"As each data point comes out, positive or negative, sentiment lurches from one extreme to the other very quickly."
That's a quote from Hugh Grieves, who runs the U.S. Opportunities Fund at Miton Group in London. He was specifically referring to China, saying .... "The probability of a global recession is rising as news out of China gets worse"
But, he notes, sentiment is swinging as each new data point hits. In the bigger picture, that's a comment that could be applied to so many areas and to movements in so many trading instruments.
Maybe thats a problem for some, maybe thats a problem for investors, but for traders its another opportunity. What to do about it? How to profit from lurches in swings in sentiment and swings in price?
Well, if you're a trader there are a couple of things to keep in mind:
1. As Mr. Soros says, 'Invest first, investigate later'. Which, I'll paraphrase as, yeah finding an story, a narrative, an explanation ... thats cool ... but don't forget to make some money too (first).
- Remember, you don't have to ride a trend for multiple big figures to make money, you can profit from smaller swings.
2. Yes, by all means pay attention to the news (and other things), but pay more attention to the price action in response to the news (and other things). If sentiment is lurching negative and price responds negatively, then go with it (see point 1). If sentiment lurches negative and price responds positively, then its probably time to think more carefully, perhaps the market is positioned negatively and profit takers are responding to the news to square up. that's a situation where you would want to take more care.
