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5 Ways to Interpret Research Like an Investment Pro

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The sheer amount of data can overwhelm even the most seasoned investor. Here are some ways to cut through the noise.

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If you want to become a professional investor (or trade like one), you need to interpret research like a pro. And this has as much to do with disciplined psychology as it does with general market knowledge and tact.
 
Shortsighted responses to others' investing-related tweets or posts won't make your stock go up or down in price. It also won't endear you to other investors. The nonstop flow of financial thoughts and opinions on social media, TV, and the Web can be overwhelming, so it's imperative that you get on top of this bevy of information.
 
In this context, interpreting research is significantly more difficult than one thinks. And although I can't sit here and tell you that I have all the answers, I do have some thoughts on the subject that may assist you in getting to the next level. Here are five ways to interpret research like a pro.

Eliminate Noise
 
On Twitter (NYSE:TWTR): If you can handle reading a Twitter feed with 1,000 followers, great. If not, hone in on those investors/sites you respect by:
 
a) Creating lists
b) Manually checking in
c) Reducing your "Following" list
 
On the Web: Stick to a handful of research and financial content sites. Do your best not to let personal biases, narratives, or politics seep into your reading of the markets.

Understand Your Best Environment for Learning

If you follow a particular type of tool, indicator, or analysis, then you may want to limit the number of people/sites you follow to that theme (and develop a strict regimen). On the flip side, if you're confident in your general approach and understanding of the financial markets, then broaden your horizons to find new research ideas and market thoughts.
 
Whether it's within your focus area(s) or in a broader context, always be open to learning. I learn something new about the markets, trading, or myself every day. And study up on what other great minds are doing -- this will help you to interpret research the right way.
 
Here's a comprehensive reading list for professional investors by fellow See It Market contributor Sheldon McIntyre.

Know Your Time Frame (And Try to Interpret the Time Frame of Others)

If you don't understand this, you'll misinterpret the ebb and flow of the markets (and you'll lose money). This is the single most important aspect to understanding research.
 
Try this on for size: If you purchase a stock based off of your reading of a 15-minute bar chart, your time frame will likely be different than when acting off a weekly bar chart. Is it a day trade? Swing trade? Or longer-term investment? Now take this approach and apply it to the way you interpret ideas from other investors. If someone says he or she likes a stock for a short-term bounce, take it at face value. You may be short the stock over a longer time frame, but perhaps you'll both be proven correct -- and perhaps that bit of research can help you to trade around your core position. Separate macro from micro. Know your time frames.

Develop a Routine

From the time we wake up in the morning to the time we go to bed, we operate best when we feel comfortable and confident. From analyzing fundamental data, charts, and research notes to checking in on Twitter, we all need a solid routine. 

Stay Disciplined

There's no need to freak out because someone has a different opinion or position than you. There's a reason you decided to invest in a particular security (and over a particular time frame). It's OK to be open to changing gears -- just be sure that this doesn't become a consistent theme.

Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.

Twitter: @andrewnyquist
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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