Did you ever thought why it is so easy to burn you food? Why it takes 20 minutes to bring food to warm temperature and only 1 minute to burn it? Answer is hided in absorbing of energy.
We like to think in linear term, more A gives more B. But laws of nature are different. In cooking there is phase transformation, in finance elliot wave principles. Our perception is often mistaken. There are phases in which subject need to reorganise internal structure to upcoming shape.
Just like there is something standing between buying your product by customers and producing goods. There is distribution of goods. You can?t produce something just for sake of producing. You need to take into account that somebody somewhere needs to want it. If faster he can buy it, than better.
Traditional model of supply and demand is too simple to explain this terms, thats why I?m gonna use elliot waves. Elliot waves is pattern of stock prices which suggest next movement in particular price.There are some rules which needs to be followed to predict next moment. Predictions are based on trends of human nature, more specific – sequence of human emotions, proportional waves of hope, denial and optimism to each other.
And just like during recession in ?30, society demand movies like Godzilla and King Kong, stock prices were dictated as well by negativism. People didn?t see future clearly. Something was wrong, nobody just knew a that time.
Look at charts as effect of battle. Between this who see the future positively, second who see negative patterns and theses who follow others. Three parties want to be right, but there can be just one winner.
Traditional model doesn?t have space for doubt. We are creatures of doubt. We want to check everything. It is our need to be in control. We are managed by trends. Look at your decisions about buying stuff. Not always but sometimes they are influenced by others.
One thing consistent about buying and selling stocks is that we can buy stock early at low price but later more people need to join party and buy it as well. That is how yo make company grow. Many people need to invest.
Preciously I mention the phase transitions. When you have one block of ice, and you want hot water form it. First you will have ice-water at 0 celsius degrees than after all water is melt you can bring it up to boil. There is sequence which needs to be followed in order to change physical changes.
Here is very interesting conclusion. If you are boiling something in water, you cannot burn it. Environment will not allow for that kind of operation. But if you remove water and steam it, possibility of burning is much higher.
When you are over the edge it is really easy to fall in to. It is the same easy to step to safe place. When you have accurate map, world is yours. Some transitions seems, linear, but they are not. Sometimes you need to melt something, sometimes everything is fine you just need more time, different environment.
Let this metaphor about finance and phase transition be a your companion. Somedays we don?t have possibility to change or predict. Then is moment for changing environment or change of strategy. If you look at just one point at that charts you cannot tell anything. With exploration of different variables you get experience when something is working or not and possibility to understand and grasp predictions, when and much absorption or alignment with reality you have.