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
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