Understanding financial markets – it’s about positioning, timing and action


In this three-part series of articles we have shown how financial markets like the rand can be likened to the movements of the ocean, with both having different degrees of trend and cycles, moods and patterns.

But what is the crux in taking a successful wave?


Positioning... timing... and then action!


And this is where the minor trend comes in, which can be likened to the ripples on the waves.

Catching a successful wave is dependent on being in the right position, then waiting for the ripples on the wave to tell you the wave is at its optimum position to take a ride.

 

And then to also tell you when the wave has lost most of its power. 

How often have you seen what looks like a perfect wave building up, and yet surfers have missed this wave because:
 

...they weren’t in the right position when the ripples on the wave were close to peaking.

...or they started paddling too late or too early – and came off second best!

...or they didn’t paddle at all, or they started, then pulled out at the last minute...

And when it comes to the rand – 

...how often have you seen the market move, but you were not in a position beforehand to take advantage?

...or you were in the right position, but took action too early, or too late?

...or you were in a position to take advantage of a move, and then pulled out at the last minute, or did nothing at all?

Sound familiar?

The fact is, if we have been involved with forex exposures for any time, we have all been there.

Such is surfing…

 

…and such is the rand – and every other financial market.

 

Bottomline: 

 

You need to know the market in three different degrees

(long, medium and short term) to be really successful.

 

Below is a chart with these three trends superimposed on them – primary, secondary and minor.

And as you can see, although the minor trends (ripples) are merely a small trend superimposed on two larger degree trends, the minor (short term) trends are a critical factor in determining whether you have a successful ride or not, and when to enter and exit the market. 

But then what is probably as critical, is that we do not let our emotions take control at the last moment, but that we use an objective proven system that removes emotion from the decision-making process. 

And then simply take action – even when our fears are screaming for us to pull out. 

The result – an exhilarating ride!

But … how do you protect yourself from making wrong decisions at these points of extreme sentiment, whether positive or negative?

and exit the market. 

But then what is probably as critical, is that we do not let our emotions take control at the last moment, but that we use an objective proven system that removes emotion from the decision-making process. 

And then simply take action – even when our fears are screaming for us to pull out. 

The result – an exhilarating ride!

But … how do you protect yourself from making wrong decisions at these points of extreme sentiment, whether positive or negative?

enables you to make educated, informed and rational decisions, instead of emotionally charged irrational ones (which we will default to every time…) 

Get more info and insight into the Rand here.

See Part 1 of this series

See Part 2 of this series