GETTING THE BIG PICTURE

Let’s forget about the peculiarities of individual stocks, but let’s look at
the big picture of where a stock is. When you trade, you need to know
where in time you are. Some traders have blinders on when trading and
forget to see where a market is in its long-term picture. Before you make
a trade you need to know what type of market it is because markets will
react differently in different conditions. You should be looking at charts in
multiple time frames to get both a short- and long-term picture of what the
market is doing to help determine if the market is trending, choppy, range
bound, and so on. You also need to know what the general direction of the
market is. You may also want to be using indicators to help you determine
where the current market is in relationship to the big picture. Once you
know all these things you can make smarter trading decisions.
For example, is the market in a long-term rally but has currently surged
and moved too far off its trend line and therefore due for a retracement before
going back up? Is it near the support of a range bound, choppy market
with clear support and resistance levels? Has it recently broken out of a
choppy market? Is it in a position where a possible reversal is looming?
Once you can pinpoint where a market is and know all of its levels you
can start planning trades with much less of a gambling factor than if you
were just looking at a small amount of data. Good traders will use different
technical indicators and systems depending on the market conditions.
Their game plan will vary according to where the market is versus its longterm
history. They will be able to make smarter decisions as to where to
get in and out as the picture gets clearer. All this in turn will make them
better traders.