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THE MARKET WHISPERER 45 1

Market Direction and the Psychological Component
Market direction is determined by an encompassing range of

psychological aspects reflecting the views of all market components. My
recommendation, therefore, is not to belittle your gut feelings. Stock trading
is far from being a precise science, and in fact is much more of an art than
a science. Even if your “artistic” sensibilities are not at all developed when
you start trading, I recommend trying to assess market direction and you
will be surprised how often you are right. When I was young, before I had
a sight corrective operation, I needed distance glasses. Every year I would
go to a well-known ophthalmologist who would trouble himself to point
out that he is not an optometrist. At the stage of the annual test where I
needed to identify the row of smallest letters, he would say, “You’re also
allowed to guess.” The interesting thing was that although I knew I couldn’t
see a thing, my guesses were very often right! The conclusion is simple:
we know a lot more than we are consciously willing to admit. Multiple and
often concealed components help us consolidate our views. Even if you do
not have easy use of all the tools, take a guess! You’ll be surprised at your
higher-than-expected success rate.

Read the Financial Headlines
Surf over to your favorite financial website, read the headlines and

perhaps the first few lines of key articles. Remember that the authors
may be excellent at analyzing the past, but generally have no clue about
the future. The reason for reading headlines is to absorb the financial
atmosphere and look for events that may impact trading. The financial
atmosphere will help you understand market direction. Special events
may help you examine entry points for stocks with extreme behaviors.
If, for example, headlines report that at the after hours, IBM is intending
to publicize its quarterly report, I can assume that speculations prior to
publication may cause the stock to be more volatile than usual. This would
allow you entry opportunities that do not appear on a regular day, as we’ve
discussed in detail in earlier chapters.

Announcements Calendar
Choose your favorite financial site, search for the “Announcements

Calendar” link, and jot down topics of interest and important announcements
for the coming week of trading. Remind yourself every day when the
announcement will be appearing. We will deal with announcements and
publication behavior separately.