Exceptionally, we’ll post an article without a chart. This is highly unusual, and that’s because we want to focus on some important insights for readers that aspire to become better traders. In fact we have a few ‘golden tips’, a few important insights, for those that want to be among the small group of outperformers. These tips come straight from the field by our research team, and are empirical (based on experience built over more than a decade, not based on theories or books).
Back in December, InvestingHaven launched the Trade Alerts service, a premium service that offers trade signals for short term trades. That’s not intraday trading, but it’s short term trades that range from a few days to a few weeks.
The best performing category of trades so far in 2020 was the S&P 500 (SPY). The trade signals, so far in 2020, delivered a result of +80%.
Wait a second, did we say +80% in 5 months, a period in which the worst crash in history took place?
That’s indeed what we said, and the trade log book is accessible to everyone who signs up here.
As part of our Trade Alerts service we not only deliver very precise trade signals (buy, sell, stop loss) but also educational updates. We typically do so during a period of extreme market behavior (in March of 2020 we sent daily exclusive crash reports to track the crash and its reversal, which we got 100% right). More importantly, we send insights that are educational in nature in our weekend updates (each and every weekend).
Because of the educational value of this weekend update we decided to share a few concepts, and ‘package’ them as tips. We cannot publish the entire piece in the public domain, as that would be disrespectful to our premium members.
Tip #1: On when you to know that you are on the right track as a trader:
Way too often do we see traders choose for EXCITEMENT as opposed to MECHANICAL trades.
Let’s bring this point home, in a very clear and maybe even confrontational way:
- Looking for exctiment? Prepare for big losses.
- Reached the state of mechanical trading? Prepare for the 8th world wonder of compound effects on your profits to kick in soon (probably it did already).
Tip #2: On the number of successful traders in the market:
We do know that 90% of investors and traders don’t get past the stage of break even. As per Tsaklanos his 1/99 Investing Principles only an absolute minority (highly disproportionate) number of traders and investors are highly successful. It’s the asymmetric law of financial markets. Our 1/99 estimate was confirmed by an independent research we requested to a data scientist who used a large dataset of traders’ results. This research confirmed that only 1% is very successful, 10% is successful, and 90% unsuccessful (small profits, breakeven or losses).
Tip #3: On bias that influences trading decisions:
2 months, early April, our trading algorithm was suggesting bullish SPY trades. It was right after the crash. The messages we got from members: “why on earth do you choose SPXL, you must have a ‘bullish bias’?” This suggested almost that we over-ruled our algorithm because we had a personal bullish bias. And we vividly remember the “reasons” why some members thought we had this ‘bullish bias’: markets are below their long term moving averages, moving averages were falling, the death toll of Corona is rising (how can you be bullish with this), Trump said this, Powell said that, RSI is this, MACD is that, hedge funds are this, Goldman Sachs says that …
Today, we see the opposite. Readers asking why we don’t choose for higher returns with other instruments … we conclude that EXCITMENT is returning into the minds of traders … and people lose again their focus on what really matters in trading.
The one and only thing to accomplish in trading is this: evolve to the state in which you take your trades in a MECHANICAL way. If you achieve to do this, you get into a ‘flow’ of taking profits / avoiding losses / leverage the compound effect.
Stated differently, if you are looking for EXCITEMENT you have the wrong focus.
Tip #4: Why excitement is bad evil for traders’ results, and how to turn it into a signal:
Excitement is an emotion, and we do know that emotions are the mother of all disasters in trading/investing. There is a way though to use your emotions to your benefit: use them as a signal. Instead of acting on your emotion, you can also dissociate yourself from that emotion. Use that emotion as a signal which tells you something.
You need to be self aware to achieve, but self awareness is something you can practice and learn. Some people have it in their nature to be self aware, some not. Not judgement here, on the contrary, everyone is different. But you can become better at it if you focus on it.
It’s all about the right focus.
The point is that we learnt over the years to use our emotion as a signal, dissociate it from ourselves and use it combination with our indicator analysis and algorithmic readings.
All of the above is wisdom that comes directly from the field, acquired over more than a decade. It’s based on the principle that made the legendary traders and investors in the world so successful: first the pain, then the gain.
It’s not theoretical, it’s not technical, it’s not mathematical.
It’s simple to grasp, and for real.
It’s also not complicated. And the funny thing is that we have observed that intelligence does not play a role in trading success. On the contrary, higher intelligence mostly leads to longer learning times before being successful in trading.
It’s not easy to execute though as wisdom in markets is often conflicting with intuitive ideas or widely accepted knowledge (consensus ideas).
Interested to receive our educational updates combined with highly accurate trading signals (buy, sell, stop loss) in the S&P 500? We can tell you, with 80% realized profits in 5 months that these signals are among the best in the world. Moreover, the combination with the educational materials makes for a perfect combination of trading + learning. We aspire to be among the best in the world, and we invite members to be part of our journey which we call Mission 2026. It’s for real, and you can join us here.