How Eating Bitumen Made Me a Better Stock Trader
Stock market trading is a fascinating activity.
There are so many layers to it. And so many paths that you can go down.
Soon after we first got interested in the stock market I became captivated by technical analysis. I finally felt that I was in control. It gave me great confidence to have all these tools to use.
We bought some expensive charting software and I started playing with the hundreds of indicators that it contained. Exotic sounding devices with impossible to understand mathematical formulas.
So, armed with all these new tools, I was sure we would be making a killing in no time. Because now we had science on our side!
And so I spent night after night, weekend after weekend trying to understand them. Backtesting. Trying one and then another.
But still we struggled to pick the winning trades.
I can remember buying this add-on to our software that gave us even more indicators. And I was convinced this would finally make the difference.
So I tried yet more indicators. Using different settings and different combinations.
But success still eluded us.
And it took us quite a long time before we understood why.
But before I explain what we discovered, let me tell you about eating bitumen.
My office is close to home. So some years ago I decided it was silly for us to have a second car. And so I traded it in and bought a scooter.
Now the only real problem with scooters or motor bikes [apart from getting wet in the rain] is that you are fairly likely to get hit by a car at some point!
It just stands to reason.
So I am always careful to watch cars to see which way they indicate they are going to turn or whether they are stopping.
But this one day I was in a bit of a hurry.
And as I approached an intersection a car was parked at the stop sign on my right. I was going straight through and the driver was indicating to turn left.
[At this point I should remind some of our overseas friends that we drive on the left side of the road!]
So I knew it was OK for me to keep going straight through the intersection. Or so I thought!
Next minute I am slamming on my brakes as the car accelerates across the street immediately in front of me. As my scooter hits the fender I go flying across the front of the car and land on the pavement on the opposite side.
For anyone who has experienced such an event you will know what I mean when I say that it was like the whole thing happened in slow motion. Quite weird!
I can remember looking at the car as it headed for me and not believing that this was really happening.
Because I was convinced it was going to turn left. The driver had indicated that he was turning so what was he doing on my side of the road?
But there he was. I couldn't believe my eyes but eating bitumen convinced me that this was indeed reality!
Ever since, I don't trust car indicators. Instead I have learned to look at the front wheels. Because this is the true indication of which way the car is actually going to go.
And you can't rely on looking at the driver, even if you can see them. Because they often don't seem to know where they are going, either!
But the wheels don't lie!
The car can only go in the direction they are pointed.
Now what on earth has this got to do with what I was talking about before?
You remember I was telling you about the problems we were having with technical indicators? Well what finally dawned on us was that we were not taking enough notice of price action.
And so we started to study the chart before adding any indicators.
And suddenly we saw what was really happening. It was like looking at the car's wheels instead of its blinkers.
You see, technical indicators are just what they say they are - indicators. Not reality. Not price action.
But an interpretation of price. A filter.
And so you need to look at a stock's price chart on its own to get a picture of what is really going on.
This is not to say that technical indicators are not useful. But the critical thing is to only use them after you have analyzed price action. Not before.
Just remember - the wheels tell the truth!
The above comments are offered for educational purposes only. We are not providing you with financial advice. We are simply sharing with you what has and hasn't worked for us personally. If you wish to trade or invest in the stock market you should obtain advice from a registered licensed advisor.
David Chandler
http://www.stockmarketgenie.com
For your FREE Stock Market Trading Mini Course:
"What The Wall Street Hot Shots Won't Tell You!" go to: http://www.stockmarketgenie.com
Latest News
 New York Times | Microsoft's Ballmer to CES: keep investing in tech despite ... Scientific American - Las Vegas , NEV. -- In his first ever CES keynote, Microsoft CEO Steve Ballmer yesterday acknowledged the tough economic times, but urged companies not to ... Microsoft: the year ahead Microsoft releases Windows Server 2008 R2 beta Windows 7 beta available worldwide on Friday |
 Wealth Bulletin | How to avoid a Madoff fund San Francisco Chronicle, USA - Feeder-funds (hedge funds or funds that do all their investing through another fund) and funds-of- funds sold investment services to individuals, ... Fund-of-Hedge Funds Lacked Technology to Avoid Madoff Losses D Bank declined offers to invest with Madoff |
 Express from The Washington Post | The Best Investment Values in a Decade Motley Fool - These days, we're presented with what Ron Muhlenkamp a few months ago called "the best investment values we've seen in a decade." Obviously, the market has ... You Are About to Make a Bad Investment The Flight to Safety Could Burn You Wednesday's Biggest Stock Stars |
 Dividend.com | Billionaire investor places next supermarket bet MarketWatch - Yucaipa's investment funds have been aggressive buyers of Whole Foods shares since Nov. 24, spending a net $98 million to amass the stake. ... Activist shareholder buys 7 percent stake in Whole Foods Billionaire investor Burkle bets on Whole Foods |
Thomas, McNerney & Partners Promotes Three Members of Its ... PR Newswire (press release), NY - Thomas, McNerney & Partners is a health care venture capital firm with approximately $600 million under management, focused on investing in life science and ... |
 Markets Media News | Uma Thurman No Help to Arpad Busson in Madoff Fraud’s Nightmare Bloomberg - In mid-December, EIM disclosed it was one of at least a dozen funds of funds caught up in the massive alleged fraud perpetrated by New York investment ... Hedge funds' year is worst ever, and fall may continue Blackstone To Rationalize Single Manager Hedge Funds Businesses In ... Hedge Funds Meet Their Match |
US investment in IT would create jobs, group says ITworld.com, MA - by Grant Gross A US$30 billion investment by the US government in broadband, health IT and smart energy grids would create or retain nearly a million jobs, ... New ITIF Report Documents How $30 Billion IT Stimulus Package ... $30B IT Stimulus Will Create Almost 1 Million Jobs |
 guardian.co.uk | Learning from Madoff's Ponzi scheme WKOW-TV.com, WI - Another important lesson from the Madoff Ponzi scandal is that investing money successfully also requires some homework on your part. "If you're investing ... Video: Congress Sounds Off Against SEC in Madoff Affair Why financial experts and laymen keep falling for pyramid schemes Be prepared, guard against financial scams |
Invesco Fund Loss Stirs Investor Fears Wall Street Journal - By DIYA GULLAPALLI 'Stable-value" investment funds have been one of the last havens in employee-retirement accounts. But one, advised by money manager ... |
Appleseed Fund Ranked by Lipper as Top Performing Midcap Value ... CNNMoney.com - "Since the Appleseed Fund's inception, we've shown it's possible to outperform the market by investing in companies with strong sustainability records and ... |
Resources
-
No Money Down - Creative Real Estate Investing!
Learn how to control real estate Without credit checks and no money down! You can Buy With No Credit!
-
real estate foreclosures- home69
Proven real estate Investing course specializing in foreclosures and pre-forclosures.
-
Real Estate Investing
How To Start And Run Your Own outrageously Profitable Fixer-Upper Business In As Little As 45 Days, even If You Can
-
Foreclosures - Real Estate Investing - Short Sales.
Learn about foreclosures and real estate Investing techniques like short sales and subject to financing
-
Online Trading for Financial Freedom - stock daytrading strategy.
Stock index trading strategy for beginning and experienced traders alike.
-
Real Estate Investing - Foreclosures
How To Start And Run Your Own outrageously Profitable Fixer-Upper Business In As Little As 45 Days, even If You Can
-
Real Estate Investing Course for Profits in Investing
Real estate Investing course reveals proven real estate Investing strategies using Lease Options and Creative Financing where you can earn big money Investing in real estate with no down and no credit
-
Make money stock trading, day trading, Investing and trading options like the pros!
Turn $200 into $4,630 in 30 days by trading options online from your home PC. Step by step instructions for novices or investment pros. Make money stock trading, day trading, Investing and trading options like the pros!
-
Make real money Investing in real estate by Lou Vukas
Lou Vukas gives you the insider secrets to making real money in real estate regardless of your credit, finances or location at realestatefortunes.com.
-
Real Estate Investing
eBook on Real Estate Investing and Real Estate Marketing