When I was a freshman economics major at the University of Florida (1998) I opened an E-Trade brokerage account with $1,000 and proceeded to buy my first stock. Twenty-five years later I've come a long way from that first purchase of Iomega shares as the dot-com bubble was gaining steam. Twenty-five lessons I've learned about trading/markets over the last twenty-five years:
~ Every stock will go thru a period of accumulation, topping out, distribution and bottoming and a new cycle begins. Rinse, repeat..... (Weinstein Stage Analysis)
~ Most legitimate double bottoms come with strong MACD/RSI divergences. This is one of the most powerful chart patterns (see $XBI Daily chart in 2022).
~ Most stocks/markets will be more volatile than you anticipated. Never underestimate the power of a momentum move (up or down). Once the freight train is in motion, it will usually keeps going much further than most have anticipated.
~ A stock being "overbought" or "oversold" is not enough of an observation to meaningfully tilt the odds in ones favor for a trade.
~ The more technical confluence that exists in a trade setup the stronger the setup.
~ The best trade setups usually work immediately after they trigger. They barely give you a chance to jump on board.
~ The market is not the economy and the economy is not the market.
~ Always separate politics from decisions about money.
~ The strongest stocks and biggest winning trades normally have big volume driving them higher.
~ The best traders I know keep their routine very simple.
~ Never confuse your macro views or what the talking heads on TV are saying with what is actually happening in the stock market.
~ Good fundamental analysis and proper technical trading is a killer combination.
~ Stop-outs are the price of admission in the market - we have to have losing trades in order to play the game. The best traders might only be profitable on 50% of their trades, but they make the winners count and don't get married to losing trades.
~ The market is a master at forecasting events well ahead of time. By the time the actual news hits, most of the time the market has already discounted it.
~ Bottoms are a process, rarely a single event. Many stocks start to bottom well ahead of the major equity indices.
~ When in doubt, stay out - overtrading is probably the most common mistake (aside from trading on leverage) that I see novice traders making.
~ All gamblers secretly desire to lose - notice that if you are overtrading or trading too large for your bankroll you might be a gambler, not an investor.
~ You will never buy the exact bottom and you'll never sell the exact top - Don't beat yourself up if you 'leave money on the table'.
~ When it's the time to buy you won't want to.
~ When it comes to the market, always assume everyone is talking their own book - focus on your own analysis and less about what everyone else is saying.
~ At the top the future will look brighter than ever and it will be difficult to develop a thesis for what could cause the trend to turn lower. Whereas, at the bottom sentiment will be so bad that most traders/investors will find it psychologically impossible to press the buy button.
~ The longer a stock bases, the more meaningful the breakout tends to be.
~ In junior mining, it's often best to "buy the sizzle and sell the steak" - usually, but not always.
~ Sentiment follows price, only all the time.
~ Stay humble, stay grounded. Whenever you are feeling great about the market or your trading, that's usually the time when you should be the most defensive/cautious.
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
