The discretionary trader uses several sources for his trading decisions. One is
intuition, for example, “I see a lot of people in stores, so I think the economy is
good, and earning will increase, so the stock market should go up, and I should
buy Sears.” He usually spends a lot of time talking to his broker. “What do you
think Joe, isn’t Woolworth’s going to turn around?” Another is reading and
watching the news, “Retail sales are looking strong and Woolworth’s is closing
stores to lower their overhead.”
Hot tips are a common way that a discretionary trader gets ideas. A call from his
broker or good friend, or a tip from a discussion at a cocktail party are all places
the discretionary trader gets his trading ideas. “Hey George, HTECH Corp. has a
hot new product in the works, here’s a stock you can pick up cheap.” If it gets dry
in 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 the
position immediately. A news story on the nightly news may cause a discretionary
trader to short the airline that has just had a crash.