What Market Declines Will Teach Us!

“What hurts can instruct us!”  – Benjamin Franklin

The most powerful question in trading is, “what did you learn from that experience?”  If you apply this question consistently to your efforts you will quickly come to appreciate its wisdom.  This is a question that traders should be asking themselves now based upon the recent market implosions.

Let me share with you a few ideas that will help your trading.

If you go check the headlines in the newspapers every time we have had a major pullback in stocks it is almost to impossible to differentiate today’s media articles content from those of years gone by.  Fear becomes the mood of the day and more importantly, traders are left wondering, how did that happen?  If you really dig into the story, you will come to appreciate that many years later the historians and professional economists will not agree on the cause of the implosion.  Think about that for a second.

Here are the headlines of the October 19, 1987 market crash.

 

 

 

In all of these publications, there is very little predictive value in any of the stories.

The Dow Jones was at 1,790 on the day after these newspaper headlines.  In the last 33 years, it rallied over 1500%!

More importantly, you will find the stories to be eerily similar to what is in the newspapers today.   Fear magnified!

If you turn on your television and watch your favorite financial news show you will quickly see the talking heads debating what the news means in light of all the economic indicators.  In the process they create enough content to fill up the 24-hour news cycle.

It’s horribly complicated.

Interest rates, Unemployment, Trade Balances, Budget Deficits, Political Tensions, Retail Sales, Crude Oil Prices, Technological Innovations.  It’s very easy to get lost and confused trying to connect all the dots and feel good about trade selection.

I share this dilemma with you because one of the key things that great traders understand is that the only fact that matters in the markets is PRICE. 

More importantly, for traders price action is the only NEWS there is.  Price action may not be understood, but it is what prints on every account statement, in every brokers office in the country.

We would all like to believe that an editorial in the newspaper will provide valuable information for our portfolios, but in reality it might have some correct opinions, it might not.  And if you read any newspaper story closely you will discover it is filled with opinions about why something occurred.  As a trader you need to understand that PRICE is the only thing that will make you poor or rich.  Everything else is just noise!

I share the following with all of the Power Traders in the Vantagepoint family.  I repeat it regularly because it is critically important.

Everybody has had horrible trades.  The difference between the winners and losers in life is that the winners learned very powerful lessons from their losses.

Artificial intelligence is so powerful because it learns what doesn’t workremembers it and then focuses on other paths to find a solution.  This is the Feedback Loop that is responsible for building the fortunes of every successful trader I know.

If you think about this question,  you will begin to appreciate that ai applies mistake prevention to discover what is true and workable.    Artificial Intelligence applies the mistake prevention as a continual process 24 hours a day, 365 days a year towards whatever problem it is looking to solve.

That should get you pretty excited because it is a game-changer.

It sounds very elementary and obvious.  But overlooking the obvious things often hurt a traders’ portfolio.

The basics are regularly overlooked by inexperienced traders.

It is very sad, and unnecessary in today’s day and age of machine learning and artificial intelligence.

A stock may have a very alluring story.

A stock may have a very effective management team.

A stock may have incredible earnings.

A stock may have infrastructure, partnerships, uniqueness, etc.,

But, if these elements are not reflected in the price, you are focused on what “SHOULD” occur in the market.

And the word should is responsible for more losses in trading than any other.

Bad Traders Obsess on the SHOULD.  Every other word out of their mouths’ is SHOULD.

I can’t recall how many times a trader has told me all of the reasons why his portfolio is heavily invested in a stock because of a great story, in spite of the stock being in a firm downtrend.  It is horribly painful to listen to.

The beauty of neural networks, artificial intelligence and machine learning is that it is fundamentally focused on pattern recognition to determine the best move forward.  When these technologies flash a change in forecast it is newsworthy.  We often do not understand why something is occurring but that does not mean that we cannot take advantage of it.

The following charts illustrate how Vantagepoint power traders READ the price action to anticipate tomorrows headline NEWS.

As I stated earlier, PRICE is the only thing that will make you RICH or POOR.  And it is these price changes correlated to the asset classes which are most statistically relevant which are responsible for creating these trend forecasts which have proven to be 87.4% accurate.

More importantly, look at how the artificial intelligence kept traders on the right side of the downtrend every step of the way.

 

 

 

 

 

 

 

This is the power of artificial intelligence in action.

As you know, the real education in trading always lies in learning from the losers.  Most humans have a really hard time learning from bad experiences.

The ego gets in the way, each and every time.

This is what makes Artificial Intelligence so powerful and unique.

Machine Learning is designed to learn from experience and make the best statistically relevant decision moving forward.  AI outperforms humanoid analysis hands down every time.

We live in very exciting times.

What hurts can instruct us.

Consider that the recent stock market implosion has erased trillions of dollars from cumulatively from people trading accounts.  However, it has made a handful of traders fabulously wealthy.

Debates will continue for hundreds of years as to why the recent implosions occurred.  However, the only thing a great trader is concerned with is PRICE.  Stories are designed to capture the imagination.  Traders need to focus on the probabilities of making the right move at the right time

Remember, artificial intelligence has decimated humans at Poker, Jeopardy, Go! and Chess.  Why should trading be any different?

Make it count!