Part of investing as a professional requires a proper process, or set of rules or checklist for how to do it. This process can be applied to any product: Stocks, ETF's, Mutual Funds, Currency, Commodities and even the famed Penny Stock market. The novice investor tends to be to eager to make money as they begin and less focused on finding 'good deals' and being patient for the right market opportunities where as the professional is patient and in control. The next thing novice investors due is make trades where they make money but can't tell you why the trade was made, this is probably worse than losing money on a trade that actually had a proper set up. We tend to see this a lot with the 'stock day traders' who each day have a new stock watch list and a short 1-2 minute, hurried, trade. It tends to be much simpler when one has a process and can determine areas of supply and demand before price even gets to those price levels.
A manager that has become overconfident by using a bad process is like somebody who plays Russian roulette three times in a row without the gun going off, and thinks they’re great at Russian roulette. The fourth time, they blow their brains out. - Dan Loeb, CEO Third Point LLC
Most great investing comes from buying when prices are falling or are 'on sale' when others who bought too high (chasing) have panicked and are selling. This is why many of the great investors of our time have discussed so much about this idea of process and controlling emotions while investing. I mean imagine if you were going to buy a new house in the market and asking the seller to double the price for you before you buy it. This would be insane and you would never do that, so why would you do that when buying stocks?
The image above is a current listing for a house and we'll use it as an example of retail v. wholesale pricing. What you've seen is a close to +300% rise in less than 5 years for a property with an asking price of $640,000. Now just like stocks, this property could have a 'great story' to go along with it (great new restaurants, remodeled, new HOA management etc.). As investors in financial markets many novice investors get tied to the story of a company and miss out on what the actual price chart says. While we agree the story and sentiment of a stock does have a factor in the momentum, price ultimately dictates all.
So let's assume we could graph this house over the last 20 years and create a price chart. Could you analyze it with technical analysis? Yes, 100%. It doesn't take a professional investor to realize that this current price for this asset is at a suppply (retail) price level. The smart investor either bought it in 2011, or, waits for another opportunity in another asset to which he or she can deploy their capital. As an investor we want to be opportunistic to all stocks, currencies, ETF's and commodities. It just doesn't matter, price on a chart is price on a chart. What comes next is how you enter, manage and exit that investment but if you can contol the first part it makes the rest of this a little less hard.
Hope this was of help.