Global Markets: Think Big Picture

You are insignificant to the market. Remember that. The market does not care about you. Nor does it knowingly give or take money from you. The market is its own beast. A great trading genre writer, Mark Douglas once wrote in “The Disciplined Trader” that “The markets are always in motion; they never stop, only pause.” The market is in constant motion, open or closed, the field of market participants have perceptions which change with each new input of data.

For example, you own a petroleum stock. The markets are closed, you watch the nightly business report and you find that some pipeline was bombed and the oil price has suddenly increased. When your friendly local stock exchange opens you find that as a result your stock holdings in your beloved petroleum company gapping a dollar or two on opening. Ask yourself: has any company fundamentals (earnings, profit/loss, debt, etc) changed since the last time the market has opened? Only the perception of the market participants have changed. The perception of future supply and demand for the company’s product have changed.

This is only one small example out of many. How one small occurrence in our world can affect global markets. That’s why it’s important to think about the big picture. Global market sentiment acts like a domino effect. The events from one market influences another market. All the markets are interrelated, financial and non financial and the domestic and international.

Short term traders tend to skip the macro perspective when analysing a stock. It is important to consider market scenarios which may affect stock (or forex) performance in the short term, whilst you are holding the security. Anticipating possibilities will get you ahead of the game – you will be prepared to pounce on any potential trading profits or jump out of harm’s way when any depressive stock news comes out.

Photo by Per Ola Wiberg (Powi)