Friday, June 8, 2012

Inside the Mind of a Trader

If you are a beginning trader you need to know that trading has to do a lot with being able to change your mind, and do it very quickly. Long-term investors have more time to adjust their positions. Depending on your style of trading, you may need to learn how to change your mind a few times a month, a week, even a day. If you are someone who is very dogmatic in your thinking, and are not used to changing you mind quickly, you need to reconsider...

So we have a lot to think about over the weekend: econodata from China, possible Spanish banking system bailout/recapitalization, and soccer. OK, the last one is not as important, but a real fun away from trading. You have to relax your brain and take your mind off trading, or you will go nuts.
If Chinese data comes in soft - mildly bearish outcome, but then we should expect more rate cuts. If the data comes in stronger, then what the heck was the cut for? Confusion... If  it comes in as expected, it will have a mildly bullish outcome.
No Spanish banking bailout - bearish. If bailout occurs, would be mildly positive, but duration of rally depends on how it is structured (through sovereign or direct). I think that if Spanish banks get a direct help from EU, it sets a precedent for other struggling EZ banks. That is where it would get really interesting. Some EU TARP rumors are flying around, supposedly being pushed by Geithner. But I remember what happened the last time he told EU leaders what to do. I will believe it when I see it, enough said...

So with the above in mind, it is a constant puzzle for traders. You have to navigate the maze and change on the fly. Are you ready to change your thinking based on the changing data, and therefore adjust your trading positions on the fly? If you answered yes, you are half way there - the other half is developing and trading your plan.

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