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What does it take to master the markets? (NYSE:SPY)

Posted by Aadil on March 15, 2011 at 12:15am
Many times in my career I have encountered new traders who believe they have the ability to master the markets after reading a book on trading, or even because they have obtained some form of degree. Most often the first question I ask them is; are you a fundamental trader? Fundamental traders are those who generally read a companies balance sheet, (example-EPS, PE, EBITDA, book value, etc.) or perhaps they are a technical trader which is someone that uses charts of past prices, patterns, and stock market cycles. More often then not the trader is unsure of a specific methodology and is typically dependent on someones opinion to invest or trade a stock, usually from a book or talk show. Within minutes, I realize that the new investor or trader is grasping onto a dream encompassing an optimistic hope mode. 

Trading is one of the most rewarding, yet highly demanding ventures that an individual can pursue. Often I compare the markets to the world's largest arena that is filled with gladiators from ancient Roman times. There is over a billion shares traded everyday globally and the participants range from huge institutions such as insurance companies, commercial companies, hedge funds, mutual funds, banks, broker dealers, down to the individual investor. These participants have different types of goals and strategies that are being applied. Many institutions and traders have a longer time frame horizon and are looking for larger gains from the market. Then on the flip side there are many institutions and individual traders that are trading in a shorter time frame and looking for smaller gains. This is all part of the vast ocean of trading and investing. Yes, the big fish does eat the small fish, the food chain theory is alive and well in the global trading world.

As most people, I'm a sports fan and enjoy watching a good athletic event. In the past few years the very popular sport of mixed martial arts has emerged to the forefront of athletic competition. This is a dynamic and fascinating sport that is very diverse and requires countless hours of physical training, studying, dieting, mental strength, and a true dedication that few can achieve. Recently I had the privilege of meeting a mixed martial arts competitor and I asked him how he got started in this sport? The fighter informed me that he was originally a boxer, later studied the martial art of Judo, and now he concentrates on the martial art of jujitsu. I then asked him if he learned the basics in Judo and Jujitsu and combined the techniques? Again, to my surprise he is a black belt (expert) in both martial arts. This means he is a black belt in two different forms of martial arts, as well as a professional boxer. The next statement was a something that I will never forget. He said, "I still need to continue to learn everyday and master more if I am to continue to get better in the sport. I'm forever a student of mixed martial arts." Then it really hit me. This is what it takes to be successful in anything that you do and the reason why only a few are able to reach the elite level. 

So what does it take to become a successful trader? This is a recipe that I'm certain will be different for each individual. It is truly an endless journey. The more you seek, the more you will find and there is surely more than one way to achieve your goal. In my personal journey to learn and understand the markets I have read over 200 books on the markets. Many of those books I have read two, three, and some four times. I have watched countless recorded trading videos, attended over 100 live seminars, and worked personally with some of the best traders alive. I have studied every bull and bear market in history and continue to learn and discover new market patterns and cycles every day. I know and believe that I still need to learn and master more as this is an ever changing arena. I am forever a student of the market. True market mastery is not a nine to five job where you punch a time clock. The real work usually begins when the market closes at 4:00pm ET. Every evening, I usually spend three to four hours reviewing charts and looking for setups for the next trading day. Reviewing charts on multiple time frames and performing multiple mathematical formulas is the norm.

In order to be successful in anything you must have a true passion. Trading is no different from a doctor, lawyer, accountant, or any other profession. A comedian I saw said it best, "a person with a job can't wait until 5:00pm for the day to end so he can go home. A person with a career doesn't even know its 5:00 pm and when at work he thinks he is home." 

Trading is a skill that takes a life time to master. However, it is the best and most rewarding profession in the world with many perks. Be your own boss, make unlimited amounts of money and learn how to read people. After all, when you trade you are not trading stocks but people and their emotions.  Learn the proper tools, keep learning, and make a fortune.

Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
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There Are Only So Many Sunny Days (NYSE:XHB) (NYSE:SPY)

Posted by Aadil on March 15, 2011 at 12:14am
There is great song by the rock band Matchbox 20 called, “How Far We've Come.”  When you think about it, it is pretty amazing how far the world has come on the back of inflation. The popular economist John Maynard Keynes was one of the first to come up with this inflation style of economics. If you look at the past 100 years in the United States the country has emerged as an economic power house on the back of inflation. I remember when my parents bought there first home in 1979 for $30,000 and years later selling it for nearly $200,000 in 1988. They thought they were geniuses. However, the next home they purchased was unfortunately much higher and they later realized that in just a few short years their new house was worth less than they paid. Why did this happen to them? It is simple. It was a short term deflationary period. Since the Jimmy Carter administration the U.S. economy has been inflating higher into 2007. Now the new era of deflation has begun. 

The bailouts over the past 30 years have now caught up with the economy. Please realize that in the 1980's the U.S. economy survived the savings and loan crisis, and the junk bonds scandals. The economy also had a stock market crash in 1987 and a housing market bubble in 1988. By 1997 the Long Term Capital crisis emerged and the economy was bailed out successfully once again. In 1999 the tech bubble burst and many can argue that technology has never recovered from that high. In 2007 the greatest housing and credit bubble popped. Here we are today watching our government bailing out the large banks and countless homeowners that are now in negative equity. What is next on the horizon? Can the government continue to inflate its way out of problems and crisis?

We are now in the deflation era. Even the Federal Reserve Bank now admits that deflation is a problem. Last year they would not even mention the “D” word. These days deflation has become a household name. In the United States we can really only look at the recent past and see Japan as a nation that has been fighting deflation for the past 20 years with very little success. Is this how it will be for the United States? There only seems to be one true cure for deflation and that is failure. However, rarely are large global corporations allowed to fail. Hence the term, “to big to fail.”

Since we know the U.S. government and the Federal Reserve Bank will continue to follow the Keynesian philosophy by trying to inflate their way out of the problem. When will they throw in the towel should this method fail? That remains to be seen. Many people have and are now losing faith in the government. The government truly believes that they can spend their way out of anything by simply borrowing and spending; the common man tried that during the mid 2000's and look at the position that he is in. Is it any different with a large nation? When does the spending end? Who is going to lend the U.S. money anymore? Is every country in the same shape as Greece? Unfortunately only time will tell when these questions can be answered. One thing is certain in these uncertain times, going forward these markets will be very choppy and represent a great place for traders. They will not be for the mom and pop trader/investor that buys stocks for the long haul and expects them to only rise. Stay tuned as the global soap opera is just getting started. 

Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
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How you can avoid a beating from these thugs (market makers)

Posted by L Levin on March 11, 2011 at 9:30pm
Market makers have a crucial role to play in the stock market. Without these banks and brokers offering to take your buy and sell orders, the stock market would just dry up. Ok you could probably buy and sell large cap stocks. But with small cap and illiquid stocks, you could be a long time waiting.                          http://www.moneyweek.com/investment-advice/how-to-spot-market-makers-10922
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