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How Professional Stock Traders Manipulate Amateur Stock Traders

May 27, 2012 | Comments: 0 | Views: 203

In this article I'm going to lay the basic foundation for some market psychology. If you're reading this, chances are, you're an amateur stock trader. Meaning you don't trade full time for a living. If you happen to be a professional trader you will find this information helpful as well. If you've read my story and know my background then you will appreciate what I'm about to share with you. My mentor, several years ago, helped me to understand how things really worked in terms of trading and market psychology.

In a nut shell, there are two groups of traders participating in the market at all times. If asked you to guess, you would probably say the bulls and the bears. I give you credit for knowing the basics of the bulls and bears but that's not the correct answer. The two groups of traders participating in the market are those who know and those who don't know. Those who can see, and those who are blind. Can you guess which ones are the amateurs? Yes, those who are blind or those who don't know. Why are professional traders considered professionals? Because they know and know how to apply what they know. Do I sound redundant to you? Maybe, but why do you think amateurs are always losing money? Because amateurs don't know what professionals know.

As you probably know trading stocks is a win/loss situation. Every time you lose money on a trade, someone else put's your money in their pocket. This is where it gets interesting. There is a little known process that frequently occurs during price action. This is where the professionals really take it to the amateurs. A while ago, on another blog I write for, I called for a sell off of Apple stock. This was about the time when everyone and their mother was buying Apple and other traders were emotionally purchasing because they thought Apple stock would never look back. I explained that I would stay out of Apple stock as I saw a short term pull back in the medium term future. Sure enough, Apple has sold off just like I said. So how did I know that? I didn't use any math, no indicators, or any fancy trading software. I used my knowledge of price action and the psychology of what was taking place between amateurs and professionals.

You might be surprised to know this little golden nugget of information I'm about to share. At the time when everyone was going nuts over Apple stock, buying up shares like crazy, professional traders were already exiting their long positions and starting to accumulate short positions. I had someone tell me that I was stupid for not buying Apple because it was headed to $1000. There is much more to this sequence of events that I will get into later but remember this. Professional traders are always well ahead of amateurs in the trading cycle.

Are you struggling to make money in the stock market? Stop trading like an amateur and start thinking like a professional trader. For more information visit http://www.googlestocks.org

Source: EzineArticles
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