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represents the consensus of opinion about the value of wheat in this instant of time, remembering the past and anticipating the future on the basis of all the traders trading at the moment. Now let us allow time to advance a split second, and in that length of time two new traders (A and B) make a trade at 210.25, one going short and the other going long. How does this affect the perception of traders A and B? Well, they both believe that their perception is correct. If they did not both believe they were right, then they would not have taken opposing positions. Did the previous continuity of thought have anything to do with the present continuity of bullish thought? Possibly, depending on why the two traders executed their trades. However, it is possible that the two traders made their trades on the basis of information that previous traders had no knowledge of. In fact, traders A and B might not even care what happened in the past because they both believe that something is going to happen in the future. It is impossible for us to determine. Did these two new traders affect the continuity of thought of the previous traders? Of course. The long traders are happy, and the short traders are upset that they are losing! The longs are thinking that they are smart, and very much on top of the hill. Now if we allow time to advance another split second, and two more traders (C and D) execute a trade at 211.25, what happens to the perception of the first two traders (A and B)? It has changed. Now both traders no longer think they are correct. The trader with the bullish perspective is happy and convinced that she is right, while the trader with the bearish perspective is upset that the price continues to go higher, and has some anxiety that he might have made a mistake. |
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What can we learn from this? Simple. What the previous longs and shorts believed, expected, rationalized, and predicted was ultimately determined by two traders agreeing on a price possibly based on previously known information. However, they could have agreed on a new price because of new information, opinions, or expectations of future events. The point is that the market is always right, and that it is totally unpredictable. It will occasionally appear to respect previous support, and resistance points, that you see on your chart. In doing so, it is validating your beliefs about support and resistance levels. At other times it will blow right through those prices as though they are totally meaningless. What you, your computer program, or your newsletter believes, thinks, or expects is of no consequence in the overall direction of the market. No matter how large your bankroll is, the market will always be larger. Even countries that have tried to artificially maintain high (or low) valuations of their currencies (Japan, Malaysia, Indonesia, Britain, Russia, Brazil) have discovered that the market is too large to manipulate for any length of time. |
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