Market Indicators: The Best-Kept Secret to More Effective Trading and Investing

Introduction

	Beware of geeks bearing formulas.
	--—WARREN BUFFETT, in his 2008 annual letter to shareholders

Some people suggest that investing is a form of gambling, complaining that they can do as well playing the Pick-3 lotto or betting on roulette. Nothing could be further from the truth. In Las Vegas, the house always has the edge. In the stock market, you can have the edge, if you wait until conditions are right.

Only poker, in which individuals compete to outwit each other, really compares to investing. At its most basic, poker is about making decisions based on imperfect and incomplete information. Players each hold a few cards that only they can see. Every other player must make educated guesses about who holds what. No one knows which card will be dealt next.

An ability to read other players is the skill that sets master poker players apart. The best poker players notice that the man with the loud shirt plays conservatively; if he bets aggressively, it's likely he has a really good hand. They see that the player in the corner plays with her chips when she's bluffing. In poker, these are known as tells, signals that give observant competitors slightly better odds and help them win more often over the course of many games.

That's the goal of this book. The following pages will describe a variety of signs, or tells, that many market professionals consider. These signs don't replace good, old-fashioned homework—but they will enhance your ability to make better stock decisions ...