This Is Your Edge on the Share Trading Pros

I’ve got a short quiz for you…

Don’t worry. It’s nothing too heavy. There are only four true or false questions.

I’m going to show you a set of words that describe a human trait or desire. There is nothing wrong with any of them — they all have a time and place.

But I want you to think about these as a trader. Then ask yourself: Is this characteristic helpful to my aim of making money — true or false?

Right, here goes…

  1. Do you trade for excitement?
  2. Is your trading emotional?
  3. Are you an instinctive trader?
  4. Do you need to be right?

 

Many people answer ‘true’ to these questions. And I can understand why. These words describe the typical image of a professional trader — a loud, alpha type who trades on gut feel.

But that’s a mistake.

Emotions like ‘exciting’ and ‘instinctive’ are more fitting with a casino than a professional trading floor. In fact, a bank’s dealing room can at times be surprisingly dull.

That’s right — dull.

Successful trading is about making money. The four characteristic above simply get in the way.

This week’s update is about trading’s ‘lack of excitement’. I’ll also tell you why doing nothing can give you a big advantage over the professionals.

OK, let’s get into it…

No buy quotas

The inspiration for this update came from an email. A new member wrote to me about his expectations. He told me he’s not happy about the lack of buy signals in recent weeks.

Here’s what he said…

Only 2 weeks in and certainly expected more buys than I have got so far. The daily signals have been nothing but “Short” listings and “Exit” advice. Disappointing from the promises up front before I subscribed.

I know it’s only early days so I am hopeful that I will get some opportunities in the near future. I have only been trading for less than a year all up and so far am not all that excited about what has happened.

Member, Ron

Ron’s right — buying opportunities have been on the low side recently. Some weeks haven’t seen any buys at all. I know this isn’t what many people imagine share trading is like.

But there’s a bit more to it…

You see, buy signals are the outcome of many variables. This is what makes a trading system. And the biggest variable of them all is the market.

Check this out…

All Ordinaries


Source: BigCharts
[Click to enlarge]

This is a graph of the All Ordinaries. It shows the market’s movement for the first 11 weeks of 2017. Prices have been mostly trading sideways since the year began.

But this isn’t likely to last.

You see, quiet trading typically leads to periods of activity. I believe the recent lull will prove no different. And this could lead to a lot more opportunities.

Have a look at this next chart. It plots Quant Trader’s buy signals — on a weekly basis — since January 2015. This will give you a good idea of what’s ‘normal’.

Buy Signals


Source: Quant Trader
[Click to enlarge]

Quant Trader’s signal frequency is variable. You could get no signals one week…and more than 10 the next. On average, there’ve been 4.5 buy signals per week since January 2015.

But, as I said, the figure varies.

The weekly average this year is 3.2. This includes the first weeks of March, where there weren’t any signals. You’ll also see a five-week stretch without a buy signal in March of last year.

Market conditions have a big influence on entries. Buying opportunities will naturally be greatest when the All Ordinaries is rising.

There’s another point I’ll make: Quant Trader does not have a weekly buy quota. My primary aim is to help you make money — not generate unnecessary brokerage.

I view markets like a giant puzzle. I’m always thinking of ways to put the pieces together. I’d describe this as an intellectual, rather than exciting, experience.

You see, ‘exciting’ doesn’t help you make money. It’s actually counterproductive.

Good trading requires patience. First, you need to wait for the right trade setups. You then need to give them time to work. If anything, good trading can be a bit boring.

A big part of Quant Trader’s job is to get you in and out of trades. That’s obvious.

But there’s another roll. Quant Trader also aims to keep you out when conditions aren’t right.

There are times when the sideline is the best place to be.

Few things are certain in financial markets. But I can say with confidence: Creating activity for the sake of it is a losing proposition. There are times when you’re better off doing nothing.

Your edge on the pros

What I’m going to say next may surprise you…

You have an advantage over many professional traders.

That’s right. Private traders have an edge. You can decide not to trade when conditions don’t suit.

Just think about this for a moment.

Investment banks pay their traders six-figure salaries, or more. This often leads to constant pressure from management to make trades. The need to create activity is never-ending.

You see, these traders have budgets to meet. And they can’t make budgets as an observer.

Waiting for the right trade is a luxury many traders don’t have. The need to make something happen pushes many into marginal trades. And this often leads to trouble.

I’ve seen lots of money lost trying to force a trade. I know; I’ve been there myself.

Sometimes, the smart play is to walk away. But this can be difficult on the trading desk.

There’s an excellent quote I want you to read. It was made by Wall Street legend Jim Rogers, who presented at Port Phillip Publishing’s ‘Great Repression’ conference in Port Douglas last year:

‘I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.’

Rogers nails one of trading’s most important concepts: Only trade when conditions are in your favour.

(You can hear more from Jim Rogers’ presentation here. There’s a lot that can be learned from a veteran like him.)

I read this early on in my career and it stuck. It made me resistant to taking trades for the sake of it. I always remind myself of this when the urge to take a marginal trade strikes.

So, don’t be in a rush to jump on any old trade. Building wealth takes time. It will likely take a lot longer if you start taking trades that don’t stack up.

There’ll be times when buy signals are few and far between. That’s just par for the course. Use your advantage of sitting tight. There’ll be plenty of opportunities when the time is right.

Until next week,

Jason McIntosh,
For Markets & Money

Editor’s note: Do you prefer profits over excitement? Many people don’t. For them, trading is more akin to visiting the casino. The result is often poor returns and a lot of heartache.

If this doesn’t sound like you, I have a strategy you should look at…

Quant Trader specialises in finding shares that are on the rise. The system’s algorithms are constantly scanning the market for opportunities. When the set-up is right, it will give you a buy signal, and calculate a unique exit stop. But you must have the patience to wait for the right trades — many people don’t.

Right now, you can get instant access to Quant Trader with a 30-day money-back guarantee.

Try it. See if it makes sense to you. It could change the way you trade forever.


Jason is a professional quantitative analyst. Before he graduated in 1991 he joined Bankers Trust — a Wall Street investment bank — to be a trader. After Bankers Trust was taken over in 1999, Jason, already financially independent, co-founded a stock market advisory and funds management business called Fat Prophets. At 37 he sold his part of that business and retired. These days, he’s a private trader and system developer. In 2014 he launched the wildly successful trading service: Quant Trader.


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