I have the tongue out of my cheek for a serious note this week.
Recent volatility has given rise to all sorts of forecasts about where the markets are heading. Six weeks ago these opinions were very much doom and gloom. More recently they have taken a turn, with many suggesting that we’re on to the next leg of the bull market.
Whilst many of us base our decisions on technical analysis, our opinions can still be influenced by ‘outsiders’ – namely other traders and the media. We need to guard against this.
I recently signed up to cable TV and have started to glance at finance shows with interest – including one in particular that I won’t mention. I will say that many of the so-called analysts or journos in the media, apart from being doom and gloom merchants, do not have much money on the line. So when stocks head high they look for reasons for them to come down. One of the reasons is that they missed the boat.
A characteristic common to some journos and technical analysts is that they take strong views. With most journos, the views are general. They don’t have a handle on when the doom and gloom might set in.
Saying that it’s likely to happen is all well and good, but knowing when is the critical thing. When it comes to trading, as we know, timing is everything.
My advice to novice investors is to have a view about what is likely to happen but beware of holding overly strong views. Always keep in mind the prospect of another scenario and what the consequences might be if it were to play out. Plan your trading for the probabilities, but also for the ‘what ifs’.
Enjoy the ride!