Find structural tendencies of stocks and markets

Find structural tendencies of stocks and markets and build your trading around them.

Structural tendencies are inherent ways in which stocks behave under certain circumstances. Many of these tendencies are enduring tendencies and do not change easily and some have persisted since markets were established.

The structural tendencies are created by the nature of the market, trading practices,tax and exchange rules, technology, different expectations and interaction of market participants and capitalisations level.

If you find a structural tendency then you can develop an edge around it. That should be the first starting point for beginner trader. While certain structural tendencies of market change , not everything changes. Smaller tendencies can change due to technology change but many big tendencies persist.

Momentum Burst is structural tendency of market. You can go back to market history and see that it existed since start of the markets. It is a structural phenomenon where when stocks move, they move in 3 to 5 days burst moves, and you can build a small edge around it and with right money management techniques you can exploit it to make millions.

Mean reversion is structural tendency of market and again a small edge but is exploited by frequent traders. When stock go down a lot or up a lot in short time frames then they tend to fade that move. This tendency of market has been exploited by swing traders for many years.

PEAD is basic structural tendency of market and it can be exploited to find longer duration trades. PEAD is post earnings announcement drift. Stocks move in direction of earnings surprise for next 1 to 2 quarters. trading stocks with big earnings surprise is gain a popular trading technique used by profitable traders.

Many business fail and this is fact of life and has not changed and will not change . This creates a structural phenomenon in market where every year number of listed stocks file bankruptcy. WTSL is an example of this. Identifying such possible bankruptcy plays will give you a small edge which can be exploited with good money management to short these companies.

These are just some examples of structural tendencies of market. If you are serious about your trading and making money then learn to exploiy structural tendencies of market.

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