The issue that afflicts many traders is the belief that they should discover something no one else has. It is thought that trading is a treasure hunt where you by dent of your analysis find some corner of value that is yet to be uncovered by the rest of the investing community.
You then invest in your new found treasure and wait for the rest of the world to recognise your genius and follow your lead.
But the question you need to ask is if no one else wants it why, other than for reasons of ego do you want it? What secret piece of information do you possess that the rest of the investing world does not?
Consider the chart below of SKS – you can see two distinct phases in the life cycle of price. There is a phase where the signal is noisy and chaotic and a later phase where the price is more coherent. Signal is dominant over noise.
The question that needs to be asked is what precipitated this transition and the answer is quite simple. Volume began to flood the stock – everyone wanted it not just you. As a result price discovery improved dramatically.
If there is a single event that can improve trading and investing results – it is only buy things that everyone else wants. Look for the transition point where this occurs and that is your go signal.
