Buzz and Banter
Tony and Toddo make excellent points, and I really like the way Toddo brought up the idea of looking for something to help make an unemotional assessment.
Misunderstandings surrounding the issue of time frames are precisely where most in the financial media fail to effectively communicate to their readers what it is they are trying to say. The most obvious example of this, is when someone on television, or in the print media, makes an observation on the market's "overbought" or "oversold" condition. Using different time frames, it is plausible that different people could accurately describe the market as overbought, oversold, and fair value simultaneously...and all be correct.
Securities do not move one way in a straight line. Therefore, as Tony points out, it is necessary to define your timeframe before applying your thesis. Otherwise, you fall into the trap that Toddo has described as getting more bullish on the upticks and more bearish on the downticks.
A large part of what a successful trader does, as well as a successful investor for that matter, is find ways to eliminate the "noise" or arbitrariness that may affect their decision making.
There is a great line from the novel "A Wild Sheep Chase" by Japan's greatest living writer, Haruki Murakami: "We can, if we so choose, wander aimlessly over the continent of the arbitrary."
I have that quote taped to my monitor. It helps remind me to focus on those things that materially affect, disprove, or undermine my thesis, and throw away the arbitrary things. Naturally that sounds easier than it actually is, but "the continent of the arbitrary" to me expresses the geography of the battlefield I am dealing with. Understanding the geography of the battlefield is the first step toward conquering the enemy.
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