Trading times, tough times - a strategic look
Times are really tough for traders all over the world and the signs are all over the place. First and fore most, the market is retracting to points of economic worry, which means that it will have a momentum affect on one or more platforms all over the investment world. When looking at the current situation, the red drop in market confidence, showing palpable in negative figures all over the world. When talking about the market, confidence is built on the pillars of economic performance, government attitude and the general technical analysis of the current market.
One of the things to worry about, during these tough times, is the instability of the levels of confidence. Yes, the market can rally when the government pulls out some sort of a reprieve package or there seems to be an increase in consumer activity, but market worry is an overarching and very palpable factor in this. All you need for is one market or a section of an investment group to drop out or start selling, and then the worry will turn into something real.
The momentum will fall and the market will start tumbling. You also need to look at the strength of currencies that are heavily attached to these markets and you need to look at the general attitude of large central banks. These are the things you need to factor in when looking at the strategic side of things. You also need to be unconventional when it comes to your trading, because rushing and riding trends has been proven to be a bad option Buy when everyone is hesitant and pace yourself when you see the market move along in a single unified direction.
Following the trend can be a good thing sometimes, especially when market and global economic performance is above board, but when times are tough, you might need to fight the crowd and do things another way. Also, when looking at your portfolio, look at the levels of diversity that are there, and these times might call for you to shrink that portfolio into something you can effectively micro-manage. Sometimes, having a portfolio that is too large could cause you to incur losses from all sides of the market. In these times, you might want to scale down and rebuild your portfolio again - a bit at a time.
Also, you might want to spend a little more time on the fundamental analysis of the market, because for now, most eyes are on world events, the new US presidency, the rescue packages and the rest of the world. Looking at the outbreak of H1N1, global wars and the situation of oil prices, these are some of the things that can affect how market psychology behaves. These are really tough times and you need to rethink the methods that worked before - because they might not work now. With these thoughts and options, you might be able to ride out the economic storm, maintain the equity of your portfolio and prepare yourself for better times ahead.
One of the things to worry about, during these tough times, is the instability of the levels of confidence. Yes, the market can rally when the government pulls out some sort of a reprieve package or there seems to be an increase in consumer activity, but market worry is an overarching and very palpable factor in this. All you need for is one market or a section of an investment group to drop out or start selling, and then the worry will turn into something real.
The momentum will fall and the market will start tumbling. You also need to look at the strength of currencies that are heavily attached to these markets and you need to look at the general attitude of large central banks. These are the things you need to factor in when looking at the strategic side of things. You also need to be unconventional when it comes to your trading, because rushing and riding trends has been proven to be a bad option Buy when everyone is hesitant and pace yourself when you see the market move along in a single unified direction.
Following the trend can be a good thing sometimes, especially when market and global economic performance is above board, but when times are tough, you might need to fight the crowd and do things another way. Also, when looking at your portfolio, look at the levels of diversity that are there, and these times might call for you to shrink that portfolio into something you can effectively micro-manage. Sometimes, having a portfolio that is too large could cause you to incur losses from all sides of the market. In these times, you might want to scale down and rebuild your portfolio again - a bit at a time.
Also, you might want to spend a little more time on the fundamental analysis of the market, because for now, most eyes are on world events, the new US presidency, the rescue packages and the rest of the world. Looking at the outbreak of H1N1, global wars and the situation of oil prices, these are some of the things that can affect how market psychology behaves. These are really tough times and you need to rethink the methods that worked before - because they might not work now. With these thoughts and options, you might be able to ride out the economic storm, maintain the equity of your portfolio and prepare yourself for better times ahead.
