have for you is a third kind of analysis that differs significantly from the two. What I propose is price action trading—understanding the psychology of the crowd.
Contrary to both Fundamentals and Technicals, Price action trading anchors to the idea that the current price is the only true price. Anything before or after that, have no significance whatsoever. The idea is to NOT think about the future price, but rather to accept that what you see is the only truth and that you have no control over what will happen next. What you only know is what it currently does. This removes the disconnect from your mind on what the price SHOULD BE and where it’s currently at.
Price action analysis deals with the collective behavior of the market participants, being in synch with the market at any instance. To not think about the future or the past. To be present in the moment. To enjoy, feel, and taste every bit of the movement. To have an intimate relationship with price. To be one with the market.
Knowing that you don’t have to know is one of the greatest discoveries I had, and it changed me forever.
That for me is the third side of the coin. Both fundamentals and technicals have long been crowned as the only types of analyses there are. I think it’s time to honor the third side of the coin, the price action. And call for a separate study of it, divulging from its commonality with technical analysis.
Price action trading gives you insights about the behavior of the crowd behind the movement. The fear, the greed, the denial, the despair behind the price. Technical analysis just fails to do that.
To end, I would like to give you a quote that I think most of the traders reading this would need to ponder upon.
“It is not that we know too little, it is because we know too much.”
Think about it for a moment, do you really think you know too little? Or are you just learning too many at the same time?
Lessen your analysis and focus on price. Who knows what things you’ll uncover?
Full Name: Geyzson Kristoffer S. Homena
Investagrams username: @GeyzsonKristoffer
About the Contributor:
An Applied Mathematics graduate and a full-time teacher, Geyzson Kristoffer is a part-time trader who has been an active user of Investagrams since 2017. He spends his mornings, afternoons, and evenings learning about trading and reading books: Alexander Elder’s Trading for a Living being his favorite. Cohering to his passion and profession, he set his heart on teaching and helping newbies, but only the dedicated ones.