As you read through, do
not assume that you must know all of this material inside
and out in order to trade. You don't, yet the more you
know, the more you know. What you need is a working
appreciation or understanding of what affects what. That's
Market Trading Environment
Don't overlook it.
The environment will not overlook your trade
Don't try to make yourself an economist. It's not
necessary, but, as I point out: the more you know,
the more you know. You'll grasp these
relationships over time anyway.
You will need
through the critical things you need to know before
you start trading. If you don't know what those critical
things are, you may be blindsided by those things
you don't know you don't know.
That's why you need a coach. Believe that if you believe
Before a stock market or
option trading coach sends you in to play, he/she needs to
verify that you indeed understand the big picture of the
game you are playing. The function of the stock market is
to act as a discounting mechanism providing valuation and
a trading platform for corporate stocks, bonds and
derivatives (options & futures). You can view the market
as a proxy as to the health of the economy looking forward
about three to six months.
Think about that
for a moment,
discounts news as well as expected
forward in time.
As such, the driving force of valuations and
news- week-by-week, day by day, minute by minute. It
is the same news that instills
fear and greed in
investors. News, good or bad, is quickly evaluated adding
or subtracting from current stock price valuations, i.e.,
does the event add potential profit or detract from
profit?. In addition to company specific news there are
core economic elements that affect
the market such as a rise or fall in interest rates,
fuel prices, inflation, taxes, government regulation and
economic indicator announcements, corporate earnings,
competition, currency valuations, to name some of the more
important ones. Therefore, you need to be aware of these
The action in the stock price
will tell you what the markets think of the news. You need
to trade the reaction rather than the news itself..."buy
the rumor, sell the news" is an old
expression. All of these swirling push-pull phenomena
become your trading environment. So do you buy (go long)
or sell (short) a stock? Do you start with the chart or
with the market environment, i.e., do you start from the
bottom up or from the top down?
If you've followed this so far, you'll have no problems.
If you're still baffled, call me...this is what I
do, I teach you the critical stuff.
quoted on TV
refers to the relationship between the futures contract on a
market index and the actual cash value of the index. If the futures
are above fair value then traders are betting the market index
will go higher, the opposite is true if futures are below fair
is only relevant in the real world as to how the market will
open and not how it will behave all day.
A sample News Headline
Below are the
indicators released by government to monitor economic
Some are more important than others with
the Employment report arguably being the most important.
Below is your
market environment. Do you know
where we are now in the cycle?
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