How to develop a feel for the market

Hey everybody. Michael Martin here. Thanks for joining the show today. So I got a nice email from somebody with expressing a lot of gratitude, which made me feel good. I appreciate that. Put a lot of work into the show. And the question was, can you elaborate please on what your take is on a person developing a feel for the market and how do you go about doing that? So that’s the million dollar question. Developing a feel is something that comes over time for most people. I do think that there are folks who are very insightful that can do it maybe more quickly than others, but it’s not something that I would think that you could develop over the, say, the course of a week or a month. It comes from a lot of time of observing, watching other people behave because that’s really what markets are, right?
You’re not really trading the instrument, you’re trading other people trading the instrument. So it’s kind of like poker on in that level is you’re playing the table as much as you’re playing the hand. So developing a feel, how would you go about it? So I think if you are on the short end of things and you’re day trading or swing trading, say stock index features, see the E mini or the Nasdaq, this and that, and you just focused on those two markets, I do think that’s the quickest way to develop a feel is by studying one instrument over maybe multiple timeframes every day. And just be prepared to do that for as long as you possibly can until you develop the feel. What’s the feel? I don’t know. The feel could probably be more like your sense of imagination, your sense of intuition. Can you foresee certain events coming to pass and then have them actually happen? So it’s not necessarily prediction, but it is anticipating how people are going to behave.
I have a good sense of knowing when to get out of a trade. It’s a natural ability. I was definitely born with it and I worked on it to hone it, to get it to be even better. So I was lucky in that regard. I needed to work on my sense of intuition, which is strong, but knowing how to hold the leash on that because your intuition could get you into situations that you don’t want to be in or that you could be early for. So then I had to learn to modify my position size because sometimes my intuition was right, but I was early and there was more volatility in the short run before what I anticipated was going to happen happened. And so I had to learn to better position size. So again, going back to why is trading difficult? This is all these moving parts that are in constant flux that you need to measure and interpret and conjugate with your emotional constitution so that you can set up a trading plan. I think if
You’re looking across many, many markets, say you’re following 2030 stocks for example, it might be something that you can do to develop a feel for a certain sector of the economy, maybe even a certain stock. But the more specialized you become, the more time it takes. The other side of that is the more you want to say be a sniper and have a developer feel for a certain market or a certain segment, you have to almost do that by forsaking everything else because there’s just not enough time in the day for you to be able to focus your energy on that one particular instrument or maybe even that one particular sector. So there are trade offs to be made.
I know folks who would get a chart book and graph paper and they would plot the price movement of the e mini on five minute increments. Now, of course you can get it all on the screen, but I have found that when you can take a paper to pen to paper, it becomes much more organic and it’s like taking notes. There’s a new form of ownership because how do people learn? There’s really three ways People learn to learn something, they learn it by hearing it, they learn it by reading it, or they learn it by writing it. And so I know reading is a big deal. Hearing it. Again, I don’t have media on, so I don’t let that into my world, but when you write that stuff out, you can kind of develop a feel that you wouldn’t get if you were just looking at the chart on a screen, for example.
So if you did that, you might notice that there’s certain tendencies. Obviously everybody, including my dead grandmother, knows that the open and the closed tend to be where there’s lots of volume. But then how does the thing behave during the day where the levels hold? And then think of those levels in terms of percentages. If there’s a big move up, how much does it typically retrace on a percentage basis before it kind of consolidates and then resumes the move. Those are all kinds of things that you can observe and see by hand and develop an enormous feel. I do think, excuse me, the more names you add to that list, it’s harder to develop that feel. It requires more work. I’m not saying that you can’t do it because I’m in no position to tell anybody what they can or can’t do, and my goal here is to help put some insight on some things, help you develop the confidence, because once you have confidence, there’s no stopping in you. So a lot of the work that we do on the consulting side is to help people see and feel and figure out where do they have skill so that they can focus on the skill, build confidence, then fill in the gaps with places where they might be lacking or they need to beef up a little bit.
And then once in a while, we do have to share some trading tactics but a lot of times the mindset work in a lot of ways has nothing to do with the trading ability. So having said that, I think it can be done. It just has to take, it takes some time. You can definitely develop a feel. I think one, another last thing that I’ll say is that if you keep some kind of trading journals, and I’ve got, let’s, well, not trade, I got journals for everything, but I’ve got one here, two here, I’ve got a third one here. So I’m a note taker. I’m a person who writes stuff down because even though I have a mind, like a trap, there’s a slangy expression out there that goes along the lines of a short list is better than a good a long memory. And so I tend to write things down.
It also helps me shape my ideas from over a longer term timeframe other than say something that I could execute right here, right now. So I feel in the end, you could definitely do it. Just know what the trade offs are. Also write down in those journals, what do you think you’re anticipating is going to happen, and then by when then what would you do as a trading tactic? How would you express that risk in your portfolio? Right? So that’s my thought. Please like and subscribe to this show. I appreciate all your comments and I’ll see you tomorrow.

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