Exposing Ideas to the Envelope of Serendipity

Contact moo at: bluechipbulldog@gmail.com

Wednesday, September 28, 2011

Focus on the Forest

It can be challenging in disorganized and volatile market environments for traders to cut through the proverbial "trees" and  keep an eye on the big picture. It is critical, even for shorter-term traders, to continually attempt to stay grounded by eliminating as much "noise" as possible when analyzing charts and market action. But perhaps most important of all, during those times when no matter how much pruning you've done you still can't see a clear pathway ahead -- then it might be time to question just why you are walking through the woods in the dark in the first place.

For the past two months, the market has been essentially moving sideways, but has managed to do so in an extremely volatile, whip-saw manner that has had little method behind its madness. Adding yet one more indicator, one more pundit opinion, or one more "guru" call to the mind-numbing search for rational markets isn't going to speed up a resolution to the violent consolidation phase now taking place. It will break out or break down on its own timetable and all we can do is wait, and depending on individual trading style and experience, take from it what we can while it prepares for the next phase. In the meantime, it is best to keep it simple: the market is moving sideways; it is exceptionally volatile; the process is triggering many conflicting signals; preservation of capital is paramount. It is not necessary, and often not advisable, to always be trading in every situation. If you are confused, or frustrated, it is unlikely that you will trade well, so do not hesitate to wait for more clarity. It will come.

Take a look below at the GLD chart represented on a line graph based on closing prices. It is clean, simple, and can be a very useful tool to gain some perspective when things seem overly complex or confusing. I will often use this approach in noisy markets to assist in zeroing in on key elements.

Trade well.

-- Brinkley
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