Financial markets: Designed to take from us, not give!
The simple individual would celebrate and get into it without asking
many questions of this feature. The savvy individual would ask the important questions,
mainly; How and Why?
The ‘how’ is easy. We, the masses make the markets. Just 15 years ago, the number of traders in a global context was just a fraction of the users today. Hundreds of millions of buys and sells move the market, basically forming many patterns of wealth distribution. Mainly, a prevalent pattern would be wealth moving from one party to another.
This brings us to ‘why’. Which parties are actually profiting largely from this access? The big players such as hedge funds, large banks, private equities, trading consortiums – basically institutional investors control a large part of the financial ‘pie’. Retail traders, the rest of us are moving according to where the markets are heading. Money moves the markets, emotion moves the money. What moves emotion?
Emotion changes according to news. News reaches the big players in the market before the rest of us. Crucially, big players tend to MAKE the news in order for markets to move according to where they need them to. Trades are made before the news gets out. The rest of us follow, thus acting on highly delayed information. This is the key reason why technical analysis is seen as a projector for the future. Personally, I'm not a believer whether in medium term or short term. All it gives me is the big picture of its past and present performance. What's happening today, for tomorrow, is always a question mark.
What about you then? Are you a technicalist or a fundamentalist? Or both?