INTUITION & HOT TIPS

The discretionary trader uses several sources for his trading decisions. One isintuition, for example, “I see a lot of people in stores, so I think the economy isgood, and earning will increase, so the stock market should go up, and I shouldbuy Sears.” He usually spends a lot of time talking to his broker. “What do youthink Joe, isn’t Woolworth’s going to turn around?” Another is reading andwatching the news, “Retail sales are looking strong and Woolworth’s is closingstores to lower their overhead.”Hot tips are a common way that a discretionary trader gets ideas. A call from hisbroker or good friend, or a tip from a discussion at a cocktail party are all placesthe discretionary trader gets his trading ideas. “Hey George, HTECH Corp. has ahot new product in the works, here’s a stock you can pick up cheap.” If it gets dryin the summer, our discretionary trader may decide to buy Corn, Beans or Wheat.However, when he looks out the window and notices that it’s raining, he sells theposition immediately. A news story on the nightly news may cause a discretionarytrader to short the airline that has just had a crash.