How to Avoid Chart Fatigue
Put away your charts for just a minute…
Turn off your real-time quotes. Close out your software and log off your brokerage account. You’re not helping your trading if you allow your emotions to swing from euphoria to despair every five minutes. Minding every single tick will do nothing but frustrate you as the market chops along this week.
Today, I want to offer a few words of encouragement to help you maintain your sanity in this turbulent market. And I want to share with you a few tips about time frames and how they affect your perception of the stock market.
First, let’s talk about the market action we’ve been seeing over the last two weeks…
Stocks are still finding higher ground. Yet they haven’t exactly taken the straightest path. Since the early June bottom, the S&P 500 has followed every thrust higher with a pullback of almost equal strength. Notice how I said “almost”.
Despite the choppy action, stocks are finding higher highs and lower lows since the June bottom:
This is only piece of information you should concern yourself with right now. Everything else is just noise.
I know how difficult it can be to ignore every tick of the market. I’ll sometimes catch myself zoning in on a 5-minute real-time chart of the S&P. It’s so easy to become mesmerized by every move the market makes, especially as we approach key levels.
But in reality, it’s important to keep even the daily moves of the market in perspective. Unless you are a daytrader, you’re not trying to pull nickels out of the market every 3 minutes. What matters is the overall trend. And one day does not a trend make. If you start to obsess over how the market finishes every day at 4 p.m., you’re going to sacrifice the perspective you’ll need to make informed trading decisions.
If you find yourself fretting over the market on down days, or celebrating a little too much on days when stocks move higher, I recommend stepping away from your trading software. Instead, pull up a weekly chart. When you widen your view of the market, so to speak, you gain a big-picture perspective. It cuts down on a lot of the noise, and longer-term trends become clearer.
Take a look:
The weekly chart of the S&P smooths the recent whipsaws. So what you are left with is a less muddled view of where stocks are potentially headed as summer begins to wind down.
Think how much easier it would be to trade off this mindset, as opposed to the tumultuous look the daily chart gives you. Now, I’m not saying you should ignore market action entirely. And you shouldn’t ignore daily and hourly charts if you’re looking to fine-tune a buy or sell. But when it comes to your overall emotional state and perspective, zooming in on market noise will cause nothing but distress, leading to poor entries and exits.
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