It is very dangerous to seek market opinion from someone. This is because different investors/traders use different strategy and timeframe when making decision. I shall generalise the following investor/trader as such:
- Investor – look at an investment horizon in terms of years. 5 to 10 years are common.
- Position trader – take large positions for months to a few years.
- Swing trader – days, weeks and months.
- Intraday trader – usually scalp within the day, taking small but numerous profits.
Maybe the pictorial is clearer below:
So if someone gives you an opinion that the market is going up, make sure you ask him what timeframe he is looking at. A day trader may be on the bullish side for the day, but at the larger timeframe of weeks, it may be a down trend. If you are a swing trader, and you got influenced by the comment of the day trader (no matter how reputable he is), you are in for a trouble. I have a personal experience. You should know Jim Rogers. I was influenced by his opinion when he mentioned he was bullish in commodities in his “Hot Commodities” book. Without a good understanding of what timeframe he is looking at, and which entry points he was looking at, I got in Lyxor Commodities near the market peak in 2007. I was lucky since I only invested a small amount. What I found out was that Jim Rogers meant that it is a long bull run in commodities, 10-20 years timeframe. And he did mention in the book that he expected periodic market corrections, but prices will continue to grow up. To be honest I was not prepared to hold for 10-20 years and hence, I should not have listened to him. I am not sure about you if you have such experience.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
The market is full of opinions, everyone has one for you if you bother to listen. That is why you can never make money off tips, especially you do not even know what timeframe that person is talking about and the technique he employs. At the end of the day, you are the one that pays for the advice.