Making money in the stock market has always seemed too hard for most people looking at it from the outside. I remeber feeling the same way like, everyone is saying if you invest this way or that way you are going to lose money. I finally had enough with it and tried everything from penny stocks to mutual funds. In the process I learned a lot. I found out you can make money in everything from penny stocks to mutual funds, and beyond. Most of you have probably heard that the stock market is controlled by fear and greed right? I heard that before also it didn’t mean much to me until I actually saw it in the stock market. I mean looking at the stock market the way most people don’t I was whatching real-time level 2 quotes and charts and it finally clicked. It doesn’t matter what you invest in or what it is you buy just as so you buy when people are fearful and sell when people are greedy.
You are probably like ya right easier said then done. Well after I saw this take place in the market and how easier the fear and greed was to spot in the stock market I spent the next six years of my life addicted to market. I knew I could find a way with this information to make huge returns on my that time small porfolio and I finally did. I didn’t just find one way I found several. Before I get into exact ways of making money exploiting this method you have to ask yourself what are you buying when you buy a stock. Most sophisticated investors come up with some response saying “I’m buying a piece of the company” In a sense you are but whats the difference between owning a share of a company that is private compared to a company that is public. I would say ALOT. First when you own a share of a company that is private you get a piece of the profits. In the stock market a few companies have dividend that allow you to share in the profits but for the most part most company keep all the profit to themselves. So after I figured out I really wasn’t owning a piece of the company then what was I buying. You are buying a piece of paper backed by the financial sheets, news about the company, and lastly the company itself. With that piece of paper all you are doing when you are buying is looking at the current state of the company and saying will this company make my piece of paper look more valueable to other people that want to buy this piece of paper in the future. Know this fundamental fact I set out to exploit the markets.
First I looked at short-term moves in the stock market and found that they are somewhat easy to spot but come around rarely. The best short term indiciator for a short term move in a stock hands down is indexes firstly the dow and nasdaq index, and second sector indexes. How many times do the major and sector indexes trend in a steady direction together? On occasion when this happends you want to be in that sector. Well how do you know what stock to buy in this sector? Easy the stock that went down the most the day before. Now this isn’t 100% but if you run this stategy against back testing software you will see that this is fairly profitable if the stock hasn’t already gapped up in over night trading. Can computers predict this? Absolutly, now before you go on thinking that I think I have discovered the golden key to the market I know I have’nt. Some go down for fundemental reasons but a lot of the times they go down for dumb reasons and using a techniques that interpretes fear and greed like the technique above allow you to easily profit in the market.
How well do computers interperte short-term fear and greed I have personally seen systems go years predicting hundreads of 98% accurate trades for years. I have heard of fellow traders of systems they have programmed making 100% accurate trades for years. If I believe so must in trading systems why don’t I keep all my money in a system? Well I do keep large amounts of my portfolio in systems highily leveraged. But I also blieve a balance between system and human trading can produce optium results. For more info on how to profit on your own account please check out my eBook.