Nov
6
Extended Learning Track (XLT), Stock Trading Session August 19th
Is this how these same masses of market speculators buy and sell in other parts of their lives? Of course not. If these people who sold the NASDAQ at such low prices were the producers of Avocados, they would not be aggressively selling Avocados at lower prices. They would not even be interested in producing Avocados if price was too low. The smart Avocado seller sells as many as he or she can at higher prices. In this NASDAQ example, the Avocado seller was not interested in selling when price was high; they waited until price was low, and this makes no sense. However, when these same people invest in the markets, they are fine with selling at low prices.
This is because they have put trading / investing in the markets and how you buy and sell everything else into two separate thinking categories and this is where the illusion lies. This illusion is the number one reason for the transfer of wealth from those who don’t properly think the markets, into the accounts of those who do. The reality was that price was gapping down to a price level where demand exceeded supply. This is no different than the Avocados briefly selling for $0.50 each; of course there will be a ton of buyers (demand) who will buy them up very fast. Quickly, there will be no more Avocados for sale at that price level. Our pre-market analysis had us buying into the stock market that morning as the buying opportunity was low risk, high reward, and very high probability. As you can see, that buying opportunity worked very well for us as price rallied dramatically from that demand level. Those who sold to us that morning did not fare that well. I bet some of those gap – down sellers who lost money that morning in the markets ended up at the grocery store later that day and properly looked for good products on sale. It’s almost like multiple personalities – amazing.
The next time you are talking to your stock broker, financial advisor, or making a trading or investing decision on your own, pretend you’re talking to a car salesman. Do your best to get the lowest price you can when buying and the highest price you can when selling. As for me, I will do my part to keep the Avocado producers in business. I know they are loaded with fat but it’s the good, healthy fats.
Lastly, would you believe that there are many people that call my line of thinking the markets “contrarian?”
Yes, it’s true. I get some emails and also talk to some people at events that ask me if my strategy is contrarian. My answer to them always has two parts. First, this is not my strategy; it’s no one’s strategy. This is how every smart buyer and seller of anything buys and sells. As for supply and demand, Adam Smith doesn’t even own that; it’s been here forever. Second, some people call my market and trading concepts contrarian simply because the vast majority of people have a thought process with money and markets that is simply wrong. So, because the minority is correct, our line of thinking is considered contrarian. Fine with me…
Hope this was helpful. Have a great day.