Custom Search

Using Market Sentiment to Find Day-Trading Opportunities

I have already discussed the importance of going against the majority opinion in order to find profitable day-trading opportunities. 1 believe that this is one of the most important qualities a day trader can possess. While there is certainly a great deal of money to be made day trading with the existing trend, it is also important to know when the existing trend has reached a possible turning point. One of the best ways, if not the best way, of doing this is through the use of market sentiment.

Since I have already discussed the particulars of applying market sentiment for the purposes of day trading, I will not repeat this information here; however, I do again stress its importance. The day trader must also be a contrarian. This does not mean that you must buck the trend, but it does mean that you must always be aware of whether sentiment is very high or very low. This will give you important clues as to whether you should be quick to take profits, whether you can allow profits to run, and whether you should look for trading opportunities on the opposite side of the existing trend.

Summary

Although there are many other important qualities that a successful day trader must either possess or acquire, I believe I have covered the most significant ones. If you strive to develop these qualities, then your odds of success as a day trader will certainly be better. ] have learned, after my many years of trading, that the major difference between those who are successful traders and those who are not is tc be found in their psychological make-up and in the skills they have acquired as traders rather than in the trading systems they use.

Although it is certainly helpful to have an effective trading system, even the best trading system in the hands of an undisciplined trader is nothing more than a destructive tool. Consequently, you must develop your skills as a day trader along the guidelines ] have given you in this chapter.

Occasionally, traders will have idiosyncratic difficulties in the markets that must be addressed on an individual basis. If this is the case, then I suggest you identify your particular problem as succinctly as you can, and if you cannot formulate a good method for minimizing the problems that this behavior causes you, I suggest you contact a professional for assistance. If you are not successful in your search for help, please drop me a line and I may have some helpful suggestions for you (MBH Commodity Advisors, Inc., P.O. Box 353, Winnetka, IL 60093).