The flawed strategy favored by most failing investors - Swing Trading

Video Transcript

ANDY: Hi, welcome back to our special video series, Secrets of a Master Trader. I?m Andy Myers, and today we?ll continue to reveal some of the most profitable secrets of a master trader ? and some of the costliest misconceptions that hold most average traders back ?

Yesterday we looked at the single biggest misconception: The idea that regular people like you and I can?t make any real profits in today?s market. In reality this just isn?t true. Here again to explain why is John Ross Crooks ? the editor of Master Trader and a regular contributor to Uncommon Wisdom Daily.

ANDY: JR, good to see you again.

JR: Good to see you too.

ANDY: There?s something you said yesterday that really caught my attention ? you said this was all about trading and investing on your own terms ? not playing by Wall Street?s rules. Can you explain that a little more fully?

JR: Of course. It?s simple, really. Just think how much the world?s changed over the last few decades. Back in the 1970s ? even the early ?80s ? there were only a few investors who had access to anything other than basic stocks and bonds.

Fast forward to today, and every one of us has a world of financial alternatives at our fingertips. Options, futures, exchange traded funds, trading software and internet platforms, real-time market data ? some of these things hadn?t even been invented a few decades ago.

But how many people are really taking advantage of all those tools? How many people are limiting themselves to one asset class ? stocks ? and one investing strategy ? buy-and-hold? If you do that to yourself, then I wouldn?t be surprised if you feel like you?re playing a rigged game.

ANDY: So you?re not a big believer in just holding a portfolio of stocks?

JR: Well, there?s a time and a place for everything of course, so I?m not completely against the idea of owning stocks. But right now I think there are bigger opportunities out there to consider ?

I mean sure, the stock market is higher than it?s been in years ? and this rally may continue. But even at these levels, the market is still just about where it was five years ago!

And eventually, when most people aren?t expecting it, reality is going to set back in. When that happens ? as it did in 2008 ? it won?t be a good time to be a pure buy-and-hold investor.

ANDY: In other words, you?re not necessarily anti-stocks, you just think people should be more sensitive to today?s market environment.

JR: Exactly.

ANDY: But right now, would you say that you?re bearish on the stock market overall?

JR: Not necessarily. I don?t think it?s quite as simple as bullish and bearish ?

Remember, over the last few years we?ve seen something like a ?Tale of Two Markets.? The fundamentals, government debt levels, unemployment, and other big economic indicators all point down ? but momentum and easy money keep driving stocks higher. So we get the manic ups and downs you can see in any basic chart of the market.

For the buy-and-hold investor this kind of thing is a nightmare. Each decline wipes out months or years of gains, sometimes in a matter of weeks.

And it?s not just stocks. It?s happening in practically EVERY asset class. Look at the Australian dollar: You have an investment that lost nine months worth of gains in a just single day last year.

But, if you were on the other side of that trade ? taking the kind of ?short? position that most buy-and-hold investors would never even consider ? then that single day could?ve been the most profitable of the year for you.

Now again, just to be clear, I?m not saying you should sell all your stocks or completely abandon your comfort zone. I?m just saying that, these days, the active approach is paying off too much to be ignored, and it?s crucially important to keep an eye on these markets.

ANDY: But it seems like you?re talking about actively managing your portfolio ? isn?t that the kind of thing that entails a lot of time, knowledge and skill?

JR: Not as much as you might think. With the help you?ll get from these videos ? especially the special presentation I?m putting together for Friday ? average investors could easily execute this approach on their own in as little as a 10 minutes each week.

Because remember, not every trader is a day trader. So you won?t have to be glued to the screen for your chance to profit. Instead ? if you?re more like me ? you?d rather spend that time with your family or doing the things you love. You won?t have to compromise on any of that. The kinds of trades I work with play out over weeks instead of minutes or hours. There?s less volatility that way, and there?s still the chance to make some outrageous gains.

ANDY: Well, when you talk about outrageous gains, I have to ask ? how much would the average person need to invest to see an aggressive trading approach like this pay off? What?s the old saying ? you have to spend money to make money?

JR: That?s the great thing about my approach ? it certainly depends on each individual, I can?t determine that for them ? but anyone could start with as little as a thousand dollars if you want to. Virtually every one of the investments I?ve been using can be had for just a few hundred dollars ? many for less than $200 plus the slight cost for commissions of course.

Now, I do want to stress that this kind of strategy IS more speculative and comes with more risk. It will help hedge your other portfolio holdings, but you shouldn?t use it for more than 10-20% of your money ? and definitely not anything you can?t afford to risk.

But even with that small portion of your portfolio, the active approach could literally help drive your profits all year long. Keep the rest in cash ? stocks ? whatever you like; but make a point of actively managing a small portion of your portfolio, and it could pay off big.

For example, the next big trade I?m considering could cost as little as a few hundred dollars to start ? but has the potential to gain as much as 593% if history is our guide. That means an investment of just $1,000 could bring in almost $6,000 in profits ? for what?s basically a few minutes? work.

Scale that up and you?ll really start to see the potential. $5,000 could bring almost $30,000 in profits ? $10,000 could bring nearly $60,000 in profits on a single trade. Even if that trade represented just 10% of your overall portfolio, it could still add a 59% profit to your bottom line.

ANDY: That?s the type of return most people would kill for in this kind of market environment.

JR: You would think so. But most people don?t even consider it. They tell themselves that they ?just can?t win? in today?s markets. Or they assume it would be too time consuming ? that the best kind of investments are unavailable to them. And that?s just not true anymore.

Right now we have greater access to investment tools and alternatives than ever before, and most people still don?t use them for a fraction of their true potential. Instead they tell themselves that someone else has an inherent advantage, and so they stick with the herd ? using the same pure buy-and-hold strategies they?ve always used and ignoring a world of profit potential.

If there?s one thing I want to communicate today, it?s that you don?t have to be some Wall Street professional to bag serious trading gains. If anything, the last few years have shown us that those guys don?t have any real advantage other than cheating. It?s all about simply having the right investments at the right time ?

ANDY: And that?s exactly what we?re going to be talking about tomorrow: Using some of the banks? most powerful weapons against them. You won?t want to miss it.

JR, thanks again for spending some time with us.

JR: My pleasure. Looking forward to being here again tomorrow.

Source: http://www.swingtradingdaily.com/2012/09/17/the-flawed-strategy-favored-by-most-failing-investors/

patsy cline pierre thomas beyonce gives birth portlandia kelly clarkson playoffs empty nest