Beat The Markets

Written by Jacey Harmon
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Every investor's goal is to beat the market. But what is "the market"? The market is the collective conscience of millions of investors. Everyday, investors around the world make decisions that shape the direction of our investments. There are some investors that have more power than others. Institutional investors--banks, pension funds, mutual funds, insurance companies--have a larger influence over the market than individual investors. These powerhouse institutions have the ability, due to their deep pockets, to push entire markets higher and lower.

How to Beat the Market

The first step to becoming an investor that will beat the market is to recognize what market you are going to trade. Stocks, bonds, currencies, commodities, futures--these are a few of the trading instruments available. Each instrument will have an index that will track the performance of the overall market. One of the most popular indexes is the S&P 500. This index tracks the performance of the 500 largest companies trading on the U.S. markets. Therefore, if you are going to try and beat the market, you must know what market you are going to play.

One theory that makes sense to me is to become learn how to identify what institutional investors are doing. Since they are the driving force behind the market, it is only in your best interest to figure out what they are doing. This task is easier to accomplish in some markets than in others. In the stock market, one can identify what institutions are doing by understanding price and volume. Price and volume, however, may not be as good of an indicator in the commodities markets as the stock market. In theory, however, if you can identify stock market moves, you can profit by trading stock index futures.

Each market will have its own various trading strategies that investors hope to use to beat the market. Strategies that are based on personal opinions have a high degree of failure. This is because they tend to go against the market's direction. When it comes down to it, the market doesn't care what you think, and it doesn't matter either. What matters is what direction the market is taking. That is why there is a saying on Wall Street: "Make the trend your friend." Strategies that are based on facts will have a much better chance of beating the market.


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