Why Price is King
Price is king when it comes to the market. Sure there are many different ways to evaluate a company and the different methods all have their advantages but the price patterns of a company still gives you the most accurate buy and sell signals.
More than any oscillator, any fundamental ratio, or any probability graph price is still the king of the stock market world. An up trending stock will still continue to trend upward until people panic and start to sell. A down trending stock will continue to trend downward until something happens.
In addition to that patterns that have historically occurred in the price of companies, such as chart patterns and candlestick patterns will continue to occur over and over again. People act in a predictable way after all. They have acted in the same predictable way since there has been such a thing as the stock market. Trading patterns in the price allows you to take advantage of this.
It also allows you to cut your losses short. Looking at price you are able to find key levels of support and resistance that if broken can mean a large move. That makes it very easy to figure out where to place stops and targets.
Now I am not saying price is the only thing you should look at when trading a stock. There are a lot of other indicators that are worth looking at as well. Volume tells you how many people traded during the day. A strong uptrend with low volume may indicate the trend is not that strong after all.
Other indicators such as oscillators and financial ratios may be good secondary indicators. Looking at a few different things about a given security normally works best. But at the end of the day price is what matters. You do not make money based on how much debt a company has or what the oscillator does; you make 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 combination.