Two weeks ago I introduced you to a partial list of market phrases that mean nothing because they are misleading, careless, and useless. In this blog post, we complete the list, but first I’d like to remind you that trading successfully is a direct result of your knowledge, experience, and ability to make tough decisions in challenging times.
Part 2 of market phrases that mean nothing
There is little risk in the markets.
When it seems markets are going to lose their connection to gravity and continue going higher, reality (in the form of a pullback) bites. Even the strongest bull markets contain risk. If we are willing to take on the risk, then we have a chance to be rewarded.
No matter how confident you’re feeling, keep your eye on volatility. When it’s rising, your risk is going up (that’s when the big money is leaving the party).
The financial media and pundits know exactly what they’re talking about.
When we’re seeking an explanation around any topic, we often look to the pros for advice. However, when it comes to the markets, it is most likely that they know as much as we do. Avoid them. Though sometimes they will be right, they are more like a broken clock – correct only twice a day.
The end of the world is coming.
We hear this most often during a big market drop. Because none of us can predict the future with any consistency or accuracy, we don’t know when markets will rebound – and that is unsettling. The biggest and fastest drops make our stomachs turn.
The media makes it worse. They portray market corrections as frightening events. They’ll tell us that we need to take cover. They’ll broadcast a “markets in crisis” show, making us all painfully aware that we are losing money (if even if we are long the market.)
No one mentions that markets correct occasionally and that the long-term historic market trend is up.
Follow the business-focused media channels.
Continual learning is the way to go when it comes to trading, but the business-focused media channels – while sometimes useful – want to keep you tuned into programming at all times. Relevant and timely information is all we really need from MSNBC or CNBC, but that information is often mixed with entertainment and sensationalism. Don’t rely on the media as your only source of information, or you’ll be late to the party (or even taken for a ride).
Missing out will kill your portfolio.
Fear of missing out, or FOMO, is pervasive in our society. Don’t let it rule your trading mind.
Yes, you have to be in the game to make money. If you don’t play, you can’t win. However, the markets can and will move without us. Have a plan, but don’t collapse in anguish if you miss out. Sitting on the sidelines for a spell won’t decimate your portfolio.
This is the “new normal.”
PIMCO’s Mohammad el-Erian said this in reference to the long-running bull market that followed the global financial crisis in 2008-09. The days of “easy money” that we enjoyed were supposedly the new normal. The key to winning in any environment – whether it’s “normal” or not – is to change your strategy based on market conditions.
I’ll get a leg up if I follow risk on/risk off advice.
Risk on simply means money is going into riskier assets like stocks, while risk off favors more defensive monetary instruments like bonds and the dollar. When you hear these terms, it’s already too late to get a jump on a trade; they are only used to describe trading conditions after the fact.
Instead, listen to the advice from my good John, who tells us to be observant of overbought and oversold conditions that cause money flow to go in and out of the markets. Watching the conditions will help you get a leg up.
This article was updated on May 11, 2023.
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