As a trader and investor looking to pull money out of the market regularly, the only thing you are really looking for is the price of the investment you bought or sold-short to move in your favor. So, common sense tells us that only price pays, not news, not how much we love a stock or commodity. If the price does not move, you do not make any money, period.
If you think it's going to help you become a better trader by reading financial articles, watching the business channel, listening to other people's opinions, or the Fed, then you are sadly mistaken. That is the absolute best way to undermine all your hard work, analysis, and hard-earned money. The last thing you want to be doing is second-guessing yourself each time you are placing a trade or adjusting an open position.
Eliminate FOMO From Your Trading
Remember that most news and surprise news events follow the direction of the trend even if the news is against the trend; more times than not, the price action will be nothing more than an intraday or a couple-day blip on the chart. So, the news, rumors, opinions, and tips that are causing you FOMO can be eliminated if you become a Technical Trader. Imagine if you could start enjoying investing again, owning only assets that are rising in value, and knowing when to exit positions not moving higher. Wouldn't that be nice?
I wrote a really fun and unique article about knowing your personality type, and how that will affect your trading and investing results. And guess what, 73.3% of individuals do not have the personality to become a successful trader or investor long term. The article is called A Valuable Lesson In Knowing Investors And Your Own Personality Type.
5th Graders Can Manage Your Buy-And-Hold Strategy At No Cost
I know so many individuals who are not happy with their investment performance. Either because of their trading results or what their advisor has not done to protect their wealth and retirement accounts. I speak to individual investors daily on the phone and hear horror stories, which makes me feel sick.
When these investors learn how bear market losses could have been avoided, and profited from with conservative and slow strategy, they have an AHA moment. Once they see how technical analysis and position and risk management can more than double their annual returns and cut their max drawdowns (losses) from 52% down to only 6% they start to get excited again.
Imagine cutting your retirement account volatility by over 88%. Would you sleep better at night? Would it save you difficult conversations with your spouse? Would it allow you to retire without the fear of running out of money?
Well, now you can rid the stock market rollercoaster ride and the buy-and-hold strategy that any 5th grader could do without charging you a dime. Heck, I was on the phone with a new subscriber last month who told me his advisor lost almost 25% of his retirement account this year alone, and the advisor still charged him over $32,000 in management fees…
Im not trying to bash advisors. I know a lot of them, they are great, and many of them use my strategies for their clients, but a guy said this the other day, and it made me laugh.
Ok, I got off on a little tangent there, so, let's get back to how only price pays.
Technical Trading Indicators That Work
If price movement is what pays us, then it's only logical that we focus mainly on the price. Most indicators are based off of price, so they lag the last traded price for an investment. Some indicators, like the 50-day moving average, which many traders use, are actually lagging that investment by 50 days.
Don't get me wrong; some lagging indicators work great for specific trading strategies. I like to keep an eye on the 5-, 20-, 50-, and 150-day simple moving averages. I only really like them when the investment has been trending for a long period of time, and the price sharply pulls back to one of those moving averages. Generally, you get a strong one to three-day bounce off of those moving averages the first time price touches them. But the point I am trying to make here is that if you want to be more of an active trader with weekly or monthly trades to generate a steady income or account growth, then you must focus on the things which have very little lag time and provide continuous trading opportunities.
Surprisingly, if you use a good combination of indicators, you can actually forecast short-term price movement before price moves.
I won't lie. It is very easy to get caught up in using several indicators because there are hundreds, if not thousands, of them. Unfortunately, many are almost duplicates of the same data shown in a different format, and many will completely contradict what other indicators are showing. This leaves you confused and frustrated, and likely trading without a clearly defined strategy, and we all know how that ends.
The key to selecting the proper indicators and tools is to find what has been working best for a specific investment and the timeframe you are trading. Using indicators that represent different types of analysis (trends, cycles, volatility, volume, and market sentiment) so you do not have any overlap, you can then create a synergy of confirming indicators. They will increase your accuracy of a pending price movement in the near future to profit from.
Markets Are Tradable Only 60% Of The Time. Don't Be Afraid Of Cash
A couple of interesting points you should know is that the stock market only trends 20-30 percent of the time. And according to J.M Hurst, the market oscillates (cycles) 20-30 percent of the time. What does this mean? It means that, at best, the market provides tradable price action for us to make money only 60 percent of the time. Why is this important? It tells you that even when the market is performing well, we will still be sitting on our hands and potentially in a cash position 40 percent of the time.
Investors who survive and thrive during bear markets understand the value and power of a cash position during specific market conditions. Sometimes, it is not about making money as an investor. Instead, it is more about preserving capital so that you can revest it later when there are safer opportunities available.
If you want to trade with the best odds possible, then you must have all the major bases covered in terms of analysis. Each indicator/tool that I use analyzes the market in a different way. So when several of my analysis tools are saying it's time to enter or exit a position, then I know there is a high probability of a price movement, and I can take the proper course of action.
Using The Correct Hours For Your Indicators
Knowing what data to follow and analyze is a major step in the right direction, but knowing what times of the day to pull that data for analyzing is equally important. You must follow the big money players, which means you should be analyzing and trading during times when they are active.
In a recent article "How To Tell If The Stock Market Is Bullish Or Bearish," we covered some interesting points and chart you may want to review.
With some instruments, you can trade 24 hours around the clock. Many traders get caught up trading the futures or FOREX market, and that is not for beginners. Because these markets are still open during times when most individuals are home from work, they give individuals a way to place some trades and satisfy their urge to become a trader.
But what most individuals do not know is that overnight trading is one of the toughest times to trade. Because of the lighter volume and lack of liquidity, moves can be magnified in either direction. The big-money players who generate the majority of the volume and price stability during the day are out of the market.
Overnight and pre-market trading data should not be used in your analysis. For example, the S&P 500 futures contract can trade all night right into the regular trading hours. The opening bell is at 9:30 a.m. ET, and between 9:30 a.m.–9:40 a.m. (10 minutes), more contracts will be traded than what took place in the entire overnight and pre-market trading. I should also note that futures and FOREX are highly leveraged, so when you are wrong, your losses happen fast, and they are big. If you trade outside of regular trading hours, be aware of the added risks involved.
With this in mind, it is essential to focus on regular trading hours (9:30 a.m. ET–4:00 p.m. ET) when analyzing market data.
Concluding Thoughts
In short, if you are a trader or investor who thinks you need to follow the news and fundamental data, and read random opinions, good luck. While some of those trade ideas may work here and there, you will almost always give back any gains you made; if you don't follow price and manage positions, it is just a matter of time. I have seen some traders learn this quickly within a year, and others I have come to me for mentoring after 30+ years of trying to do it themselves and just can't seem to get the reliable results they want.
So, if you are unhappy with your trading or investing results or that of your advisor, maybe its time for you to revest your capital with a consistent growth strategy. A strategy that exclusively holds assets rising in value, so you never again watch your wealth and retirement vanish right when you need it the most.