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Market Perception Vs. Market Reality

There's a major difference between reality and how the market perceives price. But, it doesn't matter, the market is always right.

By The Street TradingPublished about a year ago 4 min read
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It’s not about what company “XYZ” is doing or how they’re doing, it’s the market participants perception of the company – think of the herd mentality. Moves are orchestrated to guide easily influenced traders; take that out of the equation and you’re left with a level of clarity.

This clarity is the great differentiator between success and failure in the trading business. Without clarity, you’re purely guessing.

Sure, guessing can give you a “50/50” chance at being right, but what kind of stability do those odds offer? Long-term trading careers aren’t built on guessing; leave that to Vegas.

Now, having a 50%-win rate could prove to be a very successful trading career, but that relies on proper risk management. If you’re only right on 50% of your trades and cut losses quickly on the other 50%, then you’ll be a very successful trader. BUT – that requires proper risk management; and that is an entirely different conversation.

Market perception, or mass perception in general, describes how people's perceptions can be influenced by the attitudes, beliefs, and opinions of others around them. And most already know, that the market is filled with sheep following any bit of new headlines that gets fed to them.

If a news story gets published about company “XYZ” and receives extensive coverage and is also presented in a certain way by the media, it can shape the way that people perceive the issue or event. In fact, this is the end goal of many articles found about a particular stock “in play”.

Back to market perception; there are desks on the Street designed to solely influence easily influenced traders. At the very least, understanding these guys exist will keep you a step ahead of many unsuspecting market participants.

We continue to say the markets rise/fall much further than expected, but trying to make sense of market levels is a fool’s game; those days are long gone. There are too many influential aspects in today’s market to get caught up in what ‘should’ be – just trade what is.

This is flow. This is trend. This is momentum. This is trading clarity.

Knowing this reality will clear the path of confusion and allow for a much cleaner trading process.

When you click that buy button, your order is being filled by someone wanting to sell. Unpacking that transaction, will further expose how each perceive the underlying security. Who’s right, who’s wrong – that really depends on the time-frame in which each order was based on. Ultimately, only time will tell.

When you take into account, many market participants have been ‘forced’ into they’re perception of a particular security, you can then begin to understand the mindset behind who sits on the other side of your order. And this bit of information plays a significant role in the overall outcome

The manipulative schemes designed to guide your “own” perception is a harsh reality of the markets; it’s the elephant in the room so-to-speak. In other words, it’s not something that is talked about. Despite its avoidance, it’s very much a [art of every single trading session.

So, however you perceive the value of company “XYZ”, is merely your own. And how someone else perceives them is theirs. It’s this battle between different perceptions that make up prices at any given moment.

When there’s a clear influence being forced onto market participants, understand there is an ulterior motive behind the influence. Once the real motive comes to light, that perception will shift; and shift swiftly – and that’s when the real move gets underway.

Perception is Relative.

About The Street Trading

Consistently Profitable.

That's The Goal.

Start with a crystal-clear vision of where you’re headed, then effectively lay the foundation to reach that goal through a systematic process.

That's The Street Trading.

We provide a straight-forward, no-nonsense results-driven trading education, that cuts through the noise to teach new and existing traders on how the stock market truly operates.

Our attention is focused on building actionable knowledge about the markets from the ground up. We construct a foundation of the fundamentals behind consistently profitable trading that you can build a career on. Take the guess work out of trading and ultimately understand what moves the market to finally flow with the Street and Trade with Clarity.

Day Trading | Swing Trading | Position Trading - It all comes down to managing risk and market psychology.

If you’re interested in learning more about what we have to offer you as a trader, come check us out at www.thestreettrading.com

We look forward to joining you on your trading journey!

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About the Creator

The Street Trading

We provide a straight-forward, no-nonsense results-driven trading education, that cuts through the noise to teach new and existing traders on how the stock market truly operates.

Come check us out at www.thestreettrading.com/

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