Monday, August 3, 2009

Anything called the Best strategy for trading?

Ever been able to listen to anything when there is a lot of noise? Ever been able to think clearly when there is a rock band playing? Ever been able to speak or be heard over a din? Or been able to concentrate on something when a football ground or a rugby ground explodes into a thunderous shout of approval or disapproval? The Market too makes a lot of noise everyday. A noise that disturbs the thought process of a diligent investor, who wants to take a long term view of market trends, analyze, ponder and take his next step.However, for the short term investor the noise is what matters. The intra day trader makes his money by listening to the noise. Noise does make money for such investors. The noise reflects the volatility in the market resulting from the news of a government decision, of a policy announcement, of a decision by the Board of Directors of a company etc. even before full sense can be made of it.This is the time when short-term investors or intra-day traders act on what they believe they are hearing and what they believe they are seeing. More often than not, they are wrong. But why worry if it helps them make some money in the short term? They are many players in the market who want to make hay while the sun shines and cannot be called investors in the true sense.The Value Based Investor is wary of noise factors. He in fact ignores it. He is not taken in by sudden emotions or sentiments of the market. It's the fundamentals of a company and its future prospects that matter to him. What matters is the long term perspective of what the company can become, the kind of niche segment it will occupy or the kind of market share it has the potential to command. Market noise is of least significance to the value-based investor. He knows that empty vessels make the most noise.

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