Do your own market research, here’s why
The market broke through resistance
levels today. The S&P and Nasdaq both put in nice performances and
made new highs. Semiconductors, energy, natural resources and housing all had
strong moves today. I’ve also noticed some nice breakouts in all of these groups
in the last week or so. The market has problems. Breadth and momentum are two
big ones, but so far they haven’t stopped this slow trudge higher. I’ll favor
the long side with great caution until the market tells me different. Today I’d
like to talk about market research.
Several years ago, trying conduct any real market research was an extremely
difficult and time consuming thing to do. In fact, many questions a trader might
have about the market they simply could not research themselves. Market
information was either too difficult to find, or too expensive, or both. Even if
you could get all the information you wanted, it would be incredibly
time-consuming to go through it. The only way to learn for the individual trader
was through books, seminars, videos, or other educational material. If you were
lucky, you’d be able to find someone who’d had the same questions as you and had
answered them in their research. If you couldn’t find a book or article which
addressed your question, you were pretty much out of luck.
Today that has all changed. There are many different data vendors and research
tools available for traders at reasonable costs. Much of the research that I
publish in this column comes from TradeStation or TC2000. (I also use
spreadsheets and macro tools.) What traders should understand is that market
research is not a waste of time. In fact, most of the research I have done on
the market in recent years has been more valuable to my own personal trading
than anything I have found in a book or article.
By doing your own research you are able to gain a better understanding of the
concepts you are studying. One idea tends to lead to another. The answer to each
question many times leads to several more questions. It becomes a never ending
cycle with potentially great rewards.
If you’re new to market research, it may take a while before you come up with
the questions to ask that can lead to great revelations. Remember, anything
you’ve learned up until now can be questioned. Conventional wisdom is frequently
wrong. Patterns don’t always work as well as advertised, and indicators aren’t
always that reliable. Using old indicators in new ways can often produce
surprising results as well.
I would suggest that anyone who studies the market should learn how to use some
of the research tools that are now out there. Dedicate some of your book-study
time to market research time and the results will eventually pay off.
Best of luck with your trading,
Rob
For those who may be looking to expand their
knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in generating trading
signals for spread trades.
Rob Hanna is the principal of a money
management firm located in Massachusetts. He has spent the last several years
developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.