We were hearing that oil was in short supply two years ago when the price of gallon hit $5. Then all of a sudden we were down to $1.70/gallon. What happened to the short supply then?
Its just a cat and mouse game. What the companies do is restrict the supply on purpose sometimes to drive the price up high. Keeping the price high for long periods of time has negative impact for these corporations though because in the long run people start to change their habits to live without using so much oil, which drops the demand. So the oil companies can only keep the prices so high for short amounts of time.
When oil first went through $55 and everyone was talking about it I shorted it using that same theory. I was right, eventually. In the mean time I lost a ton of money and had to take the loss as it kept going up for a long time before it fell again.
Just because the herd is moving doesn’t always indicate timing.
In my opinion, it’s very difficult to tell where you’re at on that clock in a normal environment. With the current environment, it’s next to impossible. Obviously, it’s easy to see it on a historical chart - but how about a real time clock? In other words, if you looked at a chart of the DOW today, where are we at and in what time frame? Are we at 2pm and headed lower to 6pm? Where does that put the bottom and where would you sell? At 4pm? 5pm? Or…are we at 6pm and headed higher? If so, where is high noon?
I frequently hear the guy on the radio that talks about mutual funds. He’s always pumping the buy and hold strategy. Almost every show, he asks the listener where they expect the market to be in 10 years. He leads them into responding “higher” and he agrees as if that’s a certainty. I’d like to reach right through the radio and choke the idiot. I’d like to ask him “if you bought the stock market 10 years ago, where is it today?” The answer: LOWER! I wonder if he was asking that same question 10 years ago?
When I first woke up to news of the incident…it was obviously tragic, but it’s magnitude hadn’t set in yet. These things happen out in the Gulf. Helicopters go down all the time. Gas rigs explode.
As the severity of containment issues set in….BP’s stock plunged.
In step with that, marketclub trade triangles for it, (BP), have been taken out.
While I don’t have the chart up, (still rehabbing a house up here in NY), I’m sure that first to go was the Daily Red, (Sell), signal….more fickle an indicator than Weekly or Monthly triangle….but to be respected.
Then Weekly Red taken out.
Marketclub….it ain’t a Porsche….more like a Ford Model T……but it can still give you an edge.
Let the tool do the work.
You’re still dealing in probabilities….it ain’t gonna work all the time.
We get another stimulus package……you can bet that something like ANV….if it’s sitting in red right now….will jump up to a weekly green.
Tons of opportunities out there.
Still my favorite quote from Peter Lynch:
Act like a bloodhound and ignore everything except the evidence that shows up in front of your nose.
I give you a lot of credit…I know you’ve been working on your technical analysis skills for a few years now…I also know you have the discipline to WAIT until you’re confident in your system before you start trading real money with it.
That level of DISCIPLINE is really something you should be proud of. Most people don’t do it that way…They jump in, and start using real money right away, or too soon, and usually end up getting wiped out.
I think when the time comes that you start using real dollars, your self discipline will pay off for you in the end.
Very impressive! :beer
BUT…I will tell you, when you start trading REAL MONEY, the game changes…There’s MENTAL ATTACHMENT there…You view loses in terms of “I just lost the entire profit I made on 4 months of back breaking rehab work. and I lost it into THIN AIR trading.”
Hopefully, that discipline you have shown us is put to good use during draw down periods…But you won’t know until REAL MONEY is at stake!
Allagash and I speak via email a few times a month and I constantly try to talk him out of trading…As I do with many of the people I speak with on this site…Trading is a HORRIBLE way to try and make money and a great way to LOSE money if you arent well versed in evaluating risk on the fly…Trading capital should be viewed as risk capital aka if you lose it ALL you wont be broke…The downside risk in trading is %100 of your capital…If you are comfortable with that type of realistic risk and you have put in the time and research of what you are up against then give it a go…But fdjake is %100 correct the game changes drastically when you pull the trigger with real money…No one loses at paper trading and everyone looks smart when they are NOT playing with real money…This is why I post my actual time stamped entries and exits on any trades here but that is not meant to influence others to follow my lead…To the contrary I never want to see anyone start to trade…The realistic chances of you making money vs losing money is slim to none…Trading and the markets whether it be currency,metals,options,equities,energy etc is a high RISK game being played some extremely well funded and knowledgable professionals…Stay away please…And I will once again reiterate that I truly feel the dollar cost averaging investor (the person who puts x amount into the market on a weekly basis over a long period of time) will come out a winner over the long term (over 20+ years)…
On a side note…I have a close friend who is a executive headhunter and he says the economic recovery in the jobs market will be pronounced by next year…Im assuming this is good news…The markets are a future indicator though…Time will tell but this person is in the trenches and very knowledgable
Maybe this quote from Josie Wales is more in line with what Rookie is talking about.
Bounty Hunter (TRADER): “A man’s gotta do somethin’ for a livin.”
Josie Wales: (ROOKIE) “Dyin’ ain’t much of a livin.”
I couldn’t trade for a living if my life depended on it…I’d be broke in a very short period of time…
My only salvation is having some very specific knowledge about some very specific industries and I TRY and use that to my advantage…I couldn’t tell you how low Ford stock would go…I posted some historical charts showing the stock diping to the $1 mark in the late 70’s…But I sure as hell couldn’t have told you in AUGUST of 2008 that Ford was going to $1.50 in November.
I TRY and stick with what I know…If I step outside that area, I lose money and immediately get reminded WHY I stay in the areas I KNOW something about.
Making money buying and selling houses is FAR FAR easier…If you leave enough FAT ON THE BONE in your first few deals, you can even made some decent sized mistakes and STILL make money…Once you leave a few dollars on the table with those mistakes, you LEARN how NOT to repeat them…It’s a very simple, REPEATABLE business model.
It has also made me a lot of money. I like businesses that involve REPEATING steps you’ve already taken. For me investing in car companies during RECESSIONS is a classic example of this.
Thanks for the post Rookie!! EXCELLENT ADVICE, as usual. :beer
Trading is a HORRIBLE way to try and make money and a great way to LOSE money if you arent well versed in evaluating risk on the fly..
I agree. There is NO WAY that someone who is sitting at their home computer can compete with someone like Rookie sitting at a computer on Wall Street. He’s got all the research at his finger tips. He’s got the expensive computer programs with all the bells and whistles. Most importantly, he’s got the connections with other Wall Streeters who control the markets. When you or I put in our bids, we don’t change the price of a stock. When some big Goldman Sachs puts in a BIG order to buy or sell, the price changes - AND he’s got trading programs to shake out the weak hands while he’s doing so.
Combine that with the FACT that the markets are almost certainly being manipulated by the government and the little guy at home has no chance. I’ve been in cash for months, even though I enjoy trading as a hobby. However, I don’t even have enough confidence that the government can keep it’s nose out of the market to do some covered calls.
Making money buying and selling houses is FAR FAR easier...If you leave enough FAT ON THE BONE in your first few deals, you can even made some decent sized mistakes and STILL make money...
I agree. Making money flipping or with rentals is infinitely easier than making money in the market. In fact, if you do things right (and there’s no reason not to), then making a profit with flipping or rentals is all but assured. I certainly wouldn’t risk my security on trading when I can have a consistent income with my rentals.
OK, then maybe I should have asked it as a question? How can you compete, trading against Wall Street, when they spend millions on research; when they can move the market; and when they have the connections, and when they run programs to shake out the weak hands? How much money have you made so far competing with them?
I’m not saying that it’s impossible for an amateur to make any money trading. Quite the contrary, if you check the trades that I made when we were actually posting our trades live on REIClub, you’ll see that I consistently made money. However, the market was different then and I was getting my money up front - with covered calls. Furthermore, I haven’t traded for months because the market is IMO not predictable and I am not confident that I could make money trading in this environment.
Again, if you think that you can trade using the “clock”, then tell me what time it is in any time frame. Will we be up or down today? (I’m guessing down) This week? This month? This year? (my opinion - down this week, down this month (but not every month), down this year).
I’d like to chime in here on this subject. Back in Jan. '09. Rookie gave me the same advice about trading. He also gave me some good advice on what I’d need to learn and some good books. I remember him telling me that most new traders get blown or discouraged before they learn how to succeed. Here’s the thing. There’s NO better teacher than the market itself. I’ve been learning it ever since Jan. '09. I made some, but lost a lot more. I made one big mistake by letting my loss run too far. That was about a $6500 loss when I decided to sell it. But that was my largest loss. The money I’ve used is “risk capital” but I look at lost money as tuition. I’ve been slowly earning my loss back. But its from limiting my losses when a position goes against and adding to positions that are working. With all due respect to Rookie, PM and FDjake, I refuse to accept that learning to trade is pointless because its “too hard”. Losing money is part of the game. Especially in the beginning. I’ve learned a lot about technical analysis by Steve Nison, Oliver Velez, Greg Capra. I try to learn everyrthing I can. There is TON of things to learn. Money has been and will be lost for sure. I have to learn how to NOT be emotional in trading… I’ve gotten better over the past 6 months. For me, identifying support and resistance and applying candelsticks have helped me a lot. I try to buy when a stock starts to reverse at support on a daily chart. My risk reward is 1:3 minimum or else I look elsewhere. If I see that support is $20 and resistance is $24, I’d look to buy as it reversed and headed to $21. I’d have my stop loss point at about $19. It doesnt always work that way. Many times that setup is there but the general market trend is down… It took me a long time to learn just these very basic points, but even longer and more expensively, to put it into practice. The market is my teacher. It doesn’t spare the rod while teaching. It IS hard to learn. You WILL lose money. But evrytime I got knocked around, I learned a valuable lesson. Limiting my losses to fight another day is the most valuable lesson I’ve learned. I love it. I’m hoping to learn enough to be successful. I’m starting to see some of the lessons pay off even in this choppy sideways market. I’m focusing learing to trade well instead of making money. I don’t need to compete with Rookie, the govt. or any other outside forces to be successful. In fact, I’d like to see that thread start up again where members posted their stock pick in real time… I found that interesting… Sorry for the long rant, but I felt I had to post since I’m actually in the thick learning something that was deemed to difficult to try… It is difficult, buy worth trying…