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The psychology of resistance and support levels.

January 2, 2011

I write about the psychology of investing for all investors; those that read this blog for interest (most), those who read  my blogs and books about investing and incorporate some of my ideas into their existing system of investing (some), and those who study my blogs and books seriously and recreate themselves as a new “wave” of behavioral investors. Today we will expand our psychological understanding of Support and Resistance for the benefit of all three groups, but especially to support the third “wave” because they have the “guts” to suspend traditional rules of investing and try my ideas. We humans tend to support old practices and resist new practices. This is just the nature of the “Beast.” Humans are creatures of habit. Progress is very very slow for 90% of us and very fast for 10%! You can place yourself in the 10% by looking in the mirror and asking: Did I read and understand Dr. Kinarthy’s last posting in 2010 on the 10% rule? If your answer is Yes, you may be in the new “wave.” If you understand the following paragraph you probably are already in the next wave! (where the big money is).

Traditionally in investing Support (S) is when the stock price reaches its lowest price for the cycle and is supported by the system to reverse itself and start climbing up.  Resistance (R) is when the share price reaches its highest price for the cycle and further climbs are resisted by the system for that cycle. Third “wave” behavioral investors who did their homework sell when the stock price repeatedly crossed all S levels on the way down; they buy when the stock price repeatedly turns around and climbs again on the way up. The psychology of S and R is so simple that anyone can learn to estimate REVERSIBILITY in ANYTHING (e.g., relationships, financial situation, educational excellence, cosmic events, shares graph, health, happy feeling, death, yes death too!).  But, here is the “Catch”: Ever since Dr. Jean Piaget, the swiss psychologist who discovered Reversibility and supported its use in Educational systems, the world developed immense resistance to using it.  People feel insecure when they suspend traditional rules of culture and religion and try “magical” ideas. We humans tend to support old practices and resist new practices. This is just the nature of the “Beast.” Humans are creatures of habit. Progress is very very slow for 90% of us and very fast for 10%! You can judge yourself by asking yourself: Do I know for sure that today we have simple scientific means of estimating with high probability reversibility in situations or events? Study the R Concept to the hilt. Life without knowing when “shit” ends is a pain in the ass!

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