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How You Can Avoid the Biggest Trading Mistake in 2021 - YouTube
Channel: StocksToTrade
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- Today, we're going to be
talking about contrarian thinking
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and how it can sometimes trip you up.
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I mean, many of you know
one of the things we do
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in penny stocks is we try and recognize
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inefficiencies in the market,
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but some point you can
get a little too biased
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the wrong way, and really get in trouble,
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and today I'm gonna to try
and keep you out of trouble.
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(upbeat music)
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Hey everyone, before we get started,
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be sure to like, subscribe, share,
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and ring that bell, if
you're on YouTube. You'll be
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notified as soon as we drop a new video.
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All right, that being said,
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I am Lead Trainer with StocksToTrade,
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Tim Bohen here,
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Today, we're going to be
talking about the trend,
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and trend following and
trying to go contra the trend.
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Many of you may be aware
of the "Turtle Traders,"
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great book by one of my friends
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and a very inspirational author,
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Michael Covel, definitely
check out trend following,
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and the "Turtle Traders" books,
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I actually interviewed him
on the SteadyTrade podcast.
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It was a great podcast,
but that being said,
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what that book went into was kind of the
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nature versus nurture mindset,
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and just to give you a brief
introduction of the concept,
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the idea was there were two
very successful traders,
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and they kind of went back and forth
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on whether trading was an innate ability,
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or if it could simply be taught,
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and ultimately they proved,
in their sample set at least,
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that it could be taught.
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It is a skill that could be learned,
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and the skill they taught people
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was simply following the trend, you know,
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and I know that sounds so simple,
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but basically you're looking for,
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you're looking to buy stocks
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or if they traded a lot of commodities
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that are steadily trending higher,
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and when we say that
it's simply higher lows,
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and higher highs, you know,
stocks that are trending
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up on those candles, you
know, those green candles,
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and when they do have red days, you know,
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it's not a colossal red day,
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they're just holding that
trend and then vice versa.
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They're shorting stocks or commodities
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that are steadily trending lower,
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and again, I know that sounds so simple,
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but one of the biggest situations
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I see where people get
tripped up is, you know,
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they're shorting particularly right now,
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you know, steadily up trending stocks
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because they fall in love with the thesis,
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and I mean, listen, AMC
is the example of today.
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You can look at GME, GameStop, okay?
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AMC movie theaters, GameStop.
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If you're watching this video
a year or two down the road,
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they're probably both out of business,
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or they've filed bankruptcy
and they've been bought up
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and respun or something,
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but the equity, the stock trading today,
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AMC trading at $58,
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a couple years from
now it's probably gonna
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be worth zero, or pennies on the dollar.
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And, but that doesn't, you know,
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the fact that what we run into right now
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is people are trying to
short against the trend,
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I mean, look at the stock.
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I mean, this thing up-trending
with the meme stock mania.
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You go back in January,
when it went from two to 20,
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then kind of consolidated
and didn't do much.
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But then look at once
we re-broke out at 19,
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grinds higher, higher, higher,
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all the way up to 72,
pulls back a little bit,
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and here we are back at 58, you know,
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only 10, $12 a share
off of all time highs,
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and there's been, I mean, hedge funds,
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billion dollar hedge funds
that have gone out of business
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or have had to take more
equity infusions, you know,
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sell more share of their
business just to stay alive,
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because they tried bucking the trend,
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and I think that, listen,
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if a billion dollar
hedge fund is blowing up,
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do you think you're gonna
be able to capitalize
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on fighting the trend?
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So what I want you to look for
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is just these steadily
uptrending stocks, I mean,
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we don't talk about short-selling
much on the channel.
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I do have several videos.
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You can check them out,
but at the end of the day,
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most of you are new and you've
probably got a cash account,
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which means you can't short,
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and if they do have a margin account,
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you're probably under the PDT,
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which really limits how
many times you can trade.
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So, the biggest strategy
I want you to focus on
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with that small account,
as that newbie trader,
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is looking to reuse your
cash to go in and out
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of these stocks and build your account up,
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and then, when you're more consistent,
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when you've kind of got a foundation,
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you're steadily increasing your count,
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you're profitable,
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then start trying to branch
out and start shorting stocks.
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But we see so many people
that try it too early,
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and in 2020, in 2021, billions
and billions and billions
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have been erased by
people fighting the trend
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in these meme stocks.
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Then I think about, you know,
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understand where the market is.
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I mean, bring up a to- a
chart, a five-year chart
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of the S&P 500, okay?
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Well actually I'll bring it up for you.
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Why don't we do that?
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There's a good idea, Tim.
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Why not show the people?
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Anyway, I mean,
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look at the five-year
chart of the S&P 500.
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Sure, we had a rocky day,
you know, back in 2020,
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but I mean really the only
time the trend has been broken,
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considerably, is when we
was when Corona Virus broke.
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I mean, you can't, in my
opinion, I hate to say ignore,
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putting my hand over it so
I don't have to look at it,
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but I mean, listen, we only
get, hopefully only get,
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a global pandemic once a century.
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You know, you look back to the early
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to early 19 hundreds, et cetera,
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and I mean, it only comes
around once a while,
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and if you look at the
trend outside of that,
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stock market is just steadily up trending
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for five straight years.
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This is not the
environment to be shorting.
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Now, when I got started,
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when I got started actively day trading,
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it was 2007, 2008 during
the financial crisis,
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and the trend was down for 18 months.
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That's when you look to get short,
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join that trend and listen,
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I hope-hopefully you don't
take this the wrong way,
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but you're new. You're inexperienced.
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You're not going to
beat what the big boys,
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what the billion dollar Wharton
and Harvard grads are doing.
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You know, now they may win
in the end, but they have so
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much capital that they can
withstand the squeezes up.
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I mean, you know, think about the quote.
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You know, the market can
remain irrational longer
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than you can remain solvent,
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and if you've got a couple
thousand dollar account,
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or a 10 thousand-
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or even a, let's say you are over the PDT,
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you've got a $30,000 account.
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You get caught fighting the
trend and it's all over.
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Next thing you know, you
got $2,000 in your account,
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and you're retired because you can't,
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it's so much harder to build that back up.
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So follow the trend, follow the S&P 500,
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follow the Dow Jones, you know,
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follow the sectors.
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One of the big things we do
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in the SteadyTrade team, which,
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check out the link below to
join the SteadyTrade team,
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two webinars a day, every single day,
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we get into so much
detail, but we have tons
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and tons of spreadsheets where
we're tracking sectors, okay?
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So we're looking for those
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hot sectors to join the trend,
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and when you've got something,
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I mean the greatest hot
sector in my 15 years,
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which is still going on, is
the electric vehicle sector,
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and I think back to the
beginning of the pandemic,
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when Tesla was exploding
and we had, you know,
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I think we had 30 tickers on that list.
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$1 stocks, $10 stocks, $20 stock,
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and you can use that index that we build
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in the SteadyTrade team,
for lack of a better term.
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I call it an index view.
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It's not an actual ETF or an index,
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but we can track those trends
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and then look to join those trends,
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and then when they reverse, which hey,
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simple fact is, you know,
Tesla had a rough early part
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of the year in 2021, and all
of the EVs were trending lower.
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That's what you're looking to do.
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I'm not against short sell.
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I think it's a very viable
strategy, but again,
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look at this chart of
the S&P 500 here we are
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pennies from all time highs,
you know, all time highs,
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since the index began,
I mean, a hundred years,
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is that the environment to be short,
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or is it the environment, you know,
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back last February when the
world was quote unquote ending?
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So check out "Trend
Following" by Michael Covel,
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check out the podcast,
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the SteadyTrade podcast with Michael,
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great book, again, he's got
a bunch of amazing books.
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He's got a great podcast as well.
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Check it out.
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I'm always looking to
give you as many resources
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as possible to learn from
and be a contrarian thinker.
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Okay, I want you to think differently,
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to quote one of my idols, Steve Jobs,
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you know, think differently.
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Don't follow the mainstream media, okay?
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Be a free thinker, come up
with your own trade ideas,
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your own thesis, your own
patterns, but recognize,
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and I'll end with my absolute
favorite all time quote,
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trading quote of all time,
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man, I'm dropping the quotes
like crazy in this video,
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but you know, Jesse Livermore,
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from "Reminisces of Stock Operators,"
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he said, you know,
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and this is the best
trend-following quote ever.
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He said, "There's a time to go long,"
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right now, I think, there's a
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"time to go short," during the pandemic,
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2007, 2008, you know,
financial crisis, et cetera,
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and there's also a, "time to go fishing."
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There's a time when the
markets are sideways,
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there's not much going on.
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Now, I would never push back
on the great Jesse Livermore,
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but since 2016, I can't recall,
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you know, here we are five years later,
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I can't recall a slow period.
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I mean, it used to,
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I'm recording this video
in the middle of June
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and it used to be summers were
slow, particularly August,
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you know, August was always
the doldrums we- month,
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when you go back to school,
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and lot of, you know,
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a lot of Europeans take the
whole month off or holiday,
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everyone's getting in those
last minute vacations.
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Last August, I don't think I walked away
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from this computer for 30 seconds.
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So um, (laughs)
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So what I'm getting at is
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I totally agree with Jesse Livermore,
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there's a time to go long
and a time to go short.
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I don't know about a time
to go fishing anymore,
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but it seems like we never
have time to do that.
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Anyway, have a great day everyone,
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definitely check out the SteadyTrade team,
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and use the S&P watt,
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The SPY, or the ES,
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there's a lot of different
ways to track it,
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to look at that bigger picture idea,
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and if you're getting stopped out,
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you're getting stopped out,
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maybe ask yourself why,
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keep getting stopped,
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getting stuffed on afternoon longs.
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Okay, is the market down trending?
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If you just keep getting
stopped out on morning shorts,
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is the market steadily up trending?
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Follow the trend, do your due
diligence, track your trades.
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Listen, if when you're
doing that research,
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when you're doing your journal,
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write down what the S&P
500 was doing that day.
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Was it up green?
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Was it up big?
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Was it hitting all time highs?
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I mean, that is an indicator.
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When, when people see all
time highs, you know this,
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even if you're new, then you know, again,
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the mainstream media,
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every time the market hits all time highs,
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it's going to be a lead story.
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They're going to be talking about it.
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That brings FOMO, that
brings more traders.
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So that being said, have
you been fighting the trend?
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Let me know in the comments below,
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or are you looking to join
the trend? And as always,
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definitely check out the SteadyTrade team,
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and we'll see you next time.
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