Why is trading so emotional?
In August last year, I published an educational post around Fibonacci. There's also thousands of articles and books available on the topic. But how does it fit with being emotional?
Often people talk about Algos, smart money concepts and a load of other terms. All trying to make sense of the market, Fibonacci isn't magical or mystical. It's a set of simple numbers that work - due to humans wanting to see patterns in everything they look at.
Here's the article from last year - feel free to click it and go through that one as well.
The issue I have when educating people - is there is always a desire to find an automated solution. I keep saying, if algos are that good - we wouldn't have school, doctors or firemen; they would all be sipping cocktails on a beach far away! If you want to learn technical analysis, you really need to dig deep into the emotional analysis. People like Dow, Elliott and Wyckoff (for me, are not technical gurus) they merely understood - human psychology made waves, changed sentiment - the bigger players in the markets know this. It's why most news outlets and websites around TA push writers who only talk MA's and RSI's. It keeps fresh sheep on track.
The market is all about liquidity - these levels are created at psychological levels & from there, it's copy, paste, repeat.
Take a look at this on the current Bitcoin move down from the All Time High.
Swing 1 = 618 of A-B
Swing 2 = 100% of the A-B
Swing 3 = 100% of the A-B
Swing 4 = 618 of the A-B
Swing 5 = 1.23 range and 1.27 range of the A-B
Then even when you step down a level you can see the move inside the moves looking similar. Local support is 618...
When I started posting on TradingView publicly - I explained why we where seeing value areas and re-accumulation for the first times.
These levels were starting to show signs of the crypto space being institutionalised. This is important to understand, as much like Fibonacci levels, the price would now act in a different way to psychological levels. In stepped Wyckoff and you could see from before and after - where and why the price would go.
Before
Here's the AFTER shot.
Lucky Guess? Well - maybe on the way back from the 28k levels highlighted in March, the very same fibs became obvious. If we where seeing Elliott waves form you could therefor measure the fib extensions.
This was August the 24th - read the comments as to why the drop was coming (4 move) and why we would likely see the drop just above the old all time high.
By October we had seen the forecasted extension levels getting hit - a retest followed this and we dropped.
So, like I said - there's nothing magical, it's all about sentiment and psychology. Learn this and you will progress as a trader.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
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