When you see the Bull-Bear Percentage Ratio get to current levels, it usually indicates an important bottom. Every week a poll of investment advisors is taken by Investor’s Intelligence of New Rochelle, New York. The poll tracks investment advisors, to see whether they are bullish, bearish, or neutral on the stock market.
The Bull/Bear Ratio shows the percentage relationship between the bullish and bearish advisors. High readings of the Bull/Bear Ratio are bearish (there are too many bulls) and low readings are bullish (there are not enough bulls).
Current levels indicate the bulls down to 36.7%, and the bears at 35.6%. When the bulls get below 40%, it’s usually time to start thinking long. While it’s time to start shorting, when the bulls get over 60%.
Cramer mentioned it in a column on Wednesday,
“OK, this is really important. One of my most beloved indicators, the bull-bear ratio, has hit a level that simply means you cannot have a big hit to this market, and that level is the 36% bull level.
I know I am not a chartist, but I have sworn by two technical indicators all my trading life: the S&P Oscillator and the bull-bear ratio.
Any time we get severely oversold, I hold my nose and buy, any time we get the bull cohort below 40%, I have to buy something, and when it gets too close to 35%, you have to cover all shorts and get long.”
An indicator to ponder as the market tests important levels here intraday.
When I first began trading, I read somewhere that it was wise to keep a trading journal. So I did. Diligently, I would record my trades, the losses and the wins. It really wasn’t helping me become a better trader though. Eventually, I read the book, Tools and Tactics for the Master Day Trader. The light bulb went on, and I fully understood how to keep a proper trading journal.
To keep a trading journal, your first step is to record the details of the trade. You should include the date, symbol, entry and exit prices, slippage, commission, and most importantly, why you entered the trade.
The second step is to evaluate your trades. Record any mistakes that you may have made. Was it a proper entry? Did you sell too early? Did you panic sell? Then group those errors so that you can track them.
Finding the area where you’re making your most mistakes is step three. When I started doing this, I found that my biggest mistake was consistently taking trades without proper entries. Can you guess what the next step is?
Eliminating the mistake that you’re committing the most, is next on the agenda. Step four may take some time, but you want to fully discard this error from your trading.
Step five is to continue down the list until all your errors are eliminated.
You see, by correcting your mistakes, it leaves you with only winners. And we like winners! How do you treat your losing trades? Do you ignore them? Why not try discarding them with a trading journal. My guess is that if you’re disciplined about doing this, you won’t have to worry about finding winning trades. They’ll come naturally.