I get emails on this topic!

I was impressed by the
way the market shook off yesterday’s reversal
and this morning’s
rough start (blamed on Microsoft) and rallied higher. That said, volume came in
lower than during yesterday’s selloff, so that is a bit disappointing. While the
market continues to hang in there, I’ve still yet to see anything to get me
excited.

In my last few columns I’ve focused a fair amount on the market. I’ve tried to
show some of the things I’ve been seeing that have led me to believe the market
is in a topping process. I believe the next big move will be down — not up. I
also believe the down move could begin anytime in the next couple of months.

I received a fair amount of emails from people who both agree and disagree with
me. I seem to get more emails when I write about market direction than I do when
I write about trading. So today I am going to revisit an old topic — one that I
have discussed several times that never loses its importance. The topic is
market opinion and what it is worth.

My contention is that one’s market opinion is worth very little when trading. No
matter what or how you trade the most important thing you really need to know is
your buy and sell criteria. You then need to have a plan to help you determine
position size, amount of risk, and management of your trades. These things
should be your primary focus. These are the things that will make you money.
What you believe the market is going to do is of minor importance compared to
this and should be viewed as secondary.

Many traders lose sight of this, though. They spend far more time reading other
people’s market opinions than they do studying and refining their trading
techniques. This should be reversed. Spend the majority of your time focusing on
trading and the minority on the market.

Market opinion should simply be used to establish a trading bias. My bias helps
me to determine how aggressively I want to trade and the level of risk I am
willing to take on for each side of the market. The fact that I believe we are
in a topping process causes me to trade the long side with more caution. While I
believe the next big move will be lower, that doesn’t mean there isn’t room left
on the upside and that individual trades can’t succeed. On the short side, while
my opinion is bearish, there has been very little in the way of trades meeting
my short criteria. Therefore, it is simply a matter of looking for opportunities
and being ready to pounce when they arrive.

Thinking about the market will make you a great market watcher. Thinking about
your trading will make you a great trader. Focus on your setups and your
execution. When the market becomes more or less favorable for your trading
strategies, you’ll know it just by watching your trades.

Best of luck with your TRADING,

Rob

RobHanna@comcast.net

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.