<One more thing ... the technical aspects of investing/trading seem far easier to refine and master than the psychological aspects
There is a rhythm to the moods of humans, from calm, to happy, to euphoria.... climax greed, and then fear, panic, depression... and desolation... desperation....
True, the technical aspects become "logical" because the above emotions are translated to volume, highs, lows, ranges, bands, standard deviation, averages, etc. etc.... But in its very origin, the decisions to buy and sell are made based on human emotions.
True, program trading are like turbo boosters, (the old type), that accentuate and exaggerate such rhythm, (my opinion).
When turbo boosters first where installed on engines, you had to be careful... you accelerated, and for a brief instant, nothing happened, then, all of a sudden, the turbo would kick in, and zooooom a great acceleration would take effect...., then they had certain inertia, you lifted the accelerator... and the damned thing kept on going....
Stock graphs are the graphic representation of these moods, easier to see in a fast moving stock of course.... just take a look at AMAZON, and take a look at some of the comments of the same thread.
This is the real usefulness of investment boards, like a window to the emotions of the participants.... a small sample of what is out there, add a little TV promotion or exposure, (CNBC), and everything becomes magnified. One must determine if such sample is of any significance, or representative of the entire universe, be this the market at large, or a specific stock.
It is like putting a puzzle together.
After all, the market is formed --by people, buyers and sellers making decision, sometimes, decisions under pressure.
The key (trick), is to learn how close these graphs relate to the emotions, and at what point... these emotions reach exhaustion... (the top, or the bottom).
Trend recognition is a powerful tool because it smoothes all those spikes and valleys, and gives the investor a degree of certainty, (within reason).
The above, combined with the selling of call options has got to be the closest thing to a free lunch. (provided of course it is done with quality companies, NOT promise/story fleas).
And to be sure, I am certainly not discounting the value of T/A, on the contrary, T/A gives you the entry/exit point to both investments and speculative trades. A fine-tune set of tools... but rhythm is very important, and each stock has its particular rhythm. A reflection of the mood of the participants in that particular stock.
My job is to attempt to recognize these rhythms, use T/A to tell me when is the optimum time, to enter/exit, and then separate myself from the "emotional" part, once I enter the trade... I need to be a machine, with two objectives: First, make money. Second, if it is evident I made the wrong decision, get out, without hesitation.
Now... before all this, I need to have a picture of what the trade should look like.... and if it is not looking as though it will happen, there has to be plan "B"... exit. the point here is a plan.
And of course.... "Whatever works for you".
p.s. At present, I think the market is going through some kind of "PMS of the masses", as it seems not to be capable of making its mind in its direction, and all the while, you kind of sense that there is an explosion about to take place.... I can't figure out which way is going to go.... I am beginning to think it will resolve to the downside.... but a I can not be certain. |
