THE SEISMIC STOCK TRADING SYSTEM: HOW SMART AND INFORMED DECISIONS MAKE MONEY
FUNDAMENTALS - Balance sheet, book value, cash flow, P/E, a full parking lot, etc. - may tell me if a company is a good “investment” for the long term. BUT it doesn’t tell me what the stock will do in the near term.
KNOWING something about a company before anyone else knows - well, there’s only a slim chance of that!
TRENDS showing the past performance of a stock haven’t worked for me as a prediction of the future.
MANY YEARS have gone into developing a reliable forecasting system that works most of the time. I don’t make money on EVERY trade: sometimes I use stops when things no longer look right. These are small losses, sometimes unavoidable. Then it’s time to take the hit and move on.
My recommendations are based on basically two factors:
EMOTION and the ODDS.
The short term movement of a stock- up or down- will depend on the market as a whole and on people’s perception of which way a stock is moving. Perception is in large part emotional. The problem with trend lines is that by the time you see the trend, you may be getting in at the short term top or out at the bottom. Hard way to make money. In the short term, a stock goes up because people are buying it. Often there’s a lot of hype or it’s a “hot” stock. Then it heads down when they stop buying or start selling. That’s all I care about- when they’ve stopped buying (a top) or when they’ve stopped selling (a bottom).
At times I’ve had clients say “I really don’t want to sell XYZ stock, I really like it.” That’s emotion. I always reply “What, are you in a relationship with this stock? I suggest you should care about XYZ as much as it cares about you.” Don’t fall in love with a stock – it’ll cost you, at least in the short term. Trading stocks is about making money. Loving a company has nothing to do with it. If you love the company, buy the products or services but buy the stock only when it’s going to go up.