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insider tip's
to navigating
the financial
markets1. Discipline
Traders need to maintain a consistent approach to the markets. Nomatter how much preparation goes into trading, if you do not prac-tice a consistent level of discipline in trading, then you can become1 lost. All the planning in the world will not help if you fail to use it.
Before trading every week, it is important to develop a strategy tohelp guide a trader through the trading week. This game plan alertsdiscipline a trader to economic news, trading strategies, support and resist-ance, and any other factors that can cause the markets to move.Going into a trading week blind can cause losses that could have oth-erwise been avoided by simply spending an hour analyzing currentevents and economic data. Trading is a business and a businesscannot operate without some sort of plan. Taking the extra time tomake a game plan for every week can make a trader more success-ful.
2. Adapting to Changes in the Market
The markets change and you need to be prepared to change with
2 them. The markets are fluid and dynamic. Patterns that may be eas-ily identifiable from one year ago may not be recognizable in the mar-ket today. Discipline is a virtue, but stubbornness is a vice. You needto be able to change with the market, and be prepared to trade as theadapting market is telling you to trade it without having a bias.
When it comes to trading, having a market bias is not necessarily abad thing. It can be a good thing if it is used correctly. For example,if one's research, market analysis, and bias support a bullish positionbut the market briefly heads south, the bullish bias may keep onefrom falling for the short play that would not pay. Or, the bias maytemper an impulsive urge and keep one on the sidelines and out ofthe market until further analysis. Having a market bias becomes aproblem when and only when one acts on the bias alone, behaving asif he has a crystal ball.
How then does one form an opinion of market direction without beingshackled to that opinion and misled by it? How does one hold one'sbias in check so that one can adapt to constantly changing marketconditions and read correctly the true course of the market? It's notalways easy, but it can be done by letting the numbers lead the way.Let us explain with some specifics.
During much of 2005, many traders had a bearish bias. There werea number of good reasons for having a negative view including a bullmarket that is overstaying its welcome, war and political unrest, nat-ural disasters, a soaring national debt, rising interest rates, escalat-ing oil prices, and a housing boom that shows signs of cooling ormaybe even bursting. Nevertheless, in spite of these troublesomeissues, throughout much of the year prices on Wall Street haveremained strong and the futures indices have been positive. TheDow hit 10983.00 in March and in late July the S&P Futures hit1255.00. Within days the Nasdaq touched 1648.50 and in earlyOctober the Dax Futures hit 5167.00. In fact, the Dax Futures, aGerman index that is traded on the Eurex Exchange, exhibited thegreatest strength of any of the futures indices and rose over eighthundred points from its yearly open. Clearly, for almost half of theyear, in spite of anyone's bias, many financial areas were exhibitingstrength. So, how did a profitable trader respond when the S&P hitits high in July or the Nasdaq in August? Did he defy logic and stayshort as the S&P rose above the 1250.00 price just because he had abias? Not, if he wanted to make money. 3. Using Major Market Indicators to Manage Your Portfolio
The S&P is the standard by which the professionals are judged. Anaccurate estimation of the market's direction should also show thedirection of your portfolio. The Stock Market is a mirror of society3 and reflects the economic pulse of the world. Most traders andinvestors are inundated with too much information and have no wayto take advantage and profit from the input.It is very important to understand the code. The impact of informa-market tion in the markets can drive the markets higher or lower. Being ableto understand and react to this information will determine the profitindicators or loss the trader will acquir... [download for more]
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