Tuesday, June 15, 2010

Bullish or Bearish - Try to avoid a bias

A sharp rally in the S&P500 is beginning to slow. What is the outlook for the U.S. markets?
Have a look and understand the big trends. (Video opens in new window)

A quick update on the S&P
What follows is the main post. This is a bit complicated.

First, I suggest that the trader should always have an open mind - there should be no perconceived ideas about being bullish or bearish.

Second, I strongly urge traders to trade with a view, a sense of dirction.

Are these suggestions contradictory?

No. The trader should have an open mind on the direction of the market. Determine the trend using your trend detection methods. Then, trade in the direction of the trend as you perceive it.

An open mind means : I can imagine the Nifty falling back to 3500 again. Why not? It also means that the Index could rally to 7000! After all, there is no law saying that the Nifty cannot go into a bubble. So, anything can happen. When we have an open mind, the real message of the charts comes to us.

But we cannot trade with these flights of imagination. With an open mind, we are mentally preparing ourselves to listen to whatever the charts say. Trading is done on trend & setups available on our charts.An open mind ensure that we do not go into denial.


Jitender Madan said...

Hello Sudarshan!

I remember previously when market was declining, you were expecting much more painful deeper correction. But yes trader should have open mind and if market is signaling upward, should not continue to be biased for a decline and not be suspicious too much about any upsurge and specially when technicals says trend is up.
Do you by now feel 5400 will be taken out and levels like 5500 and 5600 will get this time and will enter into bubble phase as you say above 5400.
if it is really bubble above 5400, should not government intervene by way of monetary policies to prevent a bubble form. We know large number of retail investor get trapped when bubble burst.
on the other hand sometime, I get weird feeling that government by LIC or any other agency, does not allow the market to correct significantly so as to get good valuation for disinvestment.
Second weird felling I get despite trouble in Europe, Dow was making new highs of 11 k and above and Europe was rising and we were sideways sort of at 5200-5400 --- so were those rallies were created rallies. Or alternatively can big money create one way movement of markets?

Sanjeev said...

Excellent and remarkable advice. I think, it is the most important characteristics for a sucessful trader.