The Stock Market Can Be Humbling

Sometimes in life you do everything right and lose, and, conversely, you can also do everything wrong and still win.  You shake your head and try to make sense of it all.  Call it what you will.  Whether it is fate, karma, the planets being aligned, or simply bad luck, things just do not go as planned.  Such was the case this past Friday ( Aug 22).

Each day, I send out an email to subscribers with my stock picks ideal for swing traders.  These stocks meet the criteria and are poised for a 2% gain within a week.  That is the goal because it is line with the bigger picture and that is doubling my money on the stock market each year virtually risk free.  We only look at companies on the S&P 500.  We look at Relative Strength Index (RSI), 50-day/200-day moving averages, stochastic oscillators, moving average convergence divergence (MACD) and on-balance volume.  For a company to be on the recommended list, it must meet all the criteria, no exceptions.

This system has been back tested, and the numbers speak for itself.  It is very effective.  However, we ended the week with a jaw dropping experience.  On Friday, we recommended shorting seven companies.  For stock traders, shorting means you are betting the stock price will go down in order to profit.  Boy, was I wrong.  Six of the seven stocks went up.  To protect ourselves, I always insist on using a stop loss to minimize any damage.  I recommend a 3% stop loss.  Four of the six triggered the stop loss orders, and a fifth company was only a penny away from triggering it.  It was a humbling experience.

On days like that, it is natural to second guess yourself.  You wonder if your program is sound and it tests your resolve.  You risk your reputation with your followers, because when it comes to money, there are no excuses.  It can shatter your confidence, but only if you let it.  When days like that happen, I take a deep breath, take a step back and look at the big picture.  I review the back testing that was done.  I realize the results are overwhelmingly positive and this was just one of those days.

Even though it was a losing day, I always look for something positive.  Can something be learned from this?  Can we make the program better in any way?  I learn more from my mistakes than from my successes.  But was a mistake made?  Ask yourself one question, if you had to do it all over again, would you do the same thing?  If the answer is a resounding yes, then take it like a man, put your nose to the grindstone and go get the next one.

I am a huge baseball fan and the best hitters in the game have a .300 batting average.  That means they still fail more than 2 out of 3 times.  They do strike out.  Nonetheless, I hate losing, but having a humbling experience periodically can be good for you in the long run.  It is a reminder that you are not perfect and neither is the model. It keeps you grounded.  It is a reminder that you are playing the percentages.  It may be a bitter pill to swallow but that only makes victory that much sweeter at the end of the year. 

Sign up for the daily email showing stock picks poised for a 2% gain within a week.  It is free for the first 30 days and the $49/month thereafter.  Good luck with your investments.

Al

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