Because you can get the theory right but not benefit from it. The market can frustrate you before making a move. Let me explain
Fundamental Newsflow can act as trigger but till market recognizes the fundamental through Price Action - fundamental newsflow cannot be of much help.
Let us take Bank of America stock as an example:
In 2015: after a long era of Quantitative easing - the market started talking about how Fed will now increase interest rates and which sector/stock will it benefit. Look at this July 2015 article
And it's not like Bank of America stock did not rally but then there was big upside resistance to encounter. There was a hope of breakout
Will new Bull market start in Financials?
Bank of America on verge of major breakout pic.twitter.com/Ojm7L1EIoq
— Deepak Singh (@smarket) October 29, 2015
US Fed did increase interest rates in Dec 2015 after a long long time but this is what happened to Bank of America stock. It did not breakout and actually collapsed leading to more disappointment. Fundamental newsflow did not help that much. Bullish theory but no major price gain in first 12 months.
Rise in Interest rates chatter started again by middle of 2016 and Bank of America once again made a recovery attempt
But what market needed was confirmation
I remember I wrote this article just before US elections on how Large Cap Financials on verge of major breakout obviously hoping Hillary win (Perceived to be good).
Donald Trump won but market reaction was the same - Big Breakout and Price confirmation happened
So, a theory that started way back in June 2015 that it's time to buy Bank of America actually started working well only 1.5 years later in Nov 2016. I just wonder how many people would have lasted that long who entered early in the game. That's why it's so important to look at the Price Action before jumping in a new idea
If you find Price Action fascinating - then Science of Stock Price is a good place to start.
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One of the objectives of writing stateofthemarket.net blog posts is to demonstrate how price action works in a very simplistic manner. I have been writing about markets for years now and have developed a unique way of looking at the market. I have developed a course material if you are interested in learning about this whole space which comprises of the following
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers