Why is price king?

Price is king when it comes to the market. Sure there are many different ways to evaluate a company and different methods have their advantages, but a company’s price patterns still give you the most accurate buy and sell signals.

More than any oscillator, fundamental relationship or probability chart, price remains the king of the trading world. A stock trending up will continue to trend up until people panic and start selling. A stock trending down will continue to trend down until something happens.

On top of that, patterns that have historically occurred in company prices, such as chart patterns and candlestick patterns, will continue to occur over and over again. After all, people act predictably. They have acted in the same predictable way for as long as the stock market has existed. Trading patterns in price allow you to take advantage of this.

It also allows you to cut your short losses. Looking at the price, you can find key levels of support and resistance that, if broken, can mean a big move. That makes it very easy to figure out where to place stops and targets.

Now, I’m not saying that price is the only thing to consider when trading a stock. There are plenty of other indicators worth looking at as well. The volume tells you how many people traded during the day. A strong uptrend on low volume may indicate that the trend is not so strong after all.

Other indicators like oscillators and financial ratios can be good secondary indicators. Looking at a few different things about a given value usually works best. But at the end of the day the price is what matters. You don’t make money based on how much debt a company has or what the oscillator does; you earn money based on where you sold the stock and where you bought it. The market is that simple using price patterns is simple, it’s a perfect match.