There’s nothing wrong with betting on the next direction of a stock, or the market in general. But let’s be responsible about admitting that we’re wrong, when we get it wrong.
Regardless of your strategy, whether it’s technical, fundamental, economics or even if you base your analysis on the movements of the stars and the moons, it all comes down to risk management.
How good are you about admitting that you got it wrong and moving on? If you suck at it, then you’re not going to do very well and you’ll be gone soon. That’s economic Darwinism at it’s finest.
The ones who are the best at admitting they were incorrect in their assessment, and doing so the fastest, are the ones who make (and keep) the most money over time.
It’s really that simple.
How do you lose weight? Eat less and workout more. Duh.
But cupcakes and pizza are delicious.
Just like admitting we’re wrong is very difficult for us. It’s one of the hardest things for humans to do.
Just imagine if these permabears admitted 4 months ago that they got it wrong. Even just 4 months ago and they could have already turned in a huge return. It’s hilarious when you think about it.
How about the Gold Bugs? They’ve had so long to turn, but have chosen not to.
They could have owned Nasdaq stocks instead of a hunk of metal, but they said,
“No, I prefer to own rocks rather than groundbreaking Technology Companies!”
What are you going to do when stocks turn lower? It will happen. How soon will you be able to recognize that things have changed, and admit that buying stocks is now wrong?
That’s called Risk Management and, in my opinion, is the reason why Technical Analysis works so well, because analyzing price behavior is the best (only?) way to properly manage risk.
So YOLO. But YOLO Responsibly.
Howard and I got into the latest iteration of irresponsible behavior in our newest Happy Hour w/ Traders.
Check it out:
Meanwhile, look at what the Technology sector looks like relative to the rest of the market. And keep in mind, Google, Facebook, Tesla and Amazon combined represent 0% of the S&P Technology Sector Index. So even without those names, does this look like a downtrend to you?
Looks like a continuation pattern within an ongoing uptrend.
Is that not what this is?
Let me know what you think!
*Reminder: Our Monthly Conference Call is Tomorrow Night Feb 16th, 2021 @ 6PM ET. Premium Members can register here if you haven’t already. The replay and slides to download will be available here immediately after the call.