When the uncertainties start to pile up we find ourselves looking for answers that influence our decision process. It's natural, we just want to be comfortable trading or investing in the markets. We start reaching, listening and grabbing for something to explain the irrational moves. 'Markets are not supposed to move like this', we say to ourselves quietly.
In our journey to find answers (where there are none) we end up getting ourselves in trouble. We've all been there, feeling like a deer in the headlights and not able to move quickly enough before a car comes barreling down the road and smacks into us. That's game over.
But let's put a positive spin to this and see if we can figure out how best to navigate in tough markets. First off, tune out the noise. We have talked about this endlessly, and why is that? Because it is so important NOT to listen to influencers who do not have your best interest at heart. A bit of reinforcement is always good. The media, pundits, and experts are all there to sell you something you don't need. Turn it off.
Pay strict attention to sentiment indicators. In most cases, this is where we can find when momentum is about to turn. Indicators such as the VIX, put/call ratio, investor surveys, and breadth give us important information that often lead markets. They are not precise by any means, but the more they line up in one direction the more conviction you will have.
Finally, it's all about the charts. Price and volume are the king. If you follow the charts (our new book Know Your Options is a great primer to start learning) then you know what I'm talking about. Everything starts and ends with the price. There is no disputing the price action and money flows of volume.
Put it all together and you can make a clear, concise and objective read without any outside influences. Take care of yourself, don't rely on the word of others.