How often we wonder about what happens during trading hours. We spend a lot of time on message boards, chat rooms, news and corporate web sites, asking friends and colleagues, subscribing to the stock picks, hearing rumors and looking for everything else to get inspiration. Ask yourself – what a great advantage it would be to know in advance the direction of the trading. Certainly, the answer to this eternal question is self evident and does not require further explanation – by knowing the direction we can assume the possible direction of the price and try to profit on it.

At first sight it would seem obvious: the stock price falling means that traders are selling shares, hence the direction of trading is down. It's time to short stock or close a long position. On the other hand, the stock price going up means a buying sentiment and therefore the direction is up. It's time to open a long position or cover a short one. The majority follows these principles. Usually each market turnover is accompanied by an explosion of bashers and hypers activity on the street as well as analysts and observers speculating on where this market is going. Everybody tries to find the new proof that this is the last chance and a great opportunity to make lots of money and to attract the maximum of followers to support their personal position in a stock.

Unfortunately, market behavior is a lot more complicated. The simple truth is that the majority loses money. The story we most often hear is how the trader shorts a stock and it goes up, then buys a stock and it goes down, finally deciding to hold falling stock and the company goes bankrupt.

The impatient reader would say: “How can I be profitable through this tremendous volatility? Give me a hint if you are so smart!” Just read the above example again and look at it from a different angle. THERE WAS A BUYER who covered the shorted stock at the right time. Then THERE WAS A SELLER who sold shares at the right time. The unhappy trader in our example was wrong both times on guessing the direction of a stock. Therefore the DIRECTION of the stock remains the most important thing. The question is how to find the right direction?