This week we have a trading lesson for the week of 8/8/2021 from our friend Bo Yoder of the Market Forecasting Academy. Be sure to leave a comment and let us know what you think!
This week, there is little to talk about as the market drifts sideways, and we begin the traditional “August doldrums.”
I have been putting myself out there a bit more this year, as I see a new wave of interest in active trading hitting the markets. Usually, these waves create a lot of excitement from newer traders, but then they lose money and quit in frustration.
I love trading so much, and what it has allowed me to do in my life and the time freedom it has given me to work on my passion projects and spend time with my family... I want to help others achieve the same.
Since I didn’t find any high probability opportunities, I’m going to start a lesson series and share with you the information that's CRITICAL for you to understand if you are ever going to survive, much less THRIVE in this business.
So, I’m going to start at the VERY BEGINNING...
With some of the most basic questions I end up answering over and over again anytime I put myself out there in a public forum.
What is active trading, day trading, swing trading, etc...
It’s the BUSINESS of buying and selling assets. In the real estate world, you would call this “flipping.” The goal is to figure out what asset market participants are going to really, REALLY want in the near future. Then, you buy it ahead of this demand cycle, then mark up your “inventory” and sell it to them for a profit!
As an example... In Manhattan on Wall Street, there are vendors who watch the weather like a hawk, anticipate a rainstorm, and then show up on the corners with bags of umbrellas they bought for $2 they sell for $10 just before it starts to rain.
Is it gambling?
Unfortunately for many, it becomes a vehicle for thrill-seeking behavior, which can quickly descend into pathological gambling addiction. As a pro, we use the mathematics of odds just like a casino to ELIMINATE the gamble from our trading programs, and in doing so, we take the thrill OUT of our business.
Real, consistent trading is actually very boring and repetitive. I ski hard, race sailboats, and get my thrills in life from other places. My trading is just the boring grind that allows me to have this incredible amount of freedom to design my own lifestyle.
Does it take insider secrets to succeed?
Not at all; in fact, it’s illegal to trade on insider info. The government will confiscate your profits and put you in jail! There are a million different ways to produce profitability, and everybody thinks their way is the best. I do use a series of proprietary tools developed by my partner at Market Forecasting Academy. Still, those give me better results and more consistent results with a LOT less work and research. I was steady and profitable with simple open-source edges for 15 years before meeting Roger.
My experience is that people use “insider secrets” as an excuse to rationalize away their failure to perform. It's very easy to say, “well, that guy makes a bunch of money because he has the secret; I don't have the secret, so that's why I can't make any money.”
In reality, that is complete crap, and the truth is that anybody can be consistently profitable in the markets, just the same way that anybody can learn to drive a car. But, of course, there are some rusty heaps that will work just fine to get to the grocery store, and there are gorgeous Bentleys that will also get you to the grocery store. They both get you where you want to go; you just have a different experience along the way.
Can anybody do this?
Absolutely! I have over 20 years of experience trading, teaching, and mentoring people from different cultures, backgrounds, and countries. Anybody can learn to trade, but trading is not for everybody. You have to have the ability to execute the same process over and over again tens of thousands of times without introducing any variation or human error.
You need to be able to say no to almost every opportunity except the very best and not have that filtration process produce feelings of low self-worth or panic that you're not creating profits every single day.
Is it moral? In other words, does it bring any real value to the world?
This is a cultural lie to try to keep people away from an incredibly lucrative business. Nowhere in life do you get paid big money unless you create big value.
Essentially, when I buy a stock, I am insuring the person who sold me that stock against any loss. They've transferred their risk of ownership to me and were clearly happy to do so, otherwise the transaction wouldn't have taken place.
The perfect trade goes like this...
I buy a stock because my analysis says that it's currently cheap, and it is likely to go up into a powerful demand cycle in the near future. My analysis and information, I believe, is better than the competition, and there are people out there who think I'm an idiot for buying right now, and they're excited to dump their stock to me.
If my analysis and forecasting are correct, then the stock price will begin to rise, and once I have enough “mark up” from my inventory, I'll take my profits. Then, I'll sell the shares I bought at a much lower price to a market participant who thinks I'm an idiot for selling it to them because “clearly the market is going higher from here.”
Without this constant disagreement about future price movement, there would be no market, and stocks would ever exchange hands. Additionally, the professional trading community provides liquidity to the market so that longer-term investors, pension plans, insurance companies will always have a vibrant trading community to buy and sell from whenever they wish.
Think of the active trading community like a convenience store that is open 24/7 versus a farmers market that is only open once a week during the daytime.
The institutional players in our markets need that convenience store to be open all the time and available with inventory for them to get their business done because they have bigger fish to fry, and they can't waste time worrying about whether or not they can buy or sell as they adjust their portfolios.
Hopefully, this has been helpful! Next week we will talk more about the math of odds, and perhaps by then, the markets will have found some energy to trade against. There's a lot of possibilities out there for geopolitical catalysts that could hit this week which might break things free.
Keep your head down, enjoy your summer, and I'll see you right back here next week!
To Learn How To Accurately and Consistently Forecast Market Prices Just Like Me, Using Market Vulnerability Analysis™, visit Market Forecasting Academy for the Free 5 Day Market Forecasting Primer.
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About Bo Yoder:
Beginning his full-time trading career in 1997, Bo is a professional trader, partner at Market Forecasting Academy, developer of The Myalolipsis Technique, two-time author, and consultant to the financial industry on matters of market analysis and edge optimization.
Bo has been a featured speaker internationally for decades and has developed a reputation for trading live in front of an audience as a real-time example of what it is like to trade for a living.
In addition to his two books for McGraw-Hill, Mastering Futures Trading and Optimize Your Trading Edge (translated into German and Japanese), Bo has written articles published in top publications such as TheStreet.com, Technical Analysis of Stocks & Commodities, Trader’s, Active Trader Magazine and Forbes to name a few.
Bo currently spends his time with his wife and son in the great state of Maine, where he trades, researches behavioral economics & neuropsychology, and is an enthusiastic sailboat racer.
He has an MBA from The Boston University School of Management.
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation for their opinion.