I recently received several email newsletters from trader friends who shared their points of view about where markets are now and where they’re going, recalls Bob Lang of Explosive Options.
Their opinions varied, because often we see things for what we want them to be rather than for what they really are. This is why it’s important to look to the technicals to understand future market action. Wishful thinking is not a trading strategy.
Opinions versus technicals
Of the seven emails from my friends, three were bearish about future market action, two were waiting (hoping?) for a bearish turn, one was non-committal and the other was bullish.
Now, seven is a pretty small sample size to accurately assess market sentiment. But what I find interesting is the range of opinions and the strong convictions behind them. There is no doubt that my friends are certain about future market action, whether it’s up, down or sideways. One of them is bound to be right.
Here’s the rub: our job as traders is to make money, not be right all the time. And trying to time the market? A broken clock that is right twice a day – not a great model to follow.
What matters most is understanding the writer’s intent. Is it just propaganda or entertainment? What data are they basing their viewpoints on? Will they brag until the cows come home if they turn out to be correct? (Probably.)
Learn how to read charts
The funny thing is you don’t need anyone to provide you with guidance. The market will always tell you everything you need to know about current and future market action.
This is where learning how to read charts comes into play. Technical indicators tell a story. Experienced technicians look for trends and patterns that repeat over and over again, and they use high-probability analysis to form an educated guess.
No approach is 100% perfect, but as a technician, I feel more comfortable building a case with strong technical evidence instead of blindly following a guess based on criteria I might not understand. This strategy has served me well over the years; I urge you to try it, too.
Learn more about Bob Lang at ExplosiveOptions.net.