The Markets Never Sleep
05/01/2007 12:00 am EST
Many investors and traders listen to the morning news and the recap of overseas trading, but do not give it much further thought. Tom Busby is quite the opposite. In his second book, “The Markets Never Sleep: Global Insights for More Consistent Trading” he explains the important impact that other world markets have on US trading, and, more importantly, provides some insights as to how one can capitalize on it.
In the early parts of the book, Tom gives some examples of how those that trade globally are better-able to adjust their strategy in response to developments that occur while the US markets are closed. This allows them to either protect their existing positions or to establish new positions that capitalize on the developments. One of Busby’s examples, which I recall from when it happened, was the response to a comment in which Alan Greenspan called market action “irrationally exuberant” during an evening speech in December, 1996. The selling in Asia started shortly thereafter, and soon spread to Europe, creating enough selling pressure to drop the Dow 150 points in the first half hour of trading. Being able to either close out long positions during Asian trading or establishing short positions clearly put some ahead of the crowd in this instance
Tom takes the reader around the world from the opening in Asia to the NY close and tells you what he watches and which markets he likes to trade. Some of the techniques he discusses will be familiar to those who have read his first book ’Winning the Day Trading Game”, but there are some interesting additions. Using homespun wisdom and personal accounts, Tom stresses the importance of trading within a regular routine, having a strategy and most importantly controlling the risk. A major part of his methodology is focusing on what he calls the “big numbers” which include not only the week’s opening price but the year’s opening price as well. Although this may seem trivial to some, consistently monitoring the price levels of the markets you trade is important, and can give you something more than just staring at a screen. Most successful traders have a clear visual image of where the major markets stand at any moment, so that even if they haven’t been watching the markets for a few hours, they can still interpret new data on the market’s position almost immediately. The final chapters of the book deal with developing a global trading plan, overcoming the psychological barriers that sabotage most traders, and the reasons why having a successful, active trading career requires maintaining balance in your life.
Most active professional traders do closely monitor the overseas markets so if you are an active trader that is not watching the Nikkei or the Dax (German Market Index), you may be giving an edge to your competitors. Giving away anything in today’s markets may mean the difference between success and failure, so if you don’t already have a global perspective, Tom’s book can help you develop one.