Why does the market move the way it does and how can I profit from it? :)

Actually, I just wanted to post blunt entry prices and sell zones and see how everything develops. However, now some have asked why and what these prices say. I honestly did not expect any comments :)

So this is going to be a longer series of posts probably over the next few days and weeks where I may take the rose colored glasses off some people's eyes and others will directly dismiss it as bullshit (maybe just because they don't understand it) :)

If you read this, try to get involved and not directly label everything as "wrong" just because it does not fit into your previous understanding.

Part No.1:

Why does the market move the way it does?

Everyone knows keywords or statements like "supply and demand", "trends in the market", "news" or "insider information" - all these are often used by people to explain the movements in the market.

Just as often, however, statements are made that everything is already priced in and that timing the market is impossible.

I will say this much:

It's all wrong and somehow also all right :)

The market moves fundamentally according to supply and demand - that's true for now. However, only that would be very inefficient. According to the basic concept, there should always be enough buyers and sellers at price X.

But now we have the situation that there are many big players on the stock market and even more small players.

I now take away everyone's illusion and say it straight -> The stock market is only there to make the big boys richer and often with the capital of so-called "dumb money" or "retail". This does not even have to be the baker next door, but can also be a fund or a bank.

In order for supply and demand to meet and at the same time for the big boys, we will call them "smart money" from now on, to take their profit, there must be enough liquidity in the market and they must have information that we do not have otherwise.

1. what is liquidity and how does the market actually work?

Liquidity basically describes how much money/volume is in an asset. For example, the largest market measured by liquidity is the Forex market.

The amount of liquidity in an asset also determines the price formation. If an asset is very liquid, large transactions can be made without a disproportionate price impact.

If, on the other hand, an asset is illiquid, a sale or purchase of a small portion of the asset (measured by the maximum supply) can cause large price jumps.

Why is this important?

Our stock market basically works like this:

LoneMelone wants to sell 100 Tesla shares and wants to do it as quickly as possible.

In theory, there should now be someone who buys these 100 Tesla shares from me. This would be very inefficient and would take much too long.

In practice it works rather like this: LoneMelone sells his 100 Tesla shares into a pool and someone else buys 100 Tesla shares from this pool again at time X.

Who provides this "pool"?

So-called market makers, which are companies that basically do nothing but provide this liquidity pool and buy and sell shares.

This is mostly done by algorithms.

So why am I telling you all this?

Because besides supply and demand, the market always follows the most liquidity.

As we described at the beginning, very large transactions also require a lot of liquidity so that the influence on the price is as small as possible.

"Smart money" always buys at the "best prices".

How do they do that?

They build up liquidity, which they later use themselves.

They do this using a variety of methods. I'll just list a few.

• Trends
• A trend is simply the accumulation of a long or short position for smart money in a trend there are always corrections when smart money needs more liquidity to build more short positions at a better price.
• A high or a low / possibly even a double bottom or double top
• Above a high or below a low there are usually a lot of stop losses. When these are triggered, the smart money uses the just released liquidity to increase their position. -> Therefore, very often highs and lows are broken only briefly and then the trend continues as planned.
• News
• Everything is priced in, months in advance. News is just a way for smart money to push the price in the direction they want or to build up a lot of liquidity in the direction they need it. If the inflation data comes out better than expected in 6 months, smart money has already accumulated long positions 3 months before, e.g. with the help of a trend or a sideways movement.

There are several other ways, but I just want to give an impression. I will also show in the future here times quite a few examples on the chart itself :) Gladly also with your desire charts so that I can not pick the cherries out. I am 100% transparent and what I write here, I can show everything on the chart.

It happens, and on any time frame you wish.

So:

A quick summary:

1. the market moves according to supply and demand.

2. moreover, the market always moves to liquidity. Practically like a magnet.

3. today's chart shows tomorrow's news.

4. large institutions or even smart money needs a lot of liquidity to implement their large transactions

5. every information you could find out by fundamental analysis or even the information you don't have you can mostly read in the chart because smart money with their 1000 analysts definitely has more information than you :)

If you want to keep up with the info posts feel free to follow me or just check my profile regularly.

Ask as much as you want this is just the beginning though and there will probably be some posts to follow :) The topic is huge and I myself had to spend 1000nde hours to teach me and I'm still learning new aspects:)