Blocking market noise
Whether you are a trader or investor, contrary to what many think being successful is not about picking the next big winner.
It is all about having a winning process.
Put simply, it is not what happens that counts, it is what you do that does.
If you have been watching the media over the past week talking about the market you may have become a bit worried.
As you have probably heard, China has reacted to the US government raising tariffs on Chinese imports, by adding tariffs of their own to various imports from the US.
Consequently, the Dow Jones Index fell from a close of 24,682.31 points on Wednesday 21 March to close on Friday 23 March at 23,533.20, a fall of 1,149.11 points or just over 4.5 per cent.
So should we be worried about this and should we be buying or selling?
During the week I spoke to some novice investors and traders, who were buying stocks because, in their words, they were cheap as they had fallen heavily.
What they could not tell me was if the stocks had stopped falling, and here in lies the issue.
Buying a stock because it has fallen in value is a poor decision for both investors and traders.
I asked these same people what they would do if the stock they purchased continued to fall this week and how would they feel.
None of them knew what they would do, but they knew how they would feel, which was not good.
If the stocks continued to fall further, these people will do ,with high probability, what the uneducated always do, and that is hold onto their stocks as they fall.
They will also justify their poor decision by saying that they bought a good stock and that they have not lost because they have not sold.
Although, again this is poor thinking and poor decision making.
So should we by buying or selling right now?
We need to understand that just because a market is falling and may fall further does not mean your stocks will fall, it also does not mean you should be buying.
All decisions about buying and selling needs to be made solely by analysing and assessing the stock itself.
Generally, good stocks will give you signals to sell prior to these volatile periods, and so having some solid rules around managing the stocks you own is the best thing you can do to ensure you are protecting your capital.
The vast majority of investors have little or no strategy about what and why they are buying and have even less strategies about when they will sell stocks.
In my new book Accelerate your Wealth - It's Your Money, Your Choice, I discuss some simple but powerful techniques and strategies that will help anyone eliminate not only the emotions of buying and selling that happens during these times but I also provide strategies to manage a trade more successfully.
So what should you be doing right now?
I recommend watching the stocks you own for any signal that you should exit your position.
Secondly, you should be researching possible stocks to buy when the market proves it has stopped falling.
Successful trading is about being in the market when the time is right and out of it when it is not.
It is also about being prepared not only with a watch list of stocks you might like to add to your portfolio when the time is right but also having rules to exit.
So what do we expect in the market?
Following a pregnant pause on the Australian market in recent weeks, the All Ordinaries Index has finally traded lower in a response to a sell-off on global markets and confirm its direction.
The All Ordinaries index is now pulling back towards an important support level below the 6,000 points and traded to a low of 5,916 points last Friday before closing slightly higher.
As mentioned last week, major financial institutions were poised ahead of this week’s announcements.
The market learned that the US Federal Reserve is likely to only raise rates three times this year, instead of the four predicted by some analysts.
The market took the news in its stride, however, the trade war between the US and China lead to a sell-off on Thursday night, and the mood flowed onto the local market on Friday causing it to fall.
Right now there is nothing to be worried about.
As you may remember, I said previously, if the market was to fall, it would be around this time and most likely over soon.
So lets now get into the charts
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