5 Trading Proverbs – Timeless Wisdom for Traders
Have you ever thought of proverbs as a source of timeless wisdom, handed down from one generation to another? Traders have their own proverbs as well , tested and applied every day by thousands of traders globally.
Don’t try to catch a falling knife on iqoption
Sometimes everything goes not as you planned. You seem to receive all the right signals from your technical analysis indicators, open the deal at the right moment but still end up with a losing position. Some people might believe that it is wise to hold a losing position, expecting it to recover. Commonly the acquired asset will continue falling down, making the incurred losses even worse. In case of a wrong estimate, most experienced traders lean to close the deal and start searching for news opportunities.
The trend is your friend
This general expression highlights the importance of trading with the trend, unlike trading against the trend. Being different from others is not always good, and this is the case when going with the crowd can possibly be more beneficial.
Why it is that crucial to go with the market? It is not possible for a small retail investor to influence the market in any significant way and affect the prevailing trend. The only choice individual traders is to either go with the market or lose. However, there are some exceptions. Professional traders with access to colossal capital can create trends of their own but this tactic is just not for everyone.
Be fearful when others are greedy and greedy only when others are fearful
A number of experts claim that the market, being the product of people’s decisions, obeys by the law of greed and fear. When things go too well, people become greedy and forget about risk management rules and back-up plans, which can lead to the next financial crisis. When things get worse(just like it was in 2008), people are too afraid to invest, losing an opportunity to buy valuable assets at a lower price. And at those times most of the market members act not in a rational way. Generally, it is reasonably to sell when the economy is overheated and buy when the prices have fallen to the lowest point.
Buy the rumor and sell the news
Both news and rumors may affect the prices of assets. Nevertheless, when the news are officially released, it takes the market a few seconds to a couple of minutes to incorporate this just collected information into the price. Rumors work in a another way. Not every market member acts on a rumor, which means there is a grace period between the release of the rumor and release of the news itself. It gives traders who take risks an opportunity to trade the rumor while still awaiting a sudden price move.
Bull markets climb a wall of worry
Not every market member has to agree on a specific market movement so that it continues. The thing is, when more people want to buy a particular asset than to sell it, the buying pressure will push the price to go up. And vice versa, when the number of people want to sell an asset is greater than the number of people want to buy it, the price can be expected to decrease.
Traders don’t have to wait for an absolute consensus on an asset in order to open a position with it. Alternatively, when everyone says than the asset at hand is ‘the new big thing’ (e.g. Bitcoin, dot com companies and other bubbles) it is possibly already too late to place your funds to it.
We believe that these 5 proverbs will make you understand the market and market psychology better with IqOption!