Tackling your greatest investing enemy
Tuesday, 13 November 2018
By Bernd Struben
- A 25.9% gain…in two hours
- Your ‘speed trade advantage’
- Trading from the lessons of life, and life from the lessons of trading
- ‘Why the Global Elite Are Pushing a New Brexit Vote’
‘Your greatest enemy in trading is yourself.’
The Billionaire’s Trader
As a subscriber to one or more of our advisory services, it’s safe to assume you have an interest in making money. Lots and lots of money.
Certainly, at the end of the day, you don’t want to lose money.
Which is not to say every investment or trade you place will be profitable. That’s impossible.
But as I said, at the end of the day you want to be looking at some hefty gains.
Now ‘the end of the day’ is going to mean different things to different people.
If you’re an investor, it might mean the end of the tax year. Or it could mean a 10-year investment horizon…or longer.
If you’re a trader you’re often looking at just a matter of weeks before you exit your positions and buy into new ones. Sometimes less.
This is an important distinction. Particularly in volatile markets.
Long-term investors may be best off gritting their teeth and holding tight through volatile periods. This can mean losing money over the short-term with the expectation of recouping any losses — and then some — over the long-term.
On the other hand, increased volatility can spell big opportunity for savvy traders, even in the short-term.
And market volatility is soaring. In fact, the NASDAQ’s turbulence is at seven-year highs.
‘A gauge of 30-day turbulence in the Nasdaq 100 has tripled in five weeks, pushing it to the highest since 2011. Day-to-day swings are averaging 1.7 percent, half a percentage point more than in February…
‘The 30-session realized volatility of the NYFANG Index, which tracks the FANG quartet and other large tech stocks, hit an all-time high on Monday, and exceeds the fluctuations in the S&P 500 by the most on record.’
The NASDAQ lost 2.78% overnight. The tech heavy index is now down 10.4% since 1 October.
But as you can see in the chart of the NASDAQ below, the past month saw plenty of upswings along with the down. If you’re prone to motion sickness, you may want to look away…
Click to enlarge
A similar story is playing out here in Australia.
The ASX 200 is down 5.4% since 1 October. And as the one-month chart below shows, Aussie stocks are also becoming familiar with big daily price swings.
Click to enlarge
The trick to making the most of these price moves is having an edge on all of the other traders buying or selling shares in anticipation of the next rise or fall.
There are all kinds of methods traders use to try and gauge the market. Moving averages are one of the more common and simple analytical tools. But as the Billionaire’s Trader explains in today’s guest essay below, don’t expect these to give you any advantage over the masses.
‘Using moving averages or RSIs and MACDs, when every man and his dog looks at them, is a recipe for disaster. Lagging indicators are just that: lagging. They have little hope of giving you an edge in markets that move so fast.’
So lagging indicators are out.
Here’s the inside scoop from the Billionaire’s Trader:
‘Buy and sell pivots give you a clear, non-lagging definition of when momentum is shifting.
‘As it happens, last month saw a monthly sell pivot in US markets…
‘The beauty of using this method to help you make decisions about equity exposure is that we get a signal very quickly to enter and exit the long-term hedge.’
So is soaring volatility bad news for traders?
According to the Billionaire’s Trader, ‘Not a chance.’
You’ll find his latest guest essay following the market section and a quick look into a fast gaining cryptocurrency below.
And if you haven’t already, you can sign up for his three-day special trading Masterclass here.
‘The Three-Minute Speed Trade Advantage’ kicks off this Friday. As with our previous special events this year, the trading Masterclass is free to our paying subscribers.
Whether you consider yourself an experienced trader or are just looking to dip your toes in the water, this is one you won’t want to miss.
Now, to the markets. Brace yourself…
Overnight the Dow Jones Industrial Average closed down 602.32 points, or 2.32%.
The S&P 500 lost 54.79 points, or 1.97%.
In Europe the Euro Stoxx 50 index finished down 35.41 points, or 1.10%. Meanwhile, the FTSE 100 fell 0.74%, and Germany’s DAX closed down 203.72 points, or 1.77%.
In Asian markets, Japan’s Nikkei 225 is down 594.70 points, or 2.67%. China’s CSI 300 is up 0.13%.
In Australia, the S&P/ASX 200 is down 103.70 points, or 1.75%.
On the commodities markets, West Texas Intermediate crude oil is US$59.00 per barrel. Brent crude is US$70.12 per barrel.
WTI’s fall below US$60 per barrel comes a week after I’ve long predicted it would. But better late than never.
US crude dropped 3.2% overnight. It’s now down 4.5% since I last wrote to you on Thursday. And that comes in the face of Saudi Arabia’s statement over the weekend that the kingdom will cut production in December.
While the biggest price falls in crude may be behind us, I don’t expect to see it climb back anywhere near its early October highs. The world, after all, is awash with oil.
Turning to gold, the yellow metal is trading for US$1,201.22 (AU$1,673.71) per troy ounce. Silver is US$14.02 (AU$19.54) per troy ounce.
One bitcoin is worth US$6,345.26.
The Aussie dollar is worth 71.77 US cents.
A 25.9% gain…in two hours
Stock market volatility, as we looked at above, is at multi-year highs for many global indices.
Yet one of the more notoriously volatile assets has been remarkably stable of late.
Just have a look at the following graph:
Click to enlarge
Any guesses what we’re looking at?
If you answered ‘bitcoin’, go to the head of the class.
Since 7 September, bitcoin’s traded between roughly US$6,300 and US$6,800, around an 8% range.
That means bitcoin punters aren’t doubling their money every month lately…or seeing half their investment disappear either.
It also means that bitcoin may be becoming what many of its advocates say it should be. An alternate currency to government issued and manipulated fiat money. After all, it’s a heck of a lot easier to accept bitcoin for payment if you’re fairly confident the price won’t surge or plummet overnight.
But if you’ve got the appetite for some risk and are still hunting big overnight gains in the crypto market, don’t despair.
You may just need to look at some of the slightly smaller tokens. Like NEM, for example, currently the 16th largest crypto by market cap.
Here’s the price chart since noon yesterday:
Click to enlarge
NEM leapt 25.9% in a matter of hours.
CoinDesk explains why:
‘NEM’s price jumped to a peak 25 percent amid news that trading of the token is being re-enabled on Tokyo-based cryptocurrency exchange Coincheck for the first time since 500 million NEM tokens were stolen from Coincheck’s digital wallets on On Jan. 26th, 2018.
‘The price of NEM began to spike at approximately 8:15 UTC, roughly 45 minutes before Coincheck posted a public announcement regarding the re-enabled trading at 9:01 UTC.’
If you’re looking to take advantage of these kinds of potential rapid-fire gains in the crypto world, don’t do a thing until you click here.
And make sure you read all the way to the end!
Your ‘speed trade advantage’
Before you move on to the latest guest essay from the Billionaire’s Trader, a quick reminder of his upcoming trading Masterclass.
‘The Three-Minute Speed Trade Advantage’ will show you an all-new way to siphon thousands of dollars from ordinary Aussie stocks. And if you’re thinking it involves options or computer trading, think again.
I can’t give you a lot more detail today. I can’t even reveal the Billionaire Trader’s identity. Though he’s promised to unmask for the Masterclass.
The three-part series starts this Friday, 16 October.
Trading from the Lessons of Life, and Life from the Lessons of Trading
By The Billionaire’s Trader
Trading the markets is like dealing with children.
I had that reinforced to me this morning as I sat down to write today’s article. I’d spent the previous evening trying to get a ‘masterful artwork’ in ballpoint pen out of my couch, thanks to my four-year-old son.
He tried to blame his good friend ‘Piggy’, but I was sceptical.
I could have chosen to laugh at the event, but instead did the stern dad trick to make sure he knew that swirling a pen all over the couch wasn’t the done thing.
There were three solutions. Get the ink out of the couch. Throw a blanket over it. Or get a new couch. Fortunately, the ink came out.
The moral of this story?
Simply this: Life will move on, and in the long run, a bit of ink on a couch doesn’t really matter all that much.
But in the moment when I saw it, I was pretty cranky. I could have yelled and gotten frustrated. Or I could have faced the problem, and then dealt with it in the appropriate way. I chose the latter.
Being involved in the markets for as long as I have has taught me far more than just whether or not to buy or sell a particular stock or index. The greatest lessons I have learnt have been about myself.
Some of those lessons have not been what I expected or even wanted to learn. But there isn’t much personal growth without a bit of pain.
Working out why we behave in the way that we do under periods of stress, is a fascinating subject. I’ve often been quite amazed by the outrageous behaviour that can occur when you are staring down the barrel of some big losses, due to an unforeseen event. Or even worse, when you have had a freakishly good run and actually start believing you can predict the future!
Don’t laugh, every trader thinks that at least once in their lifetime.
Your internal dialogue goes rogue and the ability to make any objective decisions becomes completely lost. I know this now after more than enough trial and error. For many traders, especially novices, once you’re in a trade, you find that you can’t trust yourself to behave in a way that’s beneficial for your financial future. In which case, you need to build a method that takes this into account.
[Publisher’s Note: An exciting trading Masterclass series begins this Friday. In it, we’ll reveal the identity of the Billionaire’s Trader, and he’ll explain to you everything he’s learned from more than 20 years of trading — including time trading on the floor of the high-pressure Sydney Futures Exchange. To join the FREE Masterclass, just click here and follow the instructions.]
Every trading rule that I have has this one obvious fact as its centrepiece. Create a straitjacket around yourself so that once you are in a trade, everything from that moment on is systematic. There are no decisions to make. Just rules to follow and enact, sometimes, even through gritted teeth.
But in order to make decisions, there has to be a map to show you the direction. Technical analysis is that map. Think of technical analysis as a wind sock instead of a crystal ball. It tells you which way the wind is blowing regardless of whatever is going on in your own mind. It forces you to accept what is true, rather than what you hope to be true.
Of course, one of the problems with creating a map is that your map may be faulty.
If you’re wandering the streets of London with a map of Paris, you’re likely to be in all sorts of trouble. In a similar way, I believe most classical technical analysis is faulty, and I figure people are right to be highly sceptical of it.
In my view, using moving averages, RSI’s (relative strength index), and MACD’s (moving average convergence/divergence), when every man and his dog looks at them, is a recipe for disaster. Lagging indicators are just that: lagging. It’s like trying to drive only using your rear-view mirror. It’s great for telling you where you’ve been, but it’s useless when it comes to telling you there’s a sharp hairpin turn ahead.
That’s why those lagging indicators have little hope of giving you an edge in markets that move so fast. They may work well in a smoothly trending market (moving averages) or a range-bound market (RSI’s), but they can’t handle all situations.
When you look at it from this point of view, it becomes pretty clear what an incredibly difficult task it is to create a map that reflects what is actually going on in the markets. That map has to be simple enough to be understandable and repeatable, but also complex enough to describe reality.
Even when you have a map that you believe is useful, you have really only begun the journey towards creating a viable trading strategy.
I know that my map of market behaviour describes in detail where the buying and selling forces are. But it’s still a big leap from there to a tradeable strategy. Especially one with enough of an edge to cope with slippage and brokerage charges.
And on top of that, you’re still viewing your map through the lens of your own biases.
If you’re permanently bullish or bearish, you’ll have a tendency to read any map as bullish or bearish. Price action is so volatile and complex that you can create any story you like and convince yourself that it’s true.
It’s only in retrospect, while you are licking your wounds after another loss, that you can realise you were kidding yourself once again.
As you whittle things down further and further, you start to jettison earlier ideas about the market and your ability to conquer it. Instead, you start to become clinical in deciding what’s true and what’s fantasy. What you know and what you most certainly don’t know.
Then you can start asking sensible questions that may not sound that exciting from the outside, but that begin to lead you towards a sober and rational approach to money making in the markets.
Should you trade a stock where you have a 48% chance of making 1.6-times your stake…or should you aim for the 10-bagger in a tiny gold stock?
The first sounds boring. The second sounds exciting. But when you consider the chance of the tiny gold stock ever producing even a single ounce of gold is about one in 100, the boring trade may turn out to be the best trade.
If your aim is to make money…which is what it should be.
When I came across my son’s masterpiece, my younger self would have flipped out and yelled. All because a four-year-old was behaving like a four-year-old. But thankfully, my older self was able to cut through the initial emotional reaction, and deal with the problem without missing a beat.
It may sound strange, but I’m convinced that the lessons I’ve learnt in trading with technical analysis have helped me in life, and the lessons I’ve learnt in life have helped me with trading. Strange, but true.
I explain more on this, and how to be a successful trader in the special Masterclass series which launches this Friday. To join me (it’s FREE), just go here.
The Billionaire’s Trader
Publisher’s Note: The Masterclass series begins this Friday. In it, we’ll reveal the identity of the Billionaire’s Trader, and he’ll explain to you everything he’s learned from more than 20 years of trading — including time trading on the floor of the high-pressure Sydney Futures Exchange. To join the FREE Masterclass, just click here and follow the instructions.
Finally, don’t forget to check out the latest in the Brexit travails from The Australian Tribune:
‘Why the Global Elite Are Pushing a New Brexit Vote’
‘The global elite never believed UK citizens would vote to leave the European Union. Most of the polls, after all, indicated the “remain” campaign would comfortably win.
‘But those polls were wrong. On 23 June 2016, 52% of Brits who voted in the referendum chose to support “Brexit” and leave the EU.
‘That decision has stuck in the craw of globalists on both sides of the Channel ever since. So much so that they refuse to accept it. And like spoiled children overturning a game…’
If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.
And it’s absolutely free.
Sign up here to get The Australian Tribune delivered free to your inbox five days per week.
You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.