Reasons for Market Success vs. Failure

90% That Try Trading Lose Money!

  

Many often wonder why 90% of people that invest in the stock, bond, commodity and currency markets end up losing money – both in the short run and in the long run.  


It’s not by chance – there is a very specific reason.


First off, most people spend more time thinking about what automobile or TV to buy than they do thinking about how to invest their hard earned life savings. 


 

Unless you win the lottery, there’s no such thing as easy money – no matter how much you want to believe it!  Those who believe in easy money in the markets are in the majority that get creamed!  


Since the dawn of trading, the markets have not been neutral or indifferent, but instead quite unforgiving to the unaware and inexperienced participants.


If you watch the financial shows on TV – best of luck to you – just about everyone else that wants to make those “easy killings” watches these shows as well.  They are in that aforementioned 90% of “investors” that end up losing money to the markets.


If you do what 90% of the people do, you will get the same results of 90% of the people – in the markets – that translates into losing money!


Never forget, the primary job of the markets is to make the most number of people {financially} uncomfortable for as long as possible – and the market does it’s primary job quite well.


You could get the best investment advice possible from the best investors in the world, and you probably couldn’t act on that advice. Why? Because you lack the experience. 


Serious investing is a full time job, just like being an attorney, a physician, an accountant or a small business owner.  It’s not intended for people who just casually watch the stock market / their investments for half an hour a day, although most people treat it that way.


The greatest investor / trader on the globe can relate his or her exact strategy for making money in the markets, and, chances are, you still won’t be able to act on it. 


This is because a big part of investing is due to the “gut feeling.’ Only after many years of investment experience do you begin to have a “sixth sense” of what’s going on in the markets. Without that experience, you’re missing something very critical.   


Some say that to become an expert on anything in life, one needs to have at least 10,000 – 15,000 hours of study, experience and repetition “under your belt”.   When it comes to acquiring consistent success in trading / investing in the markets, that sounds about right.


How many people are willing to put in that kind of time and effort?

Not Many!

 

They will spend considerably more than that in their chosen profession in order to make anywhere between $50,000 to $250,000 per year, but when it comes to investing their hard earned dollars, most take a casual, laid back approach.


Taken seriously, a business person (i.e. doctor, lawyer, small business owner, etc.) can earn millions of dollars if they put the time into learning how the markets work.  The problem is – most business people just don’t have that kind of spare time.


Do you ever wonder why that 10% of consistent market winners continue 

to be in the minority?

  

And how you can join the ranks of these elite?


I’m sure you have – and, believe it or not – it is attainable – if you apply yourself or 

use an Advisory Service that has already put in the time and effort to be in that 10% 

of consistent market winners.

Here's The Reason(s):

:  

Most of the time, the 90% are buying stocks, commodities, etc. when the market is topping out. 


For example, look back to early to mid-2000 when the S&P 500 reached almost 1,600 and, more recently, in late 2007 when the S&P 500 almost reached 1,600 again!


All of the financial talking heads are touting the stock market – in other words – things are looking spectacular for owners of stocks / the sky’s the limit!


It’s at that time that the professionals (the 10%) were quietly selling / distributing their previously purchased shares (with huge profits) to the smaller investors, who are buying the “hype” (at almost exactly the wrong time) and always ultimately left “holding-the-bag” (for big losses).


On the other side of the coin:

Most of the time, the 90% are selling their stocks, commodities, etc. out of frustration (while taking large losses) when the market is bottoming out.  


For a past example, look back to early 2003 when the S&P 500 fell to 800 and, more recently, look to March, 2009 when the S&P 500 dropped to 700 – the financial world appeared to be ending.


In March of 2009, disaster appeared imminent.  Stocks were falling, unemployment was soaring, and it seemed like the end was near – market panic was rampant.


All of the financial talking heads are saying the end is near – in other words – things are looking extremely  gloomy for holders of stocks, commodities, etc.


It’s at that time that the professionals (the 10%) were calmly and quietly buying / accumulating their shares from the smaller investors (the 90%), who have sold out their stock holdings (at almost exactly the wrong time) with large losses.


The general public (the 90%) is not aware, but this cycle repeats itself time and time again – and if you learn what to look for (or use an Advisory Service that knows what to look for) – you too can be in that exclusive and elusive 10% of consistent market winners.


All markets, whether it be stocks, bonds, commodities or currencies have one thing in common:

They all experience four very distinct “phases / stages” of price movement.


It’s so simple that most overlook it – all of the markets – time and time again – form a basic bell curve!


For More Details, See:

"The Four Market Stages" Page

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A Bell Curve

The Bell Curve shows the 4 Market Stages (Detailed on the left & on "The Four Market Stages" Page).

 

A bell curve is a plot of normal distribution of a given data set – in this case – market prices.


If you look at any longer term stock, bond, commodity or currency chart, you’ll notice the cycle begins at the far bottom left of the chart, you’ll observe a flat bottom (prices are essentially moving sideways in a channel).


This is known as the Accumulation Phase (Stage 1), where the “smart money” (the 10% of professional traders) are quietly accumulating (purchasing) their stocks (inventory).  This accumulation stage can last anywhere from several weeks to many months.


The public sentiment is that the stock (or stock indices) is boring and no one in the public (90%) is paying any attention.


Then, prices break out (to the upside) of this sideways channel (on high trading volume), which indicates that the buyers are now outnumbering the sellers – that is, the buyers are now taking control / winning the proverbial tug-of-war.


Since this is usually quite subtle, the public (90%) is still not paying any attention.

Now, we’ve entered the “glorious” Mark Up Phase (Stage 2), which is also known as a Bull Market.  Now more and more people are buying and trading volume is increasing as prices are increasing.

  

As prices continue to climb, the TV talking heads are starting to perk up and the public is starting to cautiously pay more attention – and some are even beginning to buy into this developing Bull Market.


Eventually things get frenzied – everyone is buying and everyone is talking about a market that’s headed for the moon! 

 

As the late legendary trader, Jesse Livermore, said back in the early 1900’s: “When the shoe shine boy is telling me to buy stocks, that’s when I sell everything I own immediately!”


Now, the 10% (seasoned / consistent winning traders & investors) are quietly beginning to sell (distribute) the shares they had purchased back at the beginning of this Stage 2 Bull Market and reaping huge profits.


Who, you might ask, is buying from them?  


You guessed it – the 90% of the (uninformed) frenzied buying public.  That’s right, now everyone in the public is buying as many shares as possible (usually exactly at the wrong time)!


As this happens we begin the top of the bell curve, known as the Distribution Phase (Stage 3), where, as mentioned above, the professional 10% are quietly selling / distributing (unloading) their previously purchased shares to the unsuspecting public (90%).  


Not only are they unloading previously purchased shares, but they are selling short new shares in order to profit from future falling prices.  Prices once again are choppy / volatile and moving sideways in a channel.


This distribution stage can last anywhere from several weeks to many months and is well known (by the professionals) to witness VERY volatile price action as shares trade hands from the strong handed sellers (10%) to the weak handed buyers (90% unsuspecting public).


The public sentiment is still very bullish and more and more of the 90% (public) are buying like crazy!


Eventually, prices begin to break down from the sideways channel and we enter the Mark Down Phase (Stage 4), which is also known as a Bear Market.  


Now more and more people are beginning to sell their previously bought stocks, bonds, commodities, currencies, etc., however the majority will hold on and hope and pray for prices to reverse upward once again.  


All of the financial talking heads are saying “grab these great bargains” as the prices continue to fall.  Those who listen to them, intensify their losses!


A favorite quote from Al Rizzo:

"When a falling stock becomes a screaming buy because it cannot conceivably drop further, try to buy it thirty percent lower." 


As mentioned above, the “smart money” has been selling short to the unsuspecting public, who is still caught up in the buying frenzy.  


The “smart money” / 10% (professional traders) are now making huge profits as prices begin (and continue) to fall, while the public is continuing to hope and pray that prices stop falling and start to go up once again.


Eventually later (many times months and sometimes years later), market prices begin to stabilize (form a base) and we begin the Accumulation Phase (Stage 1) all over again, where the “smart money” (10% professional traders) are quietly accumulating (purchasing) their stocks (inventory).  


And so the cycle starts all over again!


Two rules for investing/trading:


Rule number one : most things will prove to be cyclical


Rule number two : some of the greatest opportunities for
gain and loss come when other people forget rule number one 

-Howard Marks


For More Details, See

"The Four Market Stages" Page


Once you learn (through experience) to look for this ever-recurring cycle (or use an Advisory Service that’s aware of this recurring cycle), you too will be in that 10% 

of consistent market winners! 


Retire early with a HIGHER STANDARD OF LIVING!


A Large part of Trading Success depends on Risk Management!


For Details on Risk Management, you can order:

Trader Screen Stock & Commodity Overview Report


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