The Dow recently closed above 42,000 for the first time, and it could charge a lot higher. But some traders appear to have a good case of the ya-yas. Here are three ways to defend yourself (and profit) from short-term chicanery, writes Keith Fitz-Gerald, editor of 5 With Fitz.
Big traders sometimes take profits because they’ve had a good week and have a lot of money on the table. Simple as that.
But they also like to “run the stops” because they know that A) Many retail investors who have piled in en masse have been taught to use trailing stops and B) They can see ‘em. This is like playing pin the tail on the donkey without a blindfold. Easy money.
(Editor’s Note: Keith Fitz-Gerald is speaking at the 2024 MoneyShow Orlando, which runs Oct. 17-19. Click HERE to register)
There are three ways to defend yourself and profit from the chicanery...
First, change your mindset. The big money doesn't give a rip about this stock or that fund. They are playing you and your money while you are playing those stocks and funds. It's not personal; it’s their job.
They know that most individual investors lack the mental control to keep their emotions out of the equation, so they will deliberately “game that” by creating alternating cycles of fear and greed that run counter to the news.
This is why you often see short-term downside moves following “good earnings,” for instance, or massive upside runs after otherwise “troubling” reports. It's also why you will almost always see short-term corrections after a few winning days like we had after the Fed meeting.
Second, buy the best and ignore the rest. We talk about the importance of buying great stocks frequently for the simple reason that Wall Street’s merry marauders have a harder time gaming ‘em. In other words, owning ‘em makes you and your money a harder target.
Third, use tactics that take away their advantage. It wasn’t always like this. But now it’s a different game thanks to the rise in computerization, high speed trading, dark pools, and passive investing. You’ve got to game the gamers if that makes sense.
Learning to use low-ball orders or even simple limit orders can make a huge difference in your results. Don't know what those are? LEARN!
There is NO excuse and nobody to blame but the person looking out at you in the mirror if you don’t. As always, I will be here if you’d like some help.
