How Trading, Not Analyzing, Can Make You More Money
Sometime you just need to forget about analyzing the number. Yesterday at
10:00 AM EST, the ISM number was released, and it came in much worse than
expected. In fact, it was the first decline in five months. The market initially
ran down, really quickly. I was not able to get short. However, moments later
the S&Ps were ripping higher, with Merrill Lynch buying everything in sight in
the pit. I sat there in disbelief.
“Why would you be buying on the heels
of that crappy news?”
That was Mistake #1, analyzing the news
like a guest on CNBC. Traders do not analyze, they trade.
Mistake #2, not buying everything I could
get my hands on and making a ton of $$.
If there is one thing I have learned over the years, it is this:
On the heels of economic numbers, the market
typically makes violent moves in the opposite direction. As traders, these are
gifts, provided you use tight stops. For some reason, I was more fixated on
the number than reacting.
These situations are where you take the standard HVT
rules (trade with the trend, stochastics, etc.) and set them aside for a
moment. Crowd psychology is far more lucrative to trade than some boring old
technical setup. As you may recall, the S&Ps went on an 8 point ripper, only to
stop dead at the magical 854 level. (Who says the markets are random?)
The point is simple:Â Some of the best trades we can make as traders are the
ones where we shoot first, ask questions later. If I had followed that rule
yesterday, I would have had a few thousand dollars in my pocket. Instead I was
left with the hollow knowledge that I analyzed the market and was questioning
its reaction.Â
It looks as though the other critical technical level I
have watching in the S&P futures (875) is within sight for today’s session. A
close above that level should set the stage for a move to 909. Today’s gap
higher should offer some nice opening reversal trades on an HVT basis, so be on
the lookout.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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* Indicates a level that is more significant
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