Filtering Out the Noise

Stevie

One of the pitfalls of being a trader, working at home alone, is the feeling of isolation, and being unsupported by a peer group. It’s really unlike any other job in the world. Just think about it. If you are trading on the floor or in an office, there’s an opportunity to toss ideas around with your comrades and observe their work habits and performance.

Even a solitary job, like that of being an artist, can be heavily supported by family members and a community of other artists. So how is it different for traders?

There are seemingly encouraging websites such as Stocktwits and the chatrooms at InvestorsHub and Yahoo! where folks share their ideas and opinions about their picks and trades. The idea is great. They give people opportunities to post links for articles about company earnings and news, and to explain why they’re bearish or bullish on a particular stock. They are like Facebook for traders. This is all fine and dandy and definitely gives one the feeling of being immersed in a peer group who all share the same goal, but there are two big problems: Most of the folks at these websites are not doing well in markets and what’s shared is complete and total garbage.

Now the operative word is ‘most’. There are a few good traders and there is some good info on these boards, but it takes a pretty hefty filter to find the gold. I had to find out the hard way, which is why I wanted to write this post.

When I first started trading, I stumbled upon Stocktwits and loved my find. I knew nothing about trading and was impressed with the conversations I was seeing on the boards. People would share complicated charts and talk moving averages, SEC filings, earnings reports, etc. Of course I gravitated to the boards of the stocks I was blindly trading and was offered up “hopium” of how my stocks were “going to the moon”. Um, yeah, right!

But after holding on to and holding out hope for (hopium) too many losing positions I then realized that a) most of these people were novices like myself and knew nothing about what they were talking about and b) another large portion were pumpers involved in manipulating sentiment.

I took a long  break from these sites while studying and learning about markets. Of course, Trader Scott, being my mentor and good friend, helped me along with his knowledge and encouragement, setting me on the path to begin trading in a much more professional and successful way. And because of that, I can now go back and visit the boards from time to time to see what’s trending and moving, but now do it with a new set of eyes.

Boredom and loneliness is a huge part of this business and can lead to “boredom trading”. So with that boredom reality, it’s tempting to go onto these social sites to find people who are sharing a similar experience. Just be careful and learn to filter out the noise. The bottom line is the….bottom line. So it’s always the quality of the content that is the most important factor for us as traders. Most everything shared by folks is pure noise – guessing, predicting and following “price targets” are not remotely helpful. So when you experience the boredom, instead of wasting time reading everyone’s opinions, start pulling up charts of stocks and individual markets, and observe. Look at how a market such as gold reacts to the allegedly always bearish impending rate increases. Or look at some companies’ fundamental news and the stock’s price reaction following the news release. Or learn new tools to incorporate into specific “trading patterns”. And observe how markets/stocks traded in and around these situations.Because just observation alone is one of our greatest teachers.

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