Are you a politician when in comes to stock trading? If you are not, you better start kissing babies and become one as this is a key component to becoming a successful stock trader.
At some point in our lives, we develop the psychological mindset of needing to…
- Be firm in your beliefs.
- Stand up for what you believe in.
- Don’t be persuaded by the majority.
This list goes on and on. As human beings, we naturally have the mental attitude of wanting/needing to hold firm to our opinions and beliefs. While this is very commendable in many areas of life, for a politician, this is going to lead to a very short career. The same goes for anyone looking to be a successful stock trader.
Successful Stock Traders and the Political Inspiration
Why do politicians get accused of changing their minds all the time regarding their beliefs? Democrat, Republican, Independent, the party affiliation does not matter. The answer to this question may be shocking… they get accused of it because that’s what they do!
If a politician is going to be successful (get elected), they need to do their best to be in touch with what the majority of people are thinking and wanting. Of course they hire clever speech writers to twist and turn their arguments into “I have always believed in this”, but for anyone that pays attention, its obvious to see they are constantly changing their mind…
As a stock trader, you need to follow this business model. Your opinions and beliefs need to be able to change in the blink of an eye if need be.
The only difference between successful stock traders and successful politicians is “who” they listen to. Politicians listen to the people. Stock traders listen to the market.
Successful Stock Trader Case Study
For my premium members who are apart of my private trading group, The Inner Circle, I alerted the technical stock chart set-up for FreeSeas Inc. (FREE). Below you can see the chart I sent to the private trading group with my original annotations.
On the chart I specifically mapped out some “bounce points” where I thought the price could regain some life. One of these areas being at $2.20. However, in the same newsletter though, I also alerted this same exact chart as an attractive shorting opportunity.
Yes, you read that right. I was bearish and bullish on the chart at the same time. Hmmmm… sounds sorta like a politician huh?
By listening to the markets, and in this particular example, listening to the chart via technical analysis, I saw both bearish and bullish attributes that my members could exploit for profit.
So how did things play out in this case? Take a look below at how a stock trader acting as a politician could have exploited this chart set-up for multiple profits.
The first thing I want to quick note is that the chart above you are looking at is called a “1 minute interval chart”. Meaning, each one of those bars (candlesticks) represent a total of one minute worth of market trading activity.
The next day after the alert, the successful stock traders were in politician mode and were bearish on the chart. For the students who have taken my course, Shorting for Profit, they would have seen a very evident “short signal” given here at $2.40. By going short at $2.40 the trader would be bearish until the $2.20 area that I mapped out in my newsletter alert as a “bounce point”.
As you can see, the price went down as low as $2.17, and in this area, the successful stock trader knows it is time to play the role of politician and change their bearish mindset to a bullish mindset. This presented traders with a quick 8.3% ‘profit window’ to work within.
(I was not exaggerating earlier in the article when I said a stock trader sometimes needs to change their beliefs in a “blink of an eye”. In this situation, the change of belief came after only five minutes!)
I liked the odds of $2.20 being a “bounce point”, and although I was off by three cents (still well within reason), you can see the chart quickly bounced from this area all the way up to $2.49 giving traders a solid 13.2% ‘profit window’ to work within.
While I understand this is just one situation, this sort of action happens all the time in the financial markets. The traders who are the most successful are the ones who have the ability to hold onto one belief until it no longer benefits them, and then they change their belief to one that does benefit from. A politician at its best!
Politicians Use Polls – Successful Stock Traders Use…
In order for a politician to form beneficial beliefs, they need to listen to whatever the majority of people think/want. They do this through polls and surveys. I’m sure we’ve all been there before where during election years our phone rings and it is someone asking if they can do a quick survey.
A successful stock trader uses polls and surveys too, but they just take a different shape: technical charts.
The reason technical charts are so powerful and worth learning is because they are the best tool to tell you “what” the majority of the market believes about the price action of a stock. While you may believe a stock should be rising, the majority of the market may not believe that… and it will show up on the chart. So, you can either listen to the chart and change your belief, or you can stand firm in your belief and go against the majority and continue to lose money.
The point being, a technical chart WILL tell you whether or not your belief is right or wrong… or, in the cast study above, technical charts are also powerful enough to tell you WHEN you will need to change your belief system.
Bottom line, turn on any movie/TV Show/documentary about wall street or traders. When they show their computer screens, I’d be willing to bet the majority of the time you will see some sort of technical chart. There is a reason for that.
Your Journey to Success as a Stock Trader Starts Now!
Whether you are totally new to technical analysis and charts, or someone who has some experience with them but is looking to add some advanced strategies, I would encourage you to check out my selection of instant download educational courses HERE.
If you already understand and use charts, but would like some additional weekly trade ideas, I would highly recommend you check out my private trading group, The Inner Circle by clicking HERE.
I’ll be upfront and admit that I am biased in recommending my own personal stuff. With that being said, all I ask is that you at least read some of the testimonials (there are many) found HERE and see what other traders are saying about my courses and private trading group.
Don’t delay. Get the politician’s mindset and start learning how to listen to the market!