I am being asked by many new followers for a refresher crash course in how I look at markets…here goes:
I believe you should invest in stocks, but if you are to take the time, aim to crush the averages.
The best way for ME (not necessarily you) to do this has been trend investing and angel investing.
Drawdowns are inevitable and no big gains over time come without pain. Just yesterday, Michael explained this perfectly using the biotech trend of the last 5 years. Bookmark it.
Tape reading is essential. You can spend 10 minutes a day and learn to read the tape and you will build a habit that you will benefit for the rest of your life. Pin this quote to your trading wall:
— StockTwits (@StockTwits) May 1, 2015
Know the field position. Recently we have had some tech blowups and a big biotech pullback. You might even have made some money on the short side. That’s awesome. But, remember to take a look at the bigger pictures once a week so you don’t get too stuck in the weeds. Picking tops and bottoms is not necessary to trounce the markets. Here is the Nasdaq right now:
Love to look at this monthly chart on $QQQ for perspective on still how healthy the trend is longer term
— HCPG (@HCPG) May. 1 at 07:35 AM
Patterns repeat because investing is more behavioral than financial (fear and greed). Most people call this technical analysis. I am not a technical person so I call it ‘Chart Art’.
Follow the money. Big money leaves footprints. I buy strength and sell strength.
Develop strict guidelines for selling. It is the hardest and most esoteric part of managing your money and very personal. It’s really fun buying stocks, but it is not a game.
Don’t chase. Take a look at my recent favorite example Alibaba. CNBC spent days gushing over it at $110 after it’s IPO:
Alibaba vs. Shanghai Comp since the IPO…
— Charlie Bilello, CMT (@MktOutperform) May. 1 at 07:56 AM
You will of course make every mistake in the book because you are human. My best suggestion is to surround yourself with people that hold you accountable and journal like we all do on Stocktwits.