As we celebrate this season of Thanksgiving, I want to acknowledge a few favorite quotes that are embedded with special wisdom for investors.
As an individual investor, what you bring to the table in the way of intellectual, emotional and behavioral skills will determine whether you succeed or fail. This is hardly a breakthrough revelation, but it needs to be said nonetheless. It’s been my experience that great investors are not born. For the most part, they are average people who simply make a personal commitment to teach themselves the most appropriate skill set.
Investors Business Daily (IBD) acknowledges this by its regular features about individuals who have excelled in one sphere or another. For it is role models who can indeed jump start the acquisition of these essential faculties. IBD features a large number of entrepreneurs in these bio picks. This is clearly from experience and by design. This is a reasonable alternative in lieu of face-to-face mentoring.
Yes, I’ve profited handsomely for years by trading on the coattails of top mutual funds when they report their new holdings each quarter. Yes, this is precisely why so many of you download the Tensile Trading ChartPack each quarter because we make it super easy for you to coattail along as well.
No, you don’t make these profits without some independent thinking, research and comparisons on your part.
Okay, so we know that due to legislative changes as explained in the Action Practice #5 blog, Fidelity is selling their positions in certain financial equities and replacing them with different financial equities, such as ICE, CME, SPGI and STT.
I heard an insightful interview with a judge talking about the transformation she goes through in her chambers as she puts on her black judicial robes and enters the courtroom.
It reminded me of my own physician who I know socially and who I’ve seen experience a similar conversion when he dons his white doctor’s coat before we discuss my medical well-being. Stay with me; there is a powerful and profitable lesson here for us investors.
Think back to your academic graduations and how you wore robes to prove that you had absorbed the wisdom imparted by your teachers. Books have been written about the dual personalities of our sport heroes when they don their shoulder pads, helmets and uniforms. Even our superheroes are empowered when they step out of the phone booth transformed by tights and a big “S” on their chest.
This is the fifth biweekly Action Practice blog we’ve done together, so I’ll assume most readers are up to speed by now and I don’t need to repeat specifics about “Permission To Buy”. Here is the link to the Action Practice #4 blog which we will address below.
1. Per our methodology, our foremost concern is to answer this question: Is the market trending up, sideways or down? The specific charts we deploy are all laid out in the Tensile Trading Chartpack within the three Permission to Buy ChartLists (10.1, 10.2 and 10.3).
This ChartPack update is chock full of enhancements as a direct result of spending a week in Napa Valley with all the sensational commentators and luminaries at ChartCon 2016. We confess that we have unabashedly incorporated a lot of their wisdom into improving our ChartPack. We are sure you’ll notice and approve.
Before we go there, a few general thoughts on the ChartPack. Even I myself am astonished to realize that I’ve been personally investing using the first version of this ChartPack now for over 15 years. In 2010, I began distributing versions to my seminar students. Since 2013, we have made it available to all StockCharts.com subscribers. The markets are messy by nature. Some investors never manage to organize the mess. ChartPack users have a tool to make it un-messy. My point is that with a user community numbering in the thousands, we investors have all benefited and profited immensely.
I’ve annotated the six charts I presented to you in my September 20, 2016 blog which was an exercise in Selling. If you missed that blog, I suggest you review the un-annotated charts first, and then mark them up yourself before you peek at my annotations. Here’s the link to the September 30th blog.
Prior to my presenting my annotations, I want to remind you that this “3-Peaks Selling” methodology which we described in our book, TENSILE TRADING, is offered to investors who have no specific selling methodology. Its attraction is based on its simplicity. Most investors can visually grasp the pattern of a price peak followed by two lower price peaks.
In my commentary to the 1,400 investors participating in ChartCon 2016, I reinforced an essential investing insight that I had many years ago which has served me well for over two decades.
If I focused on the execution of my methodology instead of meditating on profits, the bottom line just materialized. It’s a mystery, but after 25 years of trading the markets, I can assure you that this is indeed the case. It may be counterintuitive to most investors, but a market-centric focus will beat a profit-centric approach day in and day out. Nowhere is this more apropos that in the crucial four stages of stalking, buying, monitoring and selling, as we detailed in our book, Tensile Trading (Wiley & Sons, 2016).
Please refer to the charts of Charles Schwab (SCHW), PayPal (PYPL) and Morgan Stanley (MS/RA) that I presented to you in the Action Practice #2 blog I wrote on September 16, 2016.
Just for fun , you might revisit Intersil Corp. (ISIL) which I presented to you in Action Practice #1. It’s up ten percent since the blog of September 2, 2016.
Jonathan Wendel earned $454,544. He is very similar to us investors / traders in many ways despite being a professional video gamer. Academics have in fact identified the roles that gamers adopt — such as Explorers, Sentinels, Analysts and Campaigners. Not that dissimilar to the tribes academics assigned us investors. The point is, we are more alike than we are unalike, and both groups could learn valuable lessons from one another.
I’d like to focus on one important similarity. Video gamers competed for more than $65 million in prize money last year. It’s serious money that demands a serious mindset. Therefore, the top gamers treat it like a business, just the way that we investors need to treat our portfolio management efforts as a business.