One of the toughest challenges in trading is “listening” to or identifying market direction. Regularly we are almost convinced to recklessly predict instead of identifying market direction. Or, we suspect we already know what’s going to occur, so we simply jump in and wing it.
Listening, truly listening to the heartbeat of the Stock Market, with your complete being is a talent, and one of the most critical and challenging things you will master.
Identifying Market Direction
Here are Ten “rules” for listening to the market.
Stop the Chatter! It is hard to look for signs of market direction and talk to yourself at the very same time
1. Stop the internal gossip. Target the trading task at hand.
2. Give yourself time. Grant yourself “permission” to let the Market Direction speak to you. How does it look, is there an apparent bias? Is a trend already in play?
3. Let the rhythm of the market direction come through. You communicate with the Market through your charts. Look at them. Nod when you agree. Hear your charts – They’re chatting with you.
4. Remove diversions. Good listening means being prepared to switch off the television, close a door, or stop reading your e-mail.
5. Give your trading your complete attention. Hook up with the Market Makers. Particularly if they’re causing a change in market direction, or doing something that you intensely disagree with, take a minute to stand in their shoes, have a look at the situation from their viewpoint. Do you still disagree?
6. Wait. Some market direction moves take more time to find their groove and make themselves more apparent. Give the Market time to get it out before you jump in.
- Study your feelings. If what the market direction is “exclaiming” creates an emotive reaction in you, be particularly careful. When we are indignant, scared or upset, we frequently miss vital parts of what’s being shown to us.
- Don’t presume or predict. Regardless of whether you have a move go against you, respect Market Direction. If you interpret a bad trade as a personal attack, regardless of if turns in your favor, you could be building terribly unacceptable habits!
- Be careful. If uncertain stay out. A market direction move should be obvious to you and your methodology. If you find yourself hoping, get out!
- STOP talking! This tip is both the 1st and the final point, because all the other guidelines rely on it. Nature gave us 2 ears and only 1 mouth, which is a hint that we should “listen” ( watch ) 2x as much as we “talk” ( act ).