Socially constructed
Markets as a social phenomena, are so complex that differnt beanches of science are required to understand it and being less wrong about the causes of its dynamics.
Everything in the markets are socially constructed as in organized religions. Markets are closer to religions than to rigorous math-based disciplines. This is the main principle from which everything follows.
Ultimately, when not manipulated, the price moves in the direction of currently eager (or over-excited) majority - bulls or bears.
The actions of the market participants are based on their indivual forecasts of in what direction the prices will move (from where they are right now). This is exactly what is calles speculation (about the direction).
Sentiments
An intelligent trader has to know and even measure (at least to some extent) the current sentiment of the majority and act accordingly. One has to ride the current “wave” (caused by an over-exited crowd) just like a surfer.
Never play silly games
It is tempting to “bet against the stupid crowd”, because it implies some way above average abilities and cleverness, thanks to socially constructed memes and the social cult of being “special”.
Things do not work this way. It is just like betting against a semi-truck when riding a bicycle. The market forces (with its speed and momentum) will literally smash you down. Never try to stand up agaist the crowd.
Psychology
The hardest part is to analyse the current sentiment of market participants from social media, without being affected, influenced and swayed away by the streams of screaming manipulative bullshit, paid or just emotional.
Ideally, one should just measure the current sentiment and confirm the currently dominant crowd (bulls or bears) and the “strength” of their exitement.
Indicators
Idicators are the “instruments” on a dashboard, which measure the current conditions.
Idicators “work” because other people belive they do and act accordinhgly. Unlike objective indicators of a speed, momentum and volume, most of idicators capture abstract notions.
Rate of change (the slope) is, perhaps, is where one nas to stop with abstractions.
All indicators always show what already (just) happened, and never what will (would) happen. Projections and predictions are “black magic”.
The main principle is that all the factors cannot be taken into account, and even “weights” of already known factors change as we speak (measure). New factors could (and will) emerge at any moment, old factors will become irrelevant.
EMA (its direction and slope)
This is the direction the markets are going.
MACD
Short-term vs long-term averages - the change in sentiments.
RSI
Closing prices
Chart patterns
Recurrent patterns emerge from “chaos” on differnt timeframes.
Other market participants notice these emergent patterns and use them as confirmation to their current assumptions about the market conditions.
Each new 5, 15, 30 or a hourly candle closes the previous one and forms a distinct pattern to which other people react. Now wonder, mod 5 or mod 15 are the most active (volatile) times of an hour.
the Price
Every know and yet unknown, established or emergent factors contribute to the final result which is the current price.
the individual actors
Each idividual actor has some current views of how one inteprets the current market condition, based on his current assumptions.
- Bear or Bull market
- Which phase
Major events
The events that cause price movements are those which involve (cause) closing or even liquidation of lots of positions.
When the moves “moves through stop-loses” or “moves below a FOMOing level” it usually cascades into a long “dildos”.
There are always particualar causes behind each substantial price movement, and, similar to mechanics, there is always some “potential energy” involved.
The actions (and positions) of other people are the “potential energy”.
Adversaries
The price usually moves in the direction of mass liquidations causing cascades. This is not by accident.
Whole companies (market “makers”) have been created to trade “against retail” for easy, mostly automated profits.
The resent FTX scandal was an illustration of how Alameda traded against the FTX customers. Everyone else (trading desks) do the same.
It does not require an IQ of 150 to identify some meme-driven degerate communites (notably – Chainlink) and to manipulate the prices, and then to dump on retail at local tops (causing liquidations and closing of long position).