Some Quick Advice for Those Trying to Beat the Stock Market - Especially The Way This Year Is Going
Fighting the Primary Trend of any market will likely get you into trouble. Primary trends are those long-term movements of prices, either up, down, or sometimes simply sideways. So, for example, when the Primary Trend of the stock market is up, short-sellers will typically get squeezed. Even if they eke out a winner here and there, fighting the Primary Trend usually prevails, causing them to have to cover their shorts, with a likely loss of money - sometimes lots of it.
A sideways trend can be rather tricky. It may look innocent enough. But what usually happens is that it will move enough up and enough down such that traders chase their tails and wind up losing here, there, and everywhere. In grinding fashion those little losses add up, and unless the trader is extraordinary, there aren't enough wins to offset the losses.
As for down markets, there's the temptation, especially in the stock market, seek those individual stocks or perhaps sectors that you believe will run counter to the trend. At times, such stocks or sectors will indeed provide a lift even as all other boats sink. Just beware the angry bear market that, while allowing a few companies, even a sector or two, to run free and clear of the sinkhole that swallows all others, yanks the rug from beneath everyone at some point, taking the whole ship down in a terrible tumble. That's pretty much what happened in 2008. No matter where you had your money, you lost, lost quickly, and lost big-time.
With all this in mind, we don't think it's terribly prescient to begin to consider that a bear market has started and that putting money into stocks at this point can have pretty much one and only one result. We'll leave it up to you to figure out what that might be. Meanwhile, we offer this poem to those of you who began the year looking to make money in stocks, reminding you that there's still time to cut or curb your greed before you end up either chasing your tail, or in a free-fall at some point in the coming months. (BTW, the first line was conceived as a clever, but may be more a lame attempt to verbally express the date January 1, 2016.)
A sideways trend can be rather tricky. It may look innocent enough. But what usually happens is that it will move enough up and enough down such that traders chase their tails and wind up losing here, there, and everywhere. In grinding fashion those little losses add up, and unless the trader is extraordinary, there aren't enough wins to offset the losses.
As for down markets, there's the temptation, especially in the stock market, seek those individual stocks or perhaps sectors that you believe will run counter to the trend. At times, such stocks or sectors will indeed provide a lift even as all other boats sink. Just beware the angry bear market that, while allowing a few companies, even a sector or two, to run free and clear of the sinkhole that swallows all others, yanks the rug from beneath everyone at some point, taking the whole ship down in a terrible tumble. That's pretty much what happened in 2008. No matter where you had your money, you lost, lost quickly, and lost big-time.
With all this in mind, we don't think it's terribly prescient to begin to consider that a bear market has started and that putting money into stocks at this point can have pretty much one and only one result. We'll leave it up to you to figure out what that might be. Meanwhile, we offer this poem to those of you who began the year looking to make money in stocks, reminding you that there's still time to cut or curb your greed before you end up either chasing your tail, or in a free-fall at some point in the coming months. (BTW, the first line was conceived as a clever, but may be more a lame attempt to verbally express the date January 1, 2016.)
On o-one-two-o-one and six
I was resolved to make some picks
of stocks that would perform in ways
to build renown in latter days,
as people far and people wide
would recognize my smarter side.
But, no surprise, such foolish pride
was dashed the moment that I tried
to trade against the mighty tide
that marked the New Year’s first light’s haze
which vaporized my trades in days.
So thus I lick my wounds and learn
A lesson taught to all in turn:
When markets move against you, friend
Don't fight the mighty Primary Trend.
I was resolved to make some picks
of stocks that would perform in ways
to build renown in latter days,
as people far and people wide
would recognize my smarter side.
But, no surprise, such foolish pride
was dashed the moment that I tried
to trade against the mighty tide
that marked the New Year’s first light’s haze
which vaporized my trades in days.
So thus I lick my wounds and learn
A lesson taught to all in turn:
When markets move against you, friend
Don't fight the mighty Primary Trend.
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