First of all I’m getting to tell you that I’m a stock trading idiot and pleased with it. I even have made many dollars trading stocks and that I am blessed the lack to know the technical analysis of markets.
You should be happy that you simply are a stock exchange idiot because this fact may assist you in making real money within the stock exchange.
Some of the neatest people I do know are within the stock trading business and lots of them are stock brokers and financial experts. I’m getting to allow you to in on a unclean little secret. Of all the forces within the economy that have caused people to lose money within the stock exchange, none are greater than the recommendation of monetary experts and brokers. There is actually seemed to be a relationship that exists between an inverse relationship between intelligence and effective stock trading. It might seem that the smarter an individual is that the simpler they’re find ways to cause you to lose your money within the stock exchange.
It has been scientifically proven that the performance of stock brokers in picking profitable stocks might be replicated by having monkeys throw darts at a page of stock listings within the Wall Street Journal. Therefore the first lesson for the wannabe trader is to decide to MAKE YOUR STOCK TRADING DECISIONS YOURSELF and stand back from those stock brokers in their pin stripe suits and glossy shoes.
AND stand back FROM TECHNICAL ANALYSIS, ALSO referred to as WIGGLY LINE THEORY
You should also stand back from technical analysis. Technical analysis of market behavior is pseudo science and regularly promoted by snake oil salesmen disguised as brokers and other financial experts. Other technical analysis proponents include trading system vendors and trading system software companies.
For some brokers and financial wizards technical analysis may be a quite religion promoted to elucidate what otherwise can’t be explained about markets. It’s the opium of stock exchange losers everywhere. I call it WIGGLY LINE THEORY.
For example, the proponents of technical analysis may tell you to shop for XYZ stock when the 15 day moving average crosses the 45 day moving average then take profits on your positions next year when the stock moves into “overbought” territory as long as the stochastic confirms the sell signal.
Hogwash and financial sophistry I say. Again technical analysis of market behavior is pseudo science and if you’re really fascinated by the technical analysis of markets you would possibly also consider the study of cloud formations. Both technical analysis and cloud formations have a sort of imaginative beauty to them and both can appear to possess shape and meaning. On the other hand because the market moves and therefore the winds blow those shapes and meaning disappear and are soon forgotten. It’s not an honest idea to use technical analysis to work out where to place your money.
You may ask, “But all the financial experts use technical analysis and why am I able to not use this science to form financial decisions regarding stock exchange investment?”
This is my answer: within the simplest terms technical analysis is pretty useless, not because its math and formulas are flawed, but because the info it attempts to arrange and add up of is predominantly random. Short term stock exchange movement is predominantly random. It’s difficult to form sense of random data regardless of how sophisticated are your methods of study. Its garbage in and garbage out. The randomness of the markets defeats technical analysis alongside the bravest and brightest financial experts and traders.
Be happy you’re a stock exchange idiot. If you’ll‘t know it you can easily exclude the noise and not become unnecessarily confused.
MARKET MOMENTUM THEORY AND POOL HALLS
So what should we, the stock exchange dummies of the planet, use to defeat and take money from the bravest and therefore the brightest financial experts and traders? What has worked on behalf of me, and actually has made many dollars on behalf of me, isn’t technical analysis, but something I call market momentum theory. Market momentum theory is predicated more on physics than math. I didn’t learn market momentum theory during a n economics school; I learned market momentum theory in a pool hall.
Let me illustrate with a pool hall example. In pool one player makes the opening break shot by striking the billiard ball with the cue tip causing the ball to maneuver towards the racked balls on the other side of the billiard table. The billiard ball can find yourself anywhere on the table, during a pocket or maybe on the ground. However, because the first momentum pushed the ball from one side of the table to the opposite side of the table, probability favors that the ball will stop rolling on the other side of the billiard table from where it had been initially struck with the cue tip.
We can easily transfer this theory and apply it to stock exchange movement. First we must define “significant price movement” and that we can call it the “cue ball condition”. So allow us to say that during a hypothetical market the “cue ball condition” is met if price moves higher by five dollars. OK, now allow us to say that a market closes at a particular price on Monday. But on Tuesday the market meets the “cue ball condition” by moving five dollars higher then we plan to pip out at that price. Now using the previously mentioned market movement theory we plan to always sell our positions acquired on Tuesday on the open on Thursday.
So what is going to happen? Well what is going to happen is that we’ll make money over time which about 55% of our trades are going to be profitable. Why?
Because by first defining significant momentum we in effect turn stock exchange price movement into a billiard ball headed for the other side of the billiard table. There’s no guarantee that the ball will always find yourself on the other side of the billiard table but momentum theory says it’s more likely it’ll end there than recover. Similarly the stock that meets the “cue ball condition” on Tuesday is more likely than to not open higher on Thursday and if we sell it there we are more likely than to not make money.
How do I do know this? Well first of all I even have tested this very basic idea extensively and have traded similar ideas thousands of times. Actually in one two year period, while trading around two and a half million dollars, I took about 10,000 trades and pushed millions and many dollars worth of trades through the marketplace while making about five million dollars in profits.
But what was interesting is that I didn’t have a trading system that was 95% accurate. Instead I used an easy system supported market momentum theory that won about 55% of the time and lost about 45% of the time. Due to the random nature of short term stock exchange price movement I knew that 55% was about the simplest ANYBODY could do and that I settled for 55% accuracy. And by settling for 55% accuracy I made on the brink of 100% annual returns on the cash invested and that I made nearly five million dollars in profits in two years.
BE proud of a 5% “HOUSE ADVANTAGE”
So 55% accuracy isn’t really so bad. If you’ll trade consistently with 55% accuracy you’ve got a “house advantage” of fifty. Meaning that for each $100 you erupt the market you’re getting to make $5. It’s like owning your own casino and you’re THE HOUSE.
SOME ADDITIONAL RULES and methods
Now that I even have given you a strong theory of market movement which will make tons of cash for us stock exchange idiots let me just add a couple of more important rules and methods.
1) MECHANICAL TRADING SYSTEM: Now that you simply have a theory, you ought to develop a mechanical trading system, and resolve to follow it for a minimum of one year.
2) GET YOUR SYSTEM PROGRAMMED: Put your system into a program which will be run on a computer. You’re a stock exchange dummy so now let your computer do the thinking for you. You are doing not got to understand technical analysis; you only need to love and follow your computer. You are doing not even got to believe markets; you only need to put the orders your computer tells you to place.
3) DIVERSIFY: Spread your money out thin in many markets. We follow 96 markets and sometimes are in as many as 35 at a time. Market diversity can protect you from aberrant price movement and aberrant price movement is an hazard of trading random markets.
4) IN AND call at TWO to 3 DAYS: Limit your trades to 2 or three days. The billiard ball is struck and it goes forward then stops. It a brief term move then is stock exchange price movement supported momentum theory and probability. Momentum theory ends with day 3 and oftentimes sooner. But confine mind that there’s also great safety in limiting your trades to 2 or three days. You’ve got certainly heard stories of individuals who have lost everything within the stock exchange. Let me assure you that the sole people that lose everything within the stock exchange are people that let brokers do their trading for them and who marry stocks and refuse to sell them. By making it a rule that you simply will ALWAYS get out after two or three days you can’t lose all of your money and become a stock exchange casualty.
STOCK MARKET IDIOTS UNITE
So stock exchange idiots unite! Ignore the experts, trade simple ideas you’ll understand, and let your computer do the thinking for you. By following these rules for Stock Trading for Idiots we will easily take over Wall Street and put “the suits” out of business. Stock exchange idiots are often rich!