When Markets Talk To You, Don’t Just Sit There
One of the best trading edges you can get is to listen to the markets
when they talk to you. Last Thursday, April 1, 1999, was one of those times.
Let’s look at what transpired:
- The market made a 200-point downside reversal the previous day (Wednesday).
- We were going into a three-day weekend, when most traders like to
go home flat. - The market would be closed when Friday morning’s economic reports
would be released - The situation in Yugoslavia was deteriorating by the hour.
When you add this all up, common sense would suggest that: 1) the market should
have dropped for the day and, 2) you had to be crazy to go home long.
Instead, the S&P futures rose over nine points. What that meant was that the
market was saying loud and clear, “I don’t care about yesterday’s sell off;
I don’t care about the long weekend; I don’t care about tomorrow’s economic
reports, and I don’t care about Yugoslavia–I’m heading higher.” Today, as
the above four situations were behind us, there was nothing “hanging” over
the market and it did as it “said” it was going to do: It exploded higher.
A well-known trader featured in the book “Market Wizards” once said that
two-thirds of his profits came directly from the times he entered markets that
traded in the opposite direction of how they “should have” traded. He said when
he learned to listen to the markets and not to attempt to impose his personal
beliefs on them, he became a much more profitable trader. We suspect this
gentleman had a very good day today!
If you want to improve your trading even further, constantly ask yourself, “What
is the market telling me?” Many times, the answer will be obvious.
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