Traders trained in macroeconomic theory run the risk entering trades based upon superficial analysis of inter market price action. As many of you know, a sharp upward move in a commodity such as crude oil or gold can scare S&P 500 traders into selling their stock positions or going short. Commodity prices are perceived as having an inverse relationship with stock prices.
The reasoning of many traders taking short positions springs from the following logical chain: 1) commodity prices rising means that inflation is growing and therefore the Federal Reserve is more likely to raise short-term rates. 2) This monetary tightening will be bad for stocks and therefore S&P's should be sold based upon the commodity price rise. This macroeconomic logic, used at the wrong moment, leads to what I call the commodity fakeout trap. This chapter should get you to steer clear of this trap.
The psychology behind the average trader's decision to trade must be studied. It is this psychology that will take the poor trader into the wrong positions over and over. The methods that I teach you are designed to move the average trader's losses into the credit field of your account statement. Remember, in a field as complex as leveraged trading, decisions of the average trader will nearly always prove incorrect. I am about to show you one situation in which intuition may lead you astray.
What I have done is identify intermarket patterns that trick the average trader into making a mistake. By acting in a counterintuitive fashion and by taking the opposite side of the trade, we will move ourselves into the small camp of winners.
The reasoning of many traders taking short positions springs from the following logical chain: 1) commodity prices rising means that inflation is growing and therefore the Federal Reserve is more likely to raise short-term rates. 2) This monetary tightening will be bad for stocks and therefore S&P's should be sold based upon the commodity price rise. This macroeconomic logic, used at the wrong moment, leads to what I call the commodity fakeout trap. This chapter should get you to steer clear of this trap.
The psychology behind the average trader's decision to trade must be studied. It is this psychology that will take the poor trader into the wrong positions over and over. The methods that I teach you are designed to move the average trader's losses into the credit field of your account statement. Remember, in a field as complex as leveraged trading, decisions of the average trader will nearly always prove incorrect. I am about to show you one situation in which intuition may lead you astray.
What I have done is identify intermarket patterns that trick the average trader into making a mistake. By acting in a counterintuitive fashion and by taking the opposite side of the trade, we will move ourselves into the small camp of winners.
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