Don’t Suffer Paralysis From Over-Analysis In Your Trading

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by Steven Sarnoff

                    “If you spend too much time thinking about a thing, you’ll never get it done.” — Bruce Lee

This week, with more earnings and big mergers on parade, there is plenty for traders to digest.  Add to that, the myriad of technical tools available at your mouse-clicking fingertips and you can see how traders can easily be bogged down and confused by conflicting indicators and information overload.

As a technical analyst, aka a “chartist,” you have the ability to overlay a veritable smorgasbord of studies on your chart.  That can quickly clutter the picture and cause indecision.

So Sarnoff, what is your solution?

The answer is to study the technical indicators, pick a handful you like best, and use them.

I want my chart to paint a vivid picture, depicting  the human behavior (buying and selling) that drives the direction of market price movement.  I prefer to look at a clean and clear chart, one that readily reveals which side (buyers or sellers) has the advantage.  I can then go about determining when and where the balance of power is likely to shift.

Our Options Hotline subscribers are seeing the power of that approach in action today, as our recommended put play on Barrick Gold (ABX) is trading +23% in just a couple hours.

With the recent strength in the US dollar likely to weigh on asset prices, I turned my gaze to gold.  I used the chart below to determine that sellers were poised to push this gold miner lower.  Broken support often stands as new resistance and the character of the behavior of market price movement told me that sellers stood poised to press their advantage.  Subscribers saw their trade triggered this morning and shares subsequently pushed below the 20 and 200-day moving averages, eyeing a test of recent lows.

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I hope you found this example helpful. Subscribe to Options Hotline today to see how we keep our readers a step ahead of the crowd.

Good luck in your trading!

Best regards,

Steve

 

 

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