Welcome to My New Website
Welcome to my new website! I hope you’re enjoying it so far. I started this website to bring a sense of humor to an often dry industry. Let’s face it, finance and investing can be pretty dull, but by adding a bit of wit and personality, I believe we can make it a lot more interesting. Please look around, and remember that the site is still a work in progress. I will continue to work hard to add new content and educational articles daily.
Cutting Through the Noise
One of the main issues I’ve encountered in my career is that just because something works for me doesn’t necessarily mean it will work for someone else. Another thing I’ve learned is that just because I understand something, it doesn’t mean the next person does. This is why blocking out all the noise is essential, creating a plan and focusing on what’s happening beneath the surface.
I Think I Feel Investing
Another problem I see in the industry is “I think, I feel” investing. People tend to think that they’re the first to know and have some uncanny insight if they see news on social media or TV. But the truth is, if they’re getting the information now, there’s a high probability that the market already has that news priced in, and they’re the last to know. This is where biases can form and distract people from what’s happening in the market.
The Key to a Successful Trading Plan
One of the keys to a successful trading plan is the signal. If you don’t get the signal right, you’ll probably get chopped to death or be wrong. This is why entering a stock with a high-probability setup and a well-defined expected outcome is so important. Without this, you’re likely to take a loss because the stock won’t breakout, or you’ll get chopped to death before the stock has time to breakout or work. There’s an old saying in investing, “Death by a thousand papercuts,” I continue to see traders suffering that slow death even when the market is in an uptrend.
Understanding the Range of Outcomes
It’s also crucial to understand the range of outcomes that a stock or market can take. I often remind my readers to “expect the expected.” By clearly understanding the possible outcomes, one can make informed decisions and know when to exit a trade. Also, if one doesn’t understand the range of outcomes, they may get kicked out of the trade prematurely due to a lack of understanding of volatility.
Don’t Let Industry Professionals Sway You
Another thing to remember is that just because someone has initials by their name or is considered a “professional” doesn’t make them more intelligent than the rest of us. Many so-called professionals regurgitate what they’ve read in textbooks and can’t think critically or look outside the box. This is why it’s essential not to get caught up in the noise and to understand that if everyone looks at the same indicators and reads from the exact text, they will likely be late to the game.
The Limitations of So-Called “Professionals”
I find that people who include their initials in their name often miss out on asymmetrical trades due to their fears or lack of understanding. They also tend to sell too early because they constantly try to impose their biases or appear intelligent by being the first among their colleagues to call a top or a bottom. Another issue is that they don’t trust a tested trend-following system. Instead of shutting off their brain and letting a stock work until the one time it doesn’t, they tend to overthink and get whipsawed out of the trade by market noise. It’s tough for people to surrender to the trend. Once a technical signal is issued, you must acknowledge that you don’t know what will happen while letting the trend-following system take control.
The Problem with Play-by-Play Analysts
I also often see that most industry professionals do play-by-play as if we were watching a hockey game. They’re never like Wayne Gretzky skating to where the puck is going. They’re always like the color commentators telling you where the puck has already been after the fact.
No One Knows What Will Happen
And when people ask me for advice or to make a forecast, I always say I don’t know, I’m just a dude drawing lines on a chart, and my crystal ball broke a long time ago. The truth is, no matter how much somebody tries to convince you, nobody knows what will happen. That’s why having a well-defined trading system with a backtest to prove success is key.
Sharing Real-World Examples
Today, I’ll share real-world examples of the setups I use for my readers in the Workspace and over at Osprey Strategic. I’ll also demonstrate a basic trend-following system that utilizes moving averages or a volatility stop as a trailing stop-loss order. It’s important to note that this strategy won’t always work, but it can help remove noise and allow the market to work while ignoring all the distractions around you. Additionally, it’s worth mentioning that in the past, we have shared examples of setups that didn’t work or were stopped out. These examples are meant to give people a basic understanding of removing noise and letting the stock work after a technical signal is issued.
Before I Start
I emphasize that a rules-based system with risk management in place is crucial for success in trading. Without a well-defined plan, achieving profitability is unlikely. It is important to remember that individual wins are insignificant if they ultimately lead to overall loss. The key to success in trading is consistent profitability over time. While stock picks from alerts may seem appealing, they are not the key to success. Developing a plan tailored to your needs, bankroll, and risk tolerance is crucial for long-term success. Without a plan, you are essentially gambling and will likely lose money in the long run. Achieving an edge in the market is pointless without a solid plan. Please click on the link to read my article – Stock Picking Vs. Strategy: Why Everyone Wants A Quick Fix
Understanding the ATR (Average True Range) Indicator
Also, understanding how to calculate stock volatility is essential before setting a stop. The ATR (Average True Range) indicator is used to calculate the volatility of a stock. It measures the range between a stock’s highest and lowest prices over a specified period, typically 14 days. The ATR is helpful because it helps traders identify stocks that have higher or lower volatility than others. Each stock is like its own personality with its characteristics, and each stock trades with a different level of volatility. It’s essential to be aware of the ATR before choosing a stop-loss order level because it helps traders set realistic stop-loss levels that align with the stock’s trustworthy range. If a stock has a high ATR, a trader may need to develop a broader stop-loss to account for the stock’s increased volatility.
Conversely, if a stock has a low ATR, a trader may be able to set a tighter stop-loss. By considering the ATR, traders can more accurately estimate a trade’s potential risk and reward and make more informed decisions about when to enter and exit a trade. My examples below show this using different moving averages, the Chandelier Exits, and the Parabolic SAR. I will do a blog article explaining the ATR in more detail in the future.
Utilizing Moving Averages and Volatility Stops
Cathedral Energy Services Ltd. (TSX:CET)
Cathedral Energy first appeared on momentum scans on October 18th and then again on the 20th. In this example, an essential chandelier exit as a trailing stop-loss could have removed all market noise while allowing one to ride the momentum until the one time the exit didn’t hold.
Technical Signal
Follow-up
Exchange Income Corp. (TSX:EIF)
Exchange Income Corporation issued its first technical alert on November 25th. We shared this setup with our readers multiple times. I used the 8-week exponential moving average as a trailing stop-loss in this example. This moving average effectively captures momentum on the weekly timeframe.
Technical Signal
Follow-up
Filo Mining Corp. (TSX:FIL)
Filo Mining first appeared on the momentum scanner on November 25th. In this example, I used the Parabolic SAR as a trailing stop, perfectly tracking the stock’s volatility.
Technical Signal
Follow-up
Labrador Iron Ore Royalty Corp. (TSX:LIF)
Labrador Iron Ore first appeared on momentum scans on November 30th and again on December 28th. One of our members made an easy 20% on this trade by ignoring all the noise and allowing his stop-loss to work. As you can see in this example, we used the 34-day exponential moving average to capture the trend.
Technical Signal
Follow-up
Major Drilling Group Intl, Inc. (TSX:MDI)
Major Drilling gave us its first technical signal on December 2nd. The 21-day exponential moving average is commonly used, and, as you can see, it works well to trail momentum as a stop-loss.
Technical Signal
Follow-up
Supremex Inc. (TSX:SXP)
Supremex gave us a trend-following signal on November 2nd. The 50-day moving average is probably the most popular and commonly used. As you can see in this example, using the 50-day moving average to define risk and trail momentum worked very well.
Technical Signal
Follow-up
Remember that trading is not a “get rich quick” scheme. It takes time, patience, and discipline to be successful. It’s important to remember that you will have losses, and it’s part of the game. The key is to keep your losses small and let your wins run. This is where a well-defined trading plan comes in. It’s essential to have a plan that includes a risk management strategy, such as stop-loss orders, to help limit your losses.
It’s also important to keep an open mind and be willing to learn. The market is constantly changing and evolving, and what worked yesterday may not work today. It’s essential to stay up-to-date on the latest market trends and to be willing to adapt and change your strategy as needed.
Conclusion
In conclusion, I hope my website provides valuable information and insights for those interested in finance and investing. I believe that by adding a bit of humor and personality, we can make the often dry finance industry more exciting and accessible. I will continue to work hard to add new content and educational articles daily. Thank you for visiting, and I hope you enjoy the site!
And if you liked this blog post, share it with a friend! Or don’t? We don’t care. But either way, remember, “Before entering a trade, set a stop at the point where the chart sours.”
To learn more about chart patterns and how to trade them, visit our education section by clicking HERE.
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