In a recent blog post I talked about my tools of the trade in terms of the things I use as a professional forex analyst and in my own trading. I want to expand upon and extend that discussion, though, to get a feel for how market participants collect, process, and exploit information. To that end, I have a few questions to ask. Hopefully, they can stimulate a good exchange of information and ideas.
What's your routine?
Most of us fall into a pattern when it comes to deal with the markets. For someone who's a day trader that probably includes some kind of initial review of overnight developments and preparation for the day, then the day's trading activity, with some kind of wrap-up at the end of the session to prepare for the next day. Investors and others with a longer-term approach won't have the same sort of daily routine, of course, but they still have things they do as part of the review-action-review sequence. So what does that entail for you?
From where to you get your information?
Information is obviously the life blood of playing the markets. This includes news, economic data, prices, earnings reports, analyst comments, and any number of other things. There are so many sources out there these days, from newspaper to television to the internet and other digital transmission vehicles. What sort of information do you use and how do you receive it?
What do you use to make your decisions?
Once you have the requisite data in-hand, presumably there's some process involved in turning it into a contributing factor in your decision-making. Charting packages give us visual representations of price and other information, and also allow us to apply technical analysis. Spreadsheets allow us to manipulate and aggregate information, like turning information about a company into a valuation of its stock. There are any number of alert functions to let us know when something important – technically, fundamentally, or otherwise – is happening. What sorts of tools do you use to help turn information into action?
How do you interact with other market participants?
These days there are numerous ways traders and investors can interact with each other. We've got instant messaging and email. There's Twitter and Facebook. There are online communities like Currensee. And of course there's that old stand-by, the telephone. To what degree do you employ these communications methods and do you do so as a part of your data collection process or mainly just for social engagement?