Retail traders who act on live news are rarely successful, if at all. By the time a major news corporation picks up the market trend, it is too late. If you want to have an “edge” on the market, you need to follow indexes.
To understand the market a little more, I recommend following the top 10-15 future indexes. Looking at these futures can tell you a lot more than reading or watching the news.
A short list of indices to follow:
- Euro Dollar
- Japanese Yen
- Dow Jones Index
- U.S. 10 Year Interest Rates
With the above examples, here’s what they can tell you.
- Wheat and corn tell you about inflation. If the prices are too high, expect revolts from the poor.
- Interest rates tell you about mortgages, inflation, real estate prices and corporate debts, among others.
- Dow Jones primarily is about overall profits.
- Oil gives a good picture on supply and demand.
- Copper is a great way to look at the economy and get a glimpse of construction jobs.
These indices can guide you when you want to go long or short on a certain stock or future within a sector (technology, energy, financial institutions, gold, food, etc.). You’ll want to enter and exit a trend instead of always being late to the party!
Majority of the time, you will have congestion (when the market doesn’t move much). This is great for options trading. Only a small percentage of instruments have a clear movement, which can be frustrating for active traders.