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Written by Ben
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Monday, 07 April 2008 |
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In an uptrend, all along the way, demand is
greater than supply. As long as the demand is greater than the supply,
the uptrend will continue.
When people are
optimistic, they become overly optimistic and they will overbuy. That’s
why we have overbought situations. When the market is overbought, it
does not mean that it will immediately fall. It may continue to be
overbought for a long time. When
demand slows down and supply increases. The uptrend will be halted. As
the supply becomes more and more and demand less and less, the trend
turns down. Those who are
smart will sense the situation and start to unload their holdings.
Profiting takings follow suit and soon supply greatly exceeds demands.
Fear takes over; the situation becomes worse. The speed of the
downtrend gathers momentum. The uptrend may lose up to 90% of the gain. You
may alter the rivers and the mountains but not human nature. That’s why
those who do not study history are bound to repeat it. Understand the movements of the market, and you will become a better trader or investor. Good Luck.
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