Foreword
Strength and Weakness are must-know terms when it comes to trading. Understanding what they are would allow you to know what’s happening when some experts or analysts are talking about something like:
“Oh, the stock is in Weakness now. Do not chase it. “.
So, here we are. This article would help you know what is happening when those experts and analysts are mentioning these two words.
What are Strength and Weakness?
Often we use “Strength” and “Weakness” to describe the momentum of the security’s price. When the price is up and continues rising, we would say it is in Strength. Similarly, when the price is down and continues declining, we would say it is in Weakness.
How does the momentum forms?
Often, momentum forms when the demand/supply of a stock overwhelms the other one. It then continues its trend until the demand equals the supply. The trend generated by momentum usually lasts for a while since people’s emotions will spread and affect others to follow their movements, just like a virus.
What are they interpreting?
We live in a world with a binary system. The word Up was invented when comparing to the word Down. So as the Strength and Weakness are, and they come in pairs to describe the price action. When saying the price is in strength, it means that there are more buyers than sellers at that price. Similarly, when saying the price is in weakness, it means there are more sellers than buyers at that price.
Final Thought
Strength and Weakness are must-know terms when it comes to trading. Make sure you understand what they mean before you start trading with real money.
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