Markets Can be
Marked Up (or Down)
You cannot help notice how major moves from one price level to another
usually happen quickly. This
rapid movement from one price level to another is not by chance – it
is designed for you to lose money.
You can be suddenly locked-into a poor trading position, or locked out
of a potentially good trade by one or
two days (or bars) of rapid price movement: The Index or stock usually
then rests and starts to go sideways.
If you have been locked-into a poor trade, you may regain hope, and so
will not cover a potentially
dangerous position. The next sudden move against you does exactly the
same thing, so the process
continues. Conversely, if you are not in the market and have been
hesitating or waiting to trade, sudden upmoves
will catch you unawares; you are then reluctant to buy into a market
where, yesterday, you could
have bought cheaper. Eventually a price is reached where you cannot
stand the increases in prices any
more and you buy, usually at the top!
Market-makers, specialists and other professional traders, are not
controlling the market, but simply taking
full advantage of market conditions to improve their trading
positions. However, they can and will, if
market conditions are right, mark the market up or down, if only
temporarily, to catch stops and generally
put many traders on the wrong side of the market. The volume will
usually tell you if this is going on, as it
will be low in any mark-up that is not genuine. Yes, they are marking
the market either up or down, but if
the volume is low, it is telling you that there is reduced trading. If
there is no trading going on in one
direction, the path of least resistance is generally in the opposite
Chart 9: A mark-down on low volume (chart courtesy of TradeGuider)

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