Trying to Outguess the Market

Traders have been trying to outguess the market since the first stock was offered for sale in the first stock market. Traders search for overlooked stocks that are ready for a rise in price. Traders look for stocks ready to take a dive and get ready to short them. Traders are always looking for where in the world the action will be in order to make a profit a second before everyone else finds out. In today’s world of instant messaging and social media it was only matter of time before the whispered stock tips of yesterday became the stock tweets of today. In the first days of the internet a tech savvy young man went online and hyped a bunch of stocks that he had just bought. Then, obviously, he sold as soon as his victims bought. Now folks are sending text message tips and messages on social media. Because the messages can be send and received very rapidly there is the misguided sense that the receiver is getting privileged information, much like the folks who believed the kid a few years ago. The sad fact is that a lot of those folks who are acting on tips and not doing a little technical analysis are headed for trouble when trying to outguess the market.

The skittishness of the market can be blamed on any number factors from continuing sovereign debt problems to a well deserved skepticism of market makers after the recent crash. However, the speeded up version of hot stock tips being passed from Blackberry to Blackberry (heaven forbid that anyone would just use a cell phone anymore) would seem to be a contributing factor to what appears to be a variant of following the herd. However, this herd is not wildebeests on the Serengeti but rather tech savvy traders and investors looking to get a tip before the rest of the crowd does. Trading the rallies and retreats of the stock market can be done in the knowledge that trading history repeats itself. With the use of technical analysis software the trader can predict the next moves of the market with a reasonable degree of certainty. Combining knowledge of technical trading with an overview of the stocks in which one trades will allow the trader to trade with efficiency as others look for tips while trying to outguess the market.

Certainly bits of loose information may come to a trader but in order to gain perspective and anticipate the market a degree of fundamental knowledge is necessary and what is essential is the ability to confirm the information in a so called tip with solid fundamental or technical analysis. When trading Toyota, for example, a trader will need to know if a piece of allegedly new information the computerized brake problem has already passed through the hands of institutional traders in which case the market will already have discounted the “news.” There is a temptation to believe that tips disguised in very technical terms are fresh analysis but in a world where you can receive an email that has already been copied to a thousand people it is important to be able to do your own homework and to set your own goals rather than trying to outguess the market.