continuing: how to read and ride the wild market
“News, comments and opinions are nothing but loaves of ‘processed’ information. They are not original as in one is one; two is two; that’s raw. You’ll always find elements of bias, amplification and at times distortions in these statements or representations. The choice of words and numbers, points of reference can make an actual situation appear very different.
Sometimes, it may sound optimistic or at times pessimistic, but it really depends on the points of reference. These points of reference which are often used can be pretty subjective and quite up to ‘preference’ and wish. You may say, for example, that at 10% unemployment rate it’s an improvement because you are comparing with the previous high of 11%. On the other hand, you may say that it’s still bad because it’s a double digit. Both statements though referring to the same data but with the play of words and different reference points, a fact becomes a perspective when it reaches the recipient; its being processed.”
“But do I have a choice? Everybody needs the news to play the market. I still think my mama was right. She told me to enrol for speed reading course during my school vacation. The number of news on the internet and all those research emails that I received everyday are just overwhelming me. Mama’s always right.” Rex sobbed. Just when his tears were about to roll down, he wiped it off with his huge paw and said with a twist of mood as temperamental as the market he was complaining a moment ago, “If what the great genius, Albert Einstein said is true; Success is 10% inspiration and 90% perspiration, then I should be getting really close because I’ve been perspiring a lot since I started trading.” he giggled.
“Rex. I think what you are perspiring cold sweats, not the kind Einstein was referring to. You’re perspiring because your close mate is giving you a feedback on what it feels about the positions you’ve taken. It’s scared. It’s apprehensive about them. It’s not at all comfortable with your trade positions. All these because it sensed that you are not confident; that you will be shaken out of position any time.”
“Ssshhhh! Keep it down please. Are you referring to my girlfriend? But she doesn’t know a thing about me trading.”
“Now look who’s henpecked? We are referring to your subconscious mind. Why are you so jittery?” We teased.
“Ahhh... you mean that little talking voice in my head? But how do you suppose I get the confidence when the market is so fickle with all the good and bad news coming in together. It’s not as if I can control them. At best I can only play by whatever comes my way. Besides, those uncertainties that the experts had cited seem genuine, who could tell the future?” Rex reasoned, “but I think I am kinda like the excitements...hehe.” and grinned.
“Rex. We hear you and obviously you and the big players play by a set of very different rules when it comes to reading the market direction.”
“Are you implying that in the face of all chaos and randomness, they can tell the market direction? What preposterous supposition!”
“Use your brain Rex. Haven't you realised that after all the confusing news and price movements, when you finally take a look at the chart, strangely enough, these chaotic movements somehow has a direction. It’s what the chartists refer to as trends. Can't you see that there is actually order amid this seeming chaos? And this order, we would say once and again, is the result of the ‘silent’ buying activities by the big market players who hold by the vision of the economic outlook. An economy can only expand or contract. Make it simple for yourself really. It either expands or contracts. Only the pace varies, but the economists use different jargons to describe the process of growth or decline and the big market players use it to bully the less market literate with their mighty financial muscles that rock the prices to persuade the people that those ‘concerns’ of the economy or whatever are for real. That’s why most people find it bizarre when the market moves against what seems to be contradicting the ‘news’ or perhaps the actual state of the economy. They are buying despite all those ‘uncertainties’. The truth is, unlike stock market trends, the economic trend is a lot more stable and predictable. And they know it. They are using it Rex.”
“But are you sure the economy really is a ‘dependable’ signpost?”
“Rex, your understanding of how the economy works and some common sense will tell you how dependable it is.”
“Damn it. I knew that was it. I’ve long suspected that. I knew something was just...fishy about the whole up-and-down swings. And it reminds me of my mama again. She actually warned me not to skip my economic classes when I was in high school. She’s right again. She knew I would trade the market one day.” Rex sobbed.
“No worries Rex. You are not going back to school nor need you dig into your old texts. StockRats never like to attend school either and we wouldn’t want you to fall asleep each time you flip the pages. We would rather chew on wires than to write a book on economy. As we promised that this book is for everyone, we are going to take it at street level, discard jargons and terminologies and cut all craps just so we fit only the stuffs you need to know in no more than 500 words. That’s a deal. Get ready for your economic crash course. Here goes:
....to be continued.
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