Day Trading Quick Tip # 9 - Pay Attention When the Market Speaks

Every so often, the financial markets will walk up to you, slap you across the face, and tell you exactly what they are going to do next. In other words, the markets occasionally provide very clear signals of their next price movement.

Sometimes the markets provide such signals frequently, and at other times several years may go by before the next signal is provided. Either way, astute traders will have been waiting for a signal from the markets, will pay attention when it comes, and will be ready to react when the market makes its move.

What are the Signals?

These types of market provided signals can come in many forms. They can be usual trading signals such as price reversal patterns on long term charts, or they can be subtle non trading signals such as an increase in the number of brokerage commercials in the mass media (television, newspapers, etc.). One of the most common signals is when non traders start announcing that they have invested in some stock (by non traders, I mean real non traders, such as your great grandmother who has never traded a stock in her life). When these lifelong non traders start buying stock, it is definitely time to go short, really short, on everything, except perhaps gold.

Trade Sensibly

Now a word of caution. If the markets give you one of these signals, you need to be ready to make your trades, because the resulting price move could happen at any time. However, you still need to trade sensibly, and wait for a price or indicator pattern (something from your knowledge of your markets) before you actually enter your trades. Remeber that profitable trading is about reducing risk and favoring reward. The market jumping up and down and shouting at you is just a signal. It is still up to you to manage your risk and reward.