Why Does Price Fall After I Buy… and Rise After I Sell?S&P 500SP_DLY:SPXSurjeetKakkarWhy Does Price Fall After I Buy… and Rise After I Sell? Have you ever bought a stock, only to see its price start falling immediately? And when you finally lose patience, close your position, and take a loss, the price suddenly starts moving up! Why does this happen so often? The answer may lie in how most traders are taught to analyse charts. The Problem With Conventional Technical Analysis Most conventional technical analysis approaches teach us to buy after price breaks above resistance, confirms a bullish pattern, or crosses above a moving average. Similarly, we are taught to sell after price breaks below support or confirms a bearish pattern. In other words, we wait for price to move before deciding to participate. While these methods can work, they often encourage two common mistakes among novice traders. Why Does Price Fall After I Buy? Mistake 1: We buy after price has already rallied. Think about it. Price was available at lower levels, but we waited for confirmation. We waited for the breakout. We waited for the bullish candle. And when price finally started moving up, we entered. Essentially, we are buying after a rally has already taken place, often at relatively expensive prices. Mistake 2: We buy directly into a Supply Zone. This is perhaps an even bigger problem. A Supply Zone is an area where price has previously demonstrated that selling pressure was strong enough to overcome buying pressure, resulting in a significant downward move. When we buy after a breakout or a rally, we may unknowingly be buying into an area where sellers have previously dominated. So, we are buying after price has already moved up and potentially entering an area where selling pressure could emerge. And then we wonder why price starts falling immediately after we buy! Example 1: Why Price Fell After Buying Observe how price rallies, triggers a buying opportunity for a conventional breakout trader, but encounters a previously established Supply Zone. This is an example of why the location of your entry matters just as much as the signal itself. Why Does Price Rise After I Sell? The exact opposite happens when we sell. Mistake 1: We sell after price has already declined. We wait for support to break, a bearish candle to form, or a bearish pattern to confirm. By the time we enter, price may have already fallen significantly. Essentially, we are selling after a decline, often at relatively cheaper prices. Mistake 2: We sell directly into a Demand Zone. A Demand Zone is an area where price has previously demonstrated that buying pressure was strong enough to overcome selling pressure, resulting in a significant upward move. When we sell after a breakdown or a decline, we may unknowingly be selling into an area where buyers have historically dominated. So, we are selling after price has already moved down and potentially entering an area where buying pressure could emerge. And then we wonder why price starts moving up immediately after we sell! Example 2: Why Price Rose After Selling Observe how price declines, triggers a selling opportunity for a conventional breakdown trader, but reaches a previously established Demand Zone. Again, the location of the entry makes a significant difference. What Should We Do Differently? The solution isn't to blindly buy at lower prices or sell at higher prices. Instead, we need to change the way we look at charts. Rather than focusing only on what price is doing, we should also understand where price is trading. Before buying, ask yourself: Has price already rallied significantly? Am I buying into a previously established Supply Zone? Is there enough room for price to move higher? Before selling, ask yourself: Has price already declined significantly? Am I selling into a previously established Demand Zone? Is there enough room for price to move lower? Remember: A bullish signal does not automatically make a good buying opportunity. Similarly, a bearish signal does not automatically make a good selling opportunity. The location of your trade matters. Instead of simply following price movement, learn to understand the underlying Demand and Supply dynamics. Because sometimes, the problem isn't the direction of your trade. It's where you are entering the market. Disclaimer: This post is for educational purposes only and should not be considered financial or investment advice. Demand and Supply Zones indicate areas of previous price imbalance and do not guarantee future price movements.