February 27, 2008 at 2:38 pm | | Comments 2

Formulating Your Market Opinion

The Market Wizards books by Jack Schwager are in my opinion among the best trading books out there, as the interviews with top traders simply offer so much insight. I make it a habit to re-read these books semi-regularly because of the insights they offer, and it seems every time I read them I either pick up something new or am reminded of an important lesson.

One interview with Tom Baldwin contained a comment which I found interesting, especially given the clear lack of enthusiasm in Baldwin’s answers. Although Baldwin seemed to come across as stiff, arrogant, and basically anything but friendly to Schwager, he still offered some food for thought.

When asked how he learned to trade, Baldwin replied with this answer:

…All day long I stood there and developed an opinion. As I came to see that my opinion was right, I was reinforced, even if I didn’t make the trade. Then when I traded, I knew from standing there six hours a day, every day, that most of the time I was right. I would see scenarios develop over and over again.”

Baldwin’s comment is probably an oft-overlooked statement, and yet it carries some real value. “All day long I stood there and developed an opinion.” That answer isn’t anything flashy, but yet it’s so accurate. Your market opinion, your feel for the tape, your instinct….it all comes from those countless hours in front of the screens. Whether you’ve got 0 or 10 positions on at any given time, you are still soaking in the data and gathering important info which you’ll call upon sometime later.

Trading the market can be very exciting, don’t get me wrong. Pulling some fast money out of a stock and nailing a trade is a real thrill, and those of us who get to trade daily know that. However, newbie traders are often surprised at how boring the market can be at times and how much waiting is involved. Trading doesn’t mean constant motion and pure adrenaline from opening to closing bell. A lot of times it’s monotonous and dull, and yet it’s still wise to observe.

That trade you’ve been stalking might finally come around and trigger an entry, in which case you’re back on the wagon. And on the other hand, you might have days where you sit for hours on end without ever pressing a button. The best traders know this and are willing to wait when conditions warrant.

Observing the markets, watching stocks, gauging order flow and sticking close to the tape in general will help you tremendously. You’ll learn more about how particular stocks move. You’ll see where mistakes are made by others who bought or sold at the wrong times, and of course you’ll learn a lot about the role which volume plays in the action.

If you want to be a good trader, commit to putting in your hours each and every day. If you get tempted to overtrade and push buttons when you know you shouldn’t, then step away from the screen. Otherwise, formulate your market opinion by constantly staying close to the action. You won’t regret having a free ticket to the show.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

Trackbacks: 2  |  Trackback URL

  1. From Patient Progress | on May 22, 2008
  2. From Don’t Push When You Can Pull! | on Aug 27, 2008

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