Richard Wyckoff was one of the greatest minds in Wall Street. He developed several rules for optimal trading. He summarized these rules in the book “Studies in Tape Reading”, which is a classic in tape reading and stock market tactics. What is Tape Reading? According to Richard Wyckoff, it is “rapid-fire common sense”. He adds that Tape Reading is “the only known method of trading which gets you in at the beginning, keeps you posted throughout the move, and gets you out when it has culminated.”
Human psychology works differently. The instinct is to buy when the stock prices are going up – why miss the bus and lose the opportunity to make a lot more money. Or, hold on to the stock at higher prices in the hope of making more money. This is Greed. The instinct is to hold on to the stock when the market starts to fall - the prices might move back up? This is Hope. The instinct is to sell when prices stay low for a long time (in a bear market) – the prices might go even lower and the possibility of losing more money. This is Fear.
Think about the people who bought SENSEX at 21,000 and those who sold SENSEX at 8000. There is greed and hope when there should be fear. There is fear when there should be greed.
You might say that this is easier said than done? Read Richard Wyckoff’s books and see if you can devise a buy and sell strategy. More importantly, can you stick to your strategy? If you can, you have the potential to become a market technician extraordinaire.
