The old adage quoted again and again - Buy Low and Sell High is the key to making money in the markets. It really does not matter what business you are in whether it is selling shoes, mowing lawns, a distributor of medical equipment, or a fortune 500 company that sells information technology solutions. The principle of buying low and selling high holds true for all regardless whether one is aware/acknowledges it or not. The idea here is to procure at a lower value and then sell it for a higher value, the difference is what is called a PROFIT. It is a simple concept which often times escapes many a trader waddling through the quagmire of filters, trading systems, trading journals, and blogs and forums (like this one). While no one has a crystal ball at this thing, the principle of buying low and selling high will always remain paramount and one that can take you to the bank. rudy at afxedge
so what are your thoughts on it? are you planning to start a meaningful discussion on this old adage? how do you propose a trader goes about identifying when the item in question is of low value so that you can sell it high? (specific to financial markets of course)
For starters it seems that in order to assess whether or not price is high or low it is necessary to put it into some sort of context or frame of reference. For example, looking at a price chart of an instrument on a 60 minute time frame where you can spot the most recent swing high and low. From these two values, the high and the low value, you can assess whether or not the price is in the upper middle or lower region of this range.
Technically speaking, all there really is are swing highs, swing lows, zero, and infinity and unless the market is making new all time highs or lows, zero and infinity dont really come into play much . These are the reference points. It seems that time perspective is critical here as obviously most recent swing point values will likely differ on a 30 minute bar chart from those on a week bar chart. So high and low are relative to time. The logical next step in this sequence is then to look at price from the point of view from which on is trading, long term position players are waiting longer for opportunities as opposed to shorter term players whose ranges are obviously much lower and cycles occur much more frequently.
The principle of buying low and selling high holds true for all regardless whether one is aware/acknowledges it or not. The idea here is to procure at a lower value and then sell it for a higher value,
where is value??? I am getting the impression that you are confusing price and value, when they are in my opinion two different things..
because swing highs and swing lows are necessarily not all there is, value is where trade is facilitated, an equilibrium, an area where traders agree that for this given period of time, this is what this asset is worth!
look at a current chart for usd/jpy, choose a time frame, and tell me what its value is to you?
JPY Week chart
low 108.99 on 5/19/2006
high 124.15 on 6/22/2007 elapsed time little over 12 mos.
current price 114.31 low today was 111.58
after price hit the 112 area it quickly bounced up some 200 - 300 pips in a relatively short period of time. Seems like 112 was low compared to the highs and lows stated above.
Based the technical levels
low 108.99 on 5/19/2006
high 124.15 on 6/22/2007
current 114.31
based on this i would say that the a move upwards is more likely.
What is your assessment? What time frame would you choose to look at the market and which direction do you think that it is likely to head?
my view based on a top down approach referring to the attached charts:
weekly>
market has historical value around 112.15(green line), any price above this area has, historically speaking, proven to be relatively expensive, and anything below has proven to be relatively cheap...
based on this view I still deam the pair to be slightly and relatively still expensive over the longer term.
daily>
the area around 108.99(black line) in the medium term is what I deam to be 'fair value', as long as the market is above this level over the medium term again it is still expensive, this area is the most likely level the maket will gun for, although a temporary bottom may have been reached in the short term, the market will make and continue its journey south, when this level gets hit is anyones guess. this area will also and historically speaking alter my thinking to deam the market as relatively cheap based upon my synopsis of the weekly and referring to the long term value area of 112.15(green line).
intra>
the area around 114.70(blue line) is my potential value area in the short term, price has found resistance here, so penetrating this level would make me view the market as relatively expensive in the immediate short term, currently this market, in the short term is still cheap, a lot of panic selling and a heard mentality drawn in by a continous and relentless sell off also signified by the frenzied activity shown through the volume study(extreamly high) , gives me the opinion that late shorts need to be forced to cover before the market continues south. we need to create some lossers.....
conclusion> adhere to your risk parameters and trade south for 108.99
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