One thing I have talked about several times which cannot be understated is
that is the tendency for investors to believe that complex trading ideas and
automated trading systems are better than simple, logical ones.
At first thought this notion is completely understandable. After all, if an
idea is fairly simple, how could it possibly be "a secret" and investors not
using it yet?
Successful trading and investing is not about how good you look or how impressive
you sound in videos. It's about what, when and how you do it. It does
not matter if you are placing the trades yourself or using an automated trading
system. What, when and how the investment is traded is all that matters.
It's known that highly intelligent people struggle with the markets because
they believe intelligence will improve their trading results. The reality is,
they do not thing simple trade setups and strategies that look like they will
make easy money, will work. Why? Because they think that the market is complex
and thus trades should not be simple to spot and time, therefore the simple
ideas should not work.
In all fairness "simple trading" is not really that simple. Successful trading
requires the right kind of simplicity, in the right amount at just the right
time. This is what creates the highly profitable investors and automated trading
systems.
Why The Short Traders Are Losing Money This Week
They are fighting a bull market which is still pointing to higher
prices.
Take a look at the chart below of the SP500 futures index. You will notice
the bars are color coded; this is done by my automated trading system which
identifies the market trend which trades should be trading in line with.
The stock market remains in a full blown bull market. Investors should remain
long for time being. On the other hand active investors should be trading with
the current market trend which is shown on the chart.
Market corrections within a bull market are sharp and short lived. As an active
investor you will be lucky to catch one or two short trades during these pullbacks
before the uptrend is retaken.
It is important to know that eventually one of these bull market corrections
will be the straw that breaks the camel's back, and kick starts a new bear
market. This is why I always move to cash and look to short each of these corrections.
We just never know WHEN a full blown bear market will start. If you are holding
your positions through these corrections and think you're a great investor,
just wait until the market does actually breakdown and most of your gains are
gone before you realize it. I will admit, its very easy to get lazy with investments
after years of rising prices. Laziness and a lack of a trading strategy for
a falling market is what causes 99% of investors to lose their money.
I believe in trading defensively. Sure it's more work, takes time to follow,
and there are extra trading commission fees, but it is a small price to pay
to keep the majority of your gains.
SP500 Monthly Big Picture Analysis
Here is the big picture and trend of the SP500 index. Simple fact is, eventually
things are going to get really ugly. By stepping back and looking at this chart,
it's clear the market must still fall substantially in value to break below
its critical support trend line and before we can confirm a true bear market
is in place.
Do you want to see your nest egg drop 20-30% before you decide to exit? Or
do you want to profit from this initial correction when it does happen, and
make even more money when the stock market drops for a year or two after taking
your account to new all-time highs.
Keep It Simple Conclusion
The good news is that if you keep things simple by following the intermediate
trend, like the color coded chart above, you can keep making money as the market
rises to ridiculous new highs, and avoid market corrections, and possibly even
profit from them.
In my next article I will show you a simple trading strategy
that I have used for many years to time stock market bottoms and tops for swing
trading. Best part is that the data I use is available online for free.
One final note, there are automated
trading systems that does all this for you. I also use it and have it
trade my own investment capital for me. You can learn more about it and join
my mailing list here: http://www.algotrades.net/automated-trading-system-2
