Why Does the Market Move in Waves?

A common question people have when new to trading or reasonably new to trading is why does the market tend to move in waves. There are a number of reasons so let me discuss below.

Firstly the market tends to move in waves whether in a uptrend or downtrend or sideways because buyers and sellers are arguing about price, when price moves higher beyond a area where buyers are comfortable they tend to sell ( which pushes prices lower ), when prices are moving higher on a market below a area where sellers are comfortable continuing to sell they tend to sell ( which pushes prices back higher ).

These types of moves traders and investors take advantage of once a trader or an investor becomes more professional. In some instances however this is not always the case. Sometimes price is overvalued based on fundamental reasons or macro or vice versa which causes more extreme moves on markets than usual and some markets are based on assets that have limited supply meaning while prices can decline over time prices on these types of assets tend to rise due to the nature of the fiat debasement systems we live in.

In other words, not all markets are equal, an example of this could be $GOLD and $SILVER, while prices do go up and down, over time they will tend to rise due to the limited supply of these assets being priced against fiat which is slowly ( usually slowly ) every year being debased.

A simple approach that works quite well in trading for traders including myself is approaching the market from an accumulation approach, buying assets with limited supply or high demand and dollar cost averaging into them on pullbacks to the downside.

An example of this could be $SILVER, I love silver, so buying $SILVER when prices pullback decently like lets say over 15% or more and continuing to buy small amounts until the prices turn back in my favor. This method works really well, especially when approaching the market from a long term view point.