In the 2004 crime thriller Ocean’s Twelve, the character Saul Bloom says, “Didn’t you see the signs? I saw the signs,” after being asked how much of his take he’d kept since the twelve robbed Terry Benedict’s casino (“Oceans Twelve”). Saul claims he’s almost doubled his money through investments he’s made in the stock market. The stock market is for the most part just that—seeing the signs and knowing when to act. Some people characterize the stock market as a form of gambling. The market differs from a game like poker, however, in that the price of a stock is relatively predictable and isn’t determined solely by chance. Investment markets are not “luck of the draw,” and show predictable, historically consistent patterns that continue to reproduce themselves. Oftentimes it is the most basic, straightforward investment approach that is the most effective, which is why anyone can be successful when it comes to trading on the stock market. There is a proven, clear-cut path to profits in the market, which is why I am highly skeptical of those people who claim that the stock market is a complicated, intricate guessing game that is impossible to master or find real success in.
Most people know someone who has lost money on the stock market. The bear-market declines of 2000-01 brought many technology stocks down at least 75% in value. Many people lost a lot of money, and as a result are afraid to invest again. The fortune of people who used to buy a new Jaguar every two years was reduced to rubble when the market crashed. When people lost money, ignorance was again to blame. While the market hit new highs daily, it showed clear cut signs of tapering off, but amateur investors maintained a mentality that things could only get better. So, when the market began to fall, they were confident it would have to come back up eventually. If they had simply paid attention to the activity of their investments, and gotten out before it was too late, many people would have a lot less to complain about, and as a result a lot less to fear nowadays.
There is a certain level of risk associated with investing in anything, especially the stock market. What most people don’t think about though is that even putting money into a bank involves a certain amount of risk. Any institution has the ability to flop, but while people trust in banks, they need to re-lean to trust the stock market. Warren Buffet is the second richest man in the world, and is so because of his incredibly successful stock market investment tactics. He made his first trade at age 11. The majority of critics of the stock market are simply bitter over personal losses they experienced at one point or another. They cannot stand the thought of someone else profiting from the market, while they have lost an incredible amount themselves, hence they discourage other people from investing. Envy has served as a vehicle for propelling selfishness to prevail over these ex-investors, for competitors of theirs, like Warren Buffet, have found success in the market and become some of the richest people in the world, while they have been reduced to shambles and turned very bitter along the way. On the contrary, the gratification that I receive from triumphing over my investments invokes a feeling like no other.
I am extremely skeptical of market opponents that claim there is nothing to be had but bad fortune by investing. I wonder why they say that, and what their reasoning could possibly be. So many people fear losing their money that they ultimately do not invest at all. There’s no difference between me and any other investor. I’m not any more educated—in fact I’m probably less educated than most investors. I’m not more knowledgeable, I don’t have access to inside information, and I don’t know what to look for in financial reports or even how to do taxes all that well. What do I know? I know a lot of people who have lost money in the market because they bought a stock when they saw it consistently scraping the ceiling in terms of success, but to their dismay and against their expectations, it took a downturn instead. I look for a significant dip in a stock’s value when I buy it. I know that a strong corporation with solid leadership, whose stock is low, will most likely make significant gains in the coming future.
One of my best friends plays poker online. He tells me that trading stocks is far too risky, and that if he wanted, he could easily make a living by playing poker online. While I make calculated decisions, he sits and hopes for a big break on the “flop, turn, or river.” I am skeptical of those people like him who claim that their methods of reliance upon chance can and will ultimately make them much more successful than me. There is a small element of chance involved in buying and selling stocks—big and small breaks happen occasionally—but the basis behind the investment is reliance not upon chance but instead upon reasoning deduced through logical methods of interpretation. While I have been enjoying moderate success, my friend has lost everything, and unfortunately I don’t see him ever fully recovering from a loss so substantial. He was incredibly devastated when it happened, unable to eat, sleep, or even read a book. He presently sees a therapist for gambling addiction.
I first began trading on the stock market a few months ago. I started as an amateur investor with no prior experience or knowledge with regard to any aspect of any cash market, whatsoever. I read an online article on how to place a stock order, and with that know-how, I made my first stock purchase. I opened the newspaper, picked out all the stocks that had hit a 52-week low the day before, and then reviewed recent news about each company, closely examined the graphs of each, and ultimately made a purchase. In retrospect, I was blind and had no idea what I was doing. I netted 10% when I sold two weeks later. Logically, investing ignorantly is the worst possible move any investor could ever make. Did I get lucky, or did I read the “signs” dead on? I solid analysis of the stock beforehand showed me I had no reason to be skeptical, but I suppose it was still a little bit of both.
People tend to buy into a stock when it is doing well in anticipation of it continuing to perform in the same manner. The past does not necessarily reflect what the future has to hold; however, by just looking at some of the free day-to-day stock charts found almost anywhere online, you can see that every stock makes trends in the same consistent, up and down manner. There is a simple pattern involved in all of this that anyone can recognize. It is predictable and involves very little guessing. Winning can’t be any easier than this. Why, therefore do people complain about how hard it is to make money, and how they always seem to lose? I remain skeptical as to how these people can complain, when in fact their fault has always been that they’ve remained ignorant to the signs right in front of their faces. Common sense is the majority of what any person needs to be successful at trading stocks.
There is, of course, a more technical side to trading. If all investors would read just a basic book on the workings of the stock market, and simple strategies that can help you win, then those people content on making a profit would in fact do so without trouble. The common sense principals I outlined—on the most basic level, buying low and selling high—can be converted into a more technical recognition. Charts plotted using Japanese Candlesticks are the most widely used type of trend indicator. They are the biggest contributor to the logic used in placing buy and sell orders for stocks. Candlesticks illustrate, using a box, the open price and close price of a stock, and with lines extending upward and downward from the box, the highest and lowest prices the stock experienced that day. By looking at the size of the box, and the length of the lines, spinning tops, hanging men, hammers, shooting stars, doji, and maruzobus can all occur. Additionally, using the golden ratio that Fibonacci discovered as well as moving averages can help plot the future of a stock’s performance. The most basic guides for investors outline each of these, but the principle behind all of these tactics remains yet the same—that is, to buy low and sell high. So many different tools have evolved over time, but understanding them can only make an already winning strategy perform even better. You may have heard someone say before that when it comes to the stock market, “you either have it or you don’t.” This is simply not true. If you have a strategy that is logically deduced, then you cannot help but make money on the stock market.
I have read the books, learned the techniques, and taught myself the mathematics behind trading; however, the way I trade has not changed from the day I began. I remain skeptical of stock market critics who claim that the market is a gigantic mess that holds no means of finding guaranteed, consistent success. I do not guess or hope, or even pray when I invest. I look at the signs, and anticipate a gain. The manifest function of investing is to turn a profit, however, as adversaries of the market merely stop at anticipation of such profits, those who ultimately find success do so because they have preceded this process with one, essential step—they look for the signs. Even the smallest lines of the graph of a stock’s performance can give a sign. A true investor—one who is out to make money—looks for the signs, but more importantly, knows how to recognize the signs when he or she sees them. How can you learn to recognize the signs? Give me no reason to be skeptical of your decision making process. Learn to recognize the signs by reading a book or two and using common sense.
Works Cited
Ocean's Twelve. Dir. Steven Soderbergh. Perf. Carl Reiner. DVD. Warner Home Video, 2004.
No comments:
Post a Comment