Buy Signals Sell Signals: Strategic Stock Market Entries and Exits pdfdrive com

participants that are buying and selling a particular financial market based on
price action. The goal of technical analysis is to find patterns in price action that
are profitable.
More than twenty years ago, my father-in-law bought a used truck that he
wanted to flip for a quick profit. He looked at the mileage on the odometer, the
condition, the make, model, age, and the fact that it was a stick shift, and decided
on a price based on all these factors. I thought his price was high because there
were plenty of used trucks in the world and not a lot of buyers looking for this
particular type.
He asked me what I thought the value of the truck was. I thought about it and
told him I thought the value of the truck was exactly what he could get someone
to pay for it. The value would be established as offers to buy the truck came in,
versus his initial sell price.
The suggested value for the truck he would find in books was only a
fundamental valuation. The publisher of Kelley Blue Book was not offering to
buy the truck, they were giving him a value guideline. The true value would be

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set by the first person with cash offering to buy his truck.
Values are based on buyers and sellers and not opinions or fundamental
valuations. Prices can move so far away from fundamentals that they are useless.
Needless to say, my thoughts about technical price action versus the belief of
value didn’t go over great with my former drill sergeant father-in-law. He was
not impressed that I would question his wisdom on buying a depreciating asset
as an “investment”. But he is not unlike the millions of fundamentalist investors
in financial markets who get angry when price doesn’t align with their belief
about value.
Similarly, fundamentalist investors that buy companies based on what they
should be worth but can’t make money off their investment portfolio during bear
markets and downtrends, can become easily frustrated because they have placed
their trust in the belief of value.
This book is about trading price action instead of investing in a company based
on its balance sheet and stock price versus book value. The concepts in this book
will show you how to create actual trading plans for buying high probability
setups, trading on the right side of a trend, and exiting with a profit without
having to look at fundamental valuations. This is a book for traders that want to
profit from price action and not for investors wanting to buy a company that is
undervalued in the hope that one day the true value will be priced in.
There are trading systems that incorporate fundamental valuations like price-to-
earnings ratios, return on equity, sales growth, and other metrics that create their
watch lists based on fundamentals, but still trade based on technical price action,
a trading system, or chart patterns. Even if you can find the best value stocks or
growth stocks to trade, you will only profit if you buy them and sell them at the