I say it all the time during our webinars … you’ve gotta look at the big picture.
As a trader, how you see the market is critical.
Your vision and foresight determine nearly everything about how you trade.
But I still see a lot of day traders focusing on short timeframes when they should be paying attention to the broader market narrative.
This is especially true right now as we’re coming out of 2022 — the worst year for stocks since 2008.
Following such an abnormal year for the markets, the big picture becomes even more important.
I expect that, in 2023, big moves in individual stocks will be dictated by the price action of the overall markets. (This is always true to some extent, but even more vital to consider this year.)
After all, looking at the big picture helped me to discover my brand-new trading system. And speaking of that…
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Bottom line: If you’re too focused on the short term, you could miss major setups brewing in the background.
Keep reading and I’ll show you exactly what I mean by looking at the big picture…
The Pros of Looking at the Big Picture
In the stock market, looks can be deceiving…
And when you’re day trading, it can be tempting to ignore the big picture.
But what do I mean by the big picture?
Generally, I’m talking about the broader price action in the overall markets.
If you pay attention, I always start our weekly webinars by looking at the S&P 500 ETF Trust (NYSEARCA: SPY).
I do this for a very specific reason … looking at the SPY is one of the best ways to gauge the sentiment of the overall markets.
If the SPY — which tracks the 500 biggest companies in the U.S. — is leaning a certain way, there’s a much better chance the one individual stock you’re looking at will begin leaning that way as well.
Another important aspect of seeing the big picture is watching other stocks in the sector of the one you’re trading…
For example, my recent fascination with Tesla Inc.’s (NASDAQ: TSLA) chart led me to trade Rivian Inc. (NASDAQ: RIVN) for an overnight gain of 83%.
I never would’ve found this play if I wasn’t focused on the big picture.
Now that we’ve covered the positive aspects of seeing the big picture, let’s talk about the negatives of ignoring it…
The Cons of Ignoring the Big Picture
If you fail to follow the big picture, it could lead to costly trading mistakes.
Here are a few examples of what not to do…
- Letting small signs of a potential breakout (or breakdown) scare you out of a winning play…
- Only watching charts with shorter time frames (when you should be paying more attention to the daily and weekly charts)…
- Allowing market volatility to shake you out of your gut instincts.
Bottom line: Trust your gut.
The stock market (especially this one) will constantly try to fake you out of your conviction. Don’t let it succeed.
Your immediate reactions can occasionally overtake your big-picture trading mindset. Anyone who day trades should be able to relate to this.
But allowing this to happen is a mistake.
There’s usually way more to gain from sticking to your initial conviction than in allowing short-term trading signals to veer you away from your overall plan.
And one more thing … If you sell a position too early, don’t fall into the trap of counting the gains you could’ve had. (That trade is over … move on!)
Keep your mind on the big picture. NEVER let minor hiccups distract you from major indicators.
In a market as volatile as this one, the big picture is your best friend.
Don’t get too wrapped up in 5-minute charts. Pay attention to the broader market…
By doing so, you’ll be setting yourself up for a long career as a trader.