At The Close  |  MAR 2009

At The Close: Understanding The Trading Enviornment by Joseph J. Mertes

At The Close: Understanding The Trading Enviornment by Joseph J. Mertes Spending time to assess the market environment you are trading is a good habit to develop. I have a lot of trading experience from trading — some good, some bad, but great lessons all. One of the lessons I’ve learned has been about the use of the chart. Understanding the chart is important. Understanding what drives the chart is invaluable. I use the Market Development and Market Structure methodology. What drives the method is Auction Market Theory, where a willing buyer and a willing seller agree on price. When you have many buyers and sellers coming together and agreeing on price, they determine where value is for whatever commodity they are trading. It is the determination of value and depicting value on the profile chart that gives us the information that is the basis of a trade or investing strategy. MAKING AN AGREEMENT Behind the buyer and seller agreeing on price (value) is a greater force that makes the determination of value possible, and that is the psychology of the players in that market or instrument. When the trading psychology involved in a market or equity changes its outlook on that market or equity, it will move price (value) to a different level. Understanding the mindset of the players in a market can give an advantage in trading and investing.

by Joseph J. Mertes