Outdated Single Market Analysis and Lagging Indicators Lead to Trading Losses and Disappointment
Even today, traders using mass-marketed technical analysis trading software continue to ignore this complex paradigm of intertwined global markets as if it doesn’t exist. These single market approaches, developed decades ago when domestic markets were still trading in isolation from each other, are sadly still the predominant way that most individual traders analyze the markets and make their trading decisions. These traders just don’t realize how deficient these methods are and how risky it is to rely upon them when competing against other traders who have superior analytic tools tailored to today’s globally interconnected markets.
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When we speak to traders on the phone and ask how they’re doing in their trading and what tools or types of analysis they’re using, we hear the same story over and over again. It’s like a broken record even though each of them individually thinks that his or her experience is unique. They’re either losing money, just breaking even, or are barely profitable. They’re also very stressed out emotionally and frustrated, because they can’t figure out why they’re failing.
With the proliferation of trading software and execution platforms, as well as internet websites that sport dozens of commonly used single market technical indicators, crisp charting capabilities, and automated execution functions, unsuspecting traders, too many of them new to trading and with little if any understanding about the evolution of the financial markets and computerized technical analysis, are seduced by fancy looking, yet deficient, analytics that have not kept up with the unprecedented changes that have occurred in the global markets which demand that traders have an intermarket perspective in order to be successful.
John Murphy, a noted technical analyst, in his book entitled Intermarket Technical Analysis sums it up like this: “To ignore these interrelationships is to cheat oneself of enormously valuable price information. What's worse, it leaves technical analysts in the position of not understanding the external technical forces that are moving the market they are trading. The days of following only one market are long gone. Technical analysts must understand the impact of trends in related markets all over the globe. Trying to trade the markets without intermarket awareness is very dangerous.” Are you one of those traders – perhaps using fancy looking, yet seriously outdated single market oriented software – still struggling to succeed but unable to figure out what you’re missing?
These single market analysis approaches are just plain obsolete in today’s globally intertwined markets. No wonder the failure rate of individual traders is astronomically high. This disconnect between the reality of trading in today’s intertwined global markets and the shortcomings of mass-marketed technical analysis methods -- that continue to focus exclusively on each individual market using obsolete lagging technical indicators devised decades before the markets underwent globalization -- is the primary, if not sole, reason why individual traders continue to lose money in the markets and don’t even know why.
There is an Alternative to Failure - It's Called Success
You’re probably using one or more of these single market lagging indicators yourself with similarly disappointing results and frustration. Technical analysis methods that analyze each individual market just can’t deal with the complexities and interdependence of today’s global markets and are totally outdated due to these deficiencies and shortcomings. Why should you continue to let these limitations of single market, trend following, lagging indicators popularized in mass-marketed software cause you to lose money and fail as a trader, when there’s an alternative available.
In the aftermath of several global financial crises in the late 1990s, and the most recent near global meltdown in 2007-2008, traders and investors struggle to recover financially from their failure to appreciate the globally interconnected nature of the financial markets. Many have learned the hard way that the global financial markets are, indeed, intertwined with one another.
Here's a Real Life Example
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Both farmers and speculators in the grains need to know how energies, meats, and currencies affect the grain markets such as corn. For instance, the price of corn is affected by the production of ethanol to meet government mandates for cleaner fuel. Energy prices also affect the grains due to the cost of running farm equipment such as tractors and combines. Fuel is also used to transport crops and meat products, which are bought and sold in different world currencies. Because corn and many other commodities are priced in U.S. dollars, changes in value of the dollar affect exports sales. Also, prices for grain products used for feed play a big role in the production and supply of hogs, cattle and poultry, which affects consumer prices at the grocery stores.
Now, today, a quarter-century since Mr. Mendelsohn first came to that realization and did something about it when he developed the first commercially available software that was designed to analyze the affects of interconnected global markets, practically every trader will tell you that what happens in one market affects what happens in others and admits that the markets are all interrelated.
