The Yin and the Yang of Markets

I am reading a antic book on trading, first published in 1924, by Richard D. Wyckoff, titled “How Iodine Trade and Invest in Pillory & Bonds”. Although most of the illustrations in the book pertain to stocks, the penetrations into the nature of trading are relevant no matter what instrument you take to trade.

I am particularly drawn to the authors’ grasp of the ebbing and flow nature of markets and how this place can be used to great effect.

“It is hard to over-emphasize the importance of studying the technical position, particularly when making a bad commitment. Many people may say, “What is a weak or a strong technical position?” My answer is, in brief, that a stock is in a weak technical place on the bull side when it have been purchased and is held by a large number of outside speculators; when most of these are looking for a profit; when the terms of the stock have advanced to a point where no additional purchasing can be stimulated for the clip being. It stand ups to ground that when purchasing powerfulness is exhausted a stock must decline, no matter how strong its finances, management or earning power.”

“On the other hand, a stock is in a weak technical place on the short side when the bears have got exhausted their ammo by merchandising all they can afford and when the purchasing powerfulness of investing and bad purchasers is such as that it defies the pressure level of the bears; in other words, when demand defeats supply. The failing in such as a place is establish in the fact that all those who are short are possible bulls; they must, sooner or later, screen their committednesses in order to fold their trades. They make not wish to stay short indefinitely.”…. “Bears, after they have got sold short are an component of strength, not of weakness.”

Perhaps the nature of all markets is best described by the Chinese Yin Yang symbol.

In every bull move, and in every bear decline, are the seeds of their ain destruction.