Important information are not always in the Headline
Bruce Watson of the Daily Finance Blog posted the article: Food Shortages Coming? Famed Investor Jim Rogers Thinks So
The Article deals mostly with Jim Rogers opinion about the rise of commodity Futures because of an upcoming shortage in Food. But that´s not the point that caught my eye.
It would be very nice, if we could make money only by watching CNBC or reading newspapers. But like many things in live it isn’t as easy as this. Finding good opportunities is one of the big challenges, after you developed a good risk- and money-management.
And there are good opportunities in the media. But only a few of them are printed in the headlines, most of them you will not find in clear letter. You have to think and connect information while reading. You will benefit from experience in doing this. Best thing is to train this like any other skill. There are important questions you should ask yourself, while reading an article:
Is there an opportunity for a company or a sector to make money? Which correlations can be drawn following this?
Can I trade this news? Are there stocks related to this news? E.g. if the news is about a single company, it is easy to know what to trade, but if its about a whole sector you have to search for companies in the sector.
When will this happen? Time is an important factor. It doesn’t help us traders when we don’t know, when it will happen – we have to know the time horizon, in order to develope a suitable strategy.
Regarding our example, my “private headline” of this article is: “[m]any farmers cannot get loans to buy fertilizer now (…)”
The point about grains, sugar and the related commodity-futures is also interesting, but the author plays down most of it and it is an outlook for the next years. The “cannot get loans to buy fertilizer now” is something related to the situation NOW.
This one is a bit tricky, because we don’t get a date that something will change soon. But it says, that there is a demand for fertilizers that cannot be satisfied, because the potential buyers (the farmers) don’t get money from their bank. But if they get the loans they need, they will buy fertilizers. So this is something to put on your watchlist and wait. This means you have found a piece of news that can be used later in the year and will produce winners if you get in at the right point. This is what makes a watchlist so important. And it is more important that the watchlist is monitored, updated and kept close to your trading desk.
Remember buying fertilizer stocks into your portfolio only because of these thoughts isn’t good trading. Always wait until the market goes in your favored direction before you buy. And never forget to stay flexible in your judgement!
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Just wondering if any active traders are starting to trade the ETFs? After reading the book by Larry Connors - High Probability ETF Trading - I switched and I would say overall my results have improved but there are fewer trading opportunities because of the small number of ETFs he writes about. ETFs seem to be a little less erratic in their price movement so that’s good but some of them have poor results using the systems he describes in the book.
ETF trading is a wide field. Since most ETF´s are leveraged one has to be careful about the risk involved. The risk management integration of ETF´s is a little more complicated than with normal stocks but in general i agree it is useful to trade ETF´s as well.
Great comment about private money