Falling oil prices and the strengthening of the US dollar are probably responsible for the rosier outlook of the US economy. Add to that the better than expected durable-goods orders for April, rising employment, and improved retail sales numbers, and we have an economy that may actually be showing signs of improved conditions. What a difference a month makes! However, what is puzzling is the drop of the 10-year yields, which -- as of this writing -- sits at 4.1%. At such relatively low levels, you can't help but wonder if this positive outlook is going to last. Only time will tell, and as always it's just a matter of watching the markets.
It is for this very reason that adopting a buy-and-hold approach to your investments may not be in your best interests. This doesn't mean you shouldn't "invest" in funds or retirement plans. You must do that, especially if you want to retire comfortably. But don't let your investments just sit there in the expectation or hope that they will grow. Make use of them. Shift those investments around, take advantage of whatever market is doing well. After all, they do make up half of your investment picture.
The other half of the investment picture involves allocating your funds to individual stocks, futures, currencies, options, what have you. Now consider: Since you are taking matters into your own hands, it is important to really understand the market you are trading. You don't want to fall into the trap that many traders fall into. But how do you know if you are? You'll find out by reading the STOCKS & COMMODITIES interview this month with Brett Steenbarger, starting on page 68. With a background in psychology and trading, he has observed some interesting characteristics that really could help you become a better trader.
Keep in mind, though, that when you are trading your own account, you are competing against professional traders. How do you get an edge over them? Our feature article, "The Tape-Reading Edge" by Thomas Carr, helps you gain the skills to identify when traders are buying, when they are selling, and most important, identifying when the buying switches to selling and vice versa. Learning the skills takes time, lots of it. And it takes patience, but once you accustom yourself to the umpteen numbers of scenarios that you could encounter in the markets, things will start to get clearer. What have you got to lose? Go on, give it a try!
Originally published in the July 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2005, Technical Analysis, Inc.
Return to July 2005 Contents