If you want to become a professional investor (or trade like one), you need to interpret research like a pro. And this is as much to do with disciplined psychology as it is with general market knowledge and tact.
Shortsighted responses to others’ investing related tweets or posts won’t make your stock go up or down in price. And it also won’t endear you to other investors. The nonstop flow of financial thoughts and opinions on social media, TV, and the web can be overwhelming, so it’s imperative that you get on top of this bevy of information.
In this context, interpreting research is significantly more difficult than one thinks. And, although I cannot sit here and tell you that I have all the answers, I do have some thoughts on the subject that may assist you in getting to the next level. Here are 5 ways to interpret research like a pro:
1) Eliminate Noise
On Twitter: If you can handle reading a twitter stream with 1000 followers, great. If not, hone in on those investors/sites you respect by:
a) Creating a “list” in twitter
b) Manually checking in
c) Reducing your follow list
On the Web: Stick to a handful of research and financial content sites. And do your best not to let personal biases, narratives, or politics seep into your reading of the markets.
2) Understand Your Best Environment For Learning. If you follow a particular type of tool, indicator, or analysis, then you may want to limit the number of people/sites you follow to that theme (and develop a strict regimen). On the flip side, if you are confident in your general approach and understanding of the financial markets, then broaden your horizons to find new research ideas and market thoughts.
Whether it’s within your focus area(s) or a broader context, always be open to learning. I learn something new about the markets, trading, or myself everyday. And study up on what other great minds are doing – this will help you to interpret research the right way.
Here’s a comprehensive reading list for professional investors by fellow SIM contributor Sheldon McIntyre.
3) Know Your Timeframe and try to interpret the time frame of others. If you don’t understand this, you’ll misinterpret the ebb & flow of the markets (and you’ll lose money). This is the single most important aspect to understanding research.
Try this on for size: If you purchase a stock based off your reading of a 15 minute bar chart, your time frame will likely be different than when acting off a weekly bar chart. Is it a day trade? Swing trade? Or longer term investment? Now take this approach and apply it to the way you interpret ideas from other investors. If someone says they like a stock for a short-term bounce, take it at face value. You may be short the stock over a longer time frame, but perhaps you’ll both be proven correct… and perhaps that bit of research can help you to trade around your core position. Separate macro from micro… know your time frames.
4) Develop A Routine. From the time we wake up in the morning to the time we go to bed, we operate best when we feel comfortable and confident. From analyzing fundamental data, charts, and research notes to checking in on Twitter, we all need a solid routine.
5) Stay Disciplined. No need to freak out because someone has a different opinion or position than you. There’s a reason you decided to invest in a particular security (and over a particular time frame). It’s okay to be open to changing gears, just be sure that this doesn’t become a consistent theme.
Thanks for reading.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.