The stock market is always driven by news. A better-than-expected economic report sends the market higher. An earnings warning from a big blue-chip company sends the market lower.
The current market environment is exceptionally vulnerable to news. One day the market is up 300 points as the government bails out Fannie Mae and Freddie Mac, the next day it is down 300 points because of some dire employment numbers.
If you are a long-term investor, my advice is to ignore most of the news unless it directly affects a stock in your portfolio. If you are a short-term trader, take profits quickly and cut losses just as quickly. Have your targets to take profits and stick with them – and have your stop-loss points and stick with them as well.
The market is not a place for emotion. Now, more than ever, knowing this is critical to your success as a trader.