You read in the headlines that claims for unemployment insurance benefits rose by 1,000 last week, the third straight week they have risen. But does "jobless claims rise" mean that unemployment is getting worse?
By Vikram Rangala
Friday, April 24, 2015
No, but that's the headline, the first part of it anyway. The full Reuters headline was "U.S. jobless claims edge up; trend signals firmer labor market." Which doesn't seem to make sense at first. It's like the doctor saying, "Your blood pressure's up again. Looks like you're getting healthier."
A more useful number might be seven, as in seven straight weeks of jobless claims under 300,000. That is a healthy sign. Or the number all the way down in paragraph 12 of that article: "The four-week average of claims fell 20,750 between the March and April survey periods, suggesting an acceleration in job growth."
And then there's 62, as 62 straight months of job creation since March 2009. That's unprecedented. It's also often unreported, or misinterpreted, overhyped, or unappreciated. In many cases, the problem is not getting the numbers right, but using them correctly.
NUMBERS OR PERCENTAGES? IT DEPENDS
You see news reports every day saying that the Dow or euro is up or down zero-point-something percent. But who really uses that number and for what? Traders use ticks or dollars or pips.
Moreover, reporting that stock futures are down 0.4% overnight or in the early morning after a big rally is both obvious and practically useless. Sometimes it may signal what stocks are going to do on the open (though not reliably), but every trader knows that markets move in waves. A day trader who is trying to catch a pre-market move up may be looking for a place to exit before the market corrects later in the day, but that day trader won't care about percentages.
Often those premarket news reports seem to imply that the stock market is trying to make some kind of statement about what it thinks about economic events. But often it isn't making any statement at all. It just rallied up and is now resting.
It's sort of like, instead of saying "Vikram is asleep because it's night," you make the headline, "Vikram unconscious following day-long bout of awakeness."
HOURS, MINUTES, DAYS, AND YEARS
We all have heard "the trend is your friend," but it's important to know what time frame you're working in. A day trading scalper may be watching trends lasting a few minutes. An intraday trader might ignore those and try to catch the major move of the day. At the other end of the time scale, long-term investors shouldn't check their stock portfolios twice a day or maybe even every day. It'll just raise your blood pressure and give you stress.
Incidentally, some Nadex traders are long-term, buy-and-hold investors as well. But when they check the market's short-term movements—daily, weekly, or even intraday—instead of just getting frustrated about their stock portfolios going up and down 0.1 or 0.2%, they take some positive action.
For example, if the stock market is down for a week, they'll sell some binary options and profit from that move. It may not be an all-out hedge, but it's a sort of psychological hedge against feeling helpless before market forces.
What's more, a 0.5% drop in your stock portfolio's value doesn't bug you as much when your $50 binary option expires in the money. Sure it's just fifty bucks per contract, which may be pizzas for the whole family or a new shirt. But it's a 100% return on investment in as little as 20 minutes or even five with our new 5 minute forex binaries.
THE NUMBERS THAT COUNT
So the next time you see a number presented to you or have to present a number to someone else, think about whether it's a unit or a percent or a fraction. Think about whether you are trying to make it sound good or bad. After all, would you tell your child, "Look honey, you grew a whole inch this summer!"?
Or would you say, "Summer season growth results were a positive 0.2%, representing a continued decline in year-over-year gains of over 40% since your percentage growth rate peaked at age 2. Our ten-year projection, unfortunately, is that you will stop growing altogether by your early 20s."
What makes for a fine quarterly earnings report would result in some very depressing parenting. "We would conclude by warning that your height gains may even decline in later years unless you SIT UP STRAIGHT!"
However a financial number is presented to you, whether in percentages or ticks or dollars, make sure you never let it affect the numbers that really matter, like your blood pressure, or how many hours you sleep, or how much time you enjoy with the people you love.
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