One of the easiest things to do is to hear a stock market rumor. The next easiest thing to do is to actually believe the stock market rumors. Rumors and opinions about what the stock market will do in general are more numerous than the blades of grass in your front lawn.
Since there are so many rumors floating about regarding which direction the market will go it is simply best to ignore them. Let me give you a perfect example. I can’t even begin to tell you the number of people that I know who were absolutely certain that we’re going to see the Dow rapidly decline 2000-4000 points. I was literally inundated with e-mails, charts, video, and links to websites that justified the bearish sentiment of numerous individuals. It would be foolish to say that you couldn’t look at a chart and understand why the majority of people were bearish at the time.
This is one of the things that makes stock trading so tough for a beginner. Beginners find it difficult to go against conventional wisdom and the thoughts and howlings of the crowd. Many times while new traders are panicking because stocks are dropping, experienced traders are seeing unprecedented opportunities for profits.
As the doom and gloom of the stock market period in question increased on a daily basis more and more people became bearish. Again, being bearish made sense for a particular period of time. What happened in this particular instance is that the market made new lows and then rebounded from those new lows. Traders with a bearish sentiment saw every rally as an opportunity to continue to short the market in order to gain an advantage for what they believed to be the next gigantic decline.
As the market continued to rise many traders added to their short positions in the stock market.
This would’ve actually worked out great if the market had again declined and gone on to make new lows. What was happening to these traders is that they were stuck with a “belief” about the direction of the market. If you believe that the market is going to go down then it may appear to you that everything the market does is in preparation for a huge decline.
What happened in the end during this trading period? The market continually rose and here we are about 2000 points higher on the Dow. No matter how bearish you are a 2000 point rise in the Dow is not going to benefit your account equity.
The moral of this story is that money is made in stock trading by trading in the correct direction. What you believe the market should do and what the market does do can be completely different things. Don’t expect the market to do what you want to do… expect the market to do what it wants to do.
When it comes to profiting stock trading you will find the best to do your own stock analysis. Rumors have a nasty habit of forming beliefs in our heads and blinding us to the plain, apparent reality that lies before us. You will find that by doing your own stock research your portfolio’s performance will be head and shoulders above the portfolios of the rumor followers.
Carl Robertts is an expert free stock analysis and runs the very successful and popular website about stock analysis. He has helped people all over the world become better stock traders. Visit his site at http://www.Stock-Analysis.org right now for more information and/or help on Stock analysis.