The Money Train

Do you remember, “All who are not present, raise your hand”?  Whether you do or you do not, it makes little difference because that is where we are now.  You are part of a selected group and others (those who are not here) can only be here through their own efforts.  You have been selected because of your interest in wanting more out of your trading.  One would think everyone would want that, correct?  Well, based on what happens after they register, apparently not . Some are willing to work for what they want and others are looking for it to be handed to them on a platter.  The hard cold facts are there is no such thing.

Wisdom Is The key To Success

Your WISDOM will come as a result of your efforts.   Some of you will find it more difficult than others.  Some will be certain of it from the beginning and others will have doubts until finally they do not.  Some will find clarity from the start others will develop it with effort.  It is a process that will stay will you all your life.  And like life, you will occasionally doubt the destination of your journey but if you persist you will arrive.

My Failure Led To My Success

I have heard that all of my life.  It is a simply way of saying I “screwed up” and finally I got on track.  But you do not need to fail before you succeed.  Failure means losing all hopes of success and that need not happen to you.  With a proven system, and I offer you one; you will find success and profitable success at that.  Last week the market was mixed with good days and bad days and yet I still made $6,437.23.  I could have done better, but then, you can always do better and that is a good thing.

I Will Reveal The Secret of Trading Success

Have you heard that one before?  Well, I am not going to as, I already have and if you do not know that I have you have not been paying attention.  Every time I post one these bits of insight or methodology I am showing you the way.   There is no secret, I willing to show it to anyone.  I have even gone to the trouble of bundling it up in nice little downloadable packets.

If There Was A Secret This Would Be It

Sometimes you lose money, but you will make more than you lose.  The sooner you get that in your head the sooner you will stop worrying about your success.  Now let us get on with working our system.  It will all come to you in time, but you first you must begin your journey. If you want to ride the rails you have to catch the train, the “STRESS FREE” money train.

Is It What It Is?

Today is a perfect example.  The market started out on a down note.  What it finishes at close has nothing to do with this article, for we all know the market can do anything that anytime.  What this article is about is seeing what is happening or is it?

Is it what it is or not?  Confused? 

Good, read on. When the market opened on a down note the prognosticators deemed it as result of the threat of war.  Really?  Does anyone really think we are on the cusp of a war with Iran?  You know as well as I do that things just do not happen that quickly.  This is not like a bar room fight that breaks out over a spilled drink.  No one is under the influence here and everyone realizes the severity of entering a war.  So why is the market starting lower.  Simply, it is about money and will always be about money.  So maybe it is the prognosticators that are confused and not you.

If it costs a company more to make their products, then it will result in lower profit.  Any investor knows that a company needs to make profit before it is truly a good long term investment.  International tensions of any kind generally result in an increase in oil prices. This world is geared to oil, it is what fuels everything from locomotives to plastic bags.  When oil prices go up, that effects profits and also the desirability for owning stocks.  People tend to react too quickly.  Fear is a really strong motivator and fear causes selling and selling causes the market to drop. So what to do?

Back to the question,

“Is it what it is or not?”, that is the question you should be asking yourself.  Determine in your own mind what the driving force behind market change is.   If you feel like it is temporary, then consider the market a good place to seek entries for the longer term trade.  Else, if you conclude it is here to stay then consider taking short positions to profit from the fall.  These things are obvious, but do you stop and think about what is really happening or do you react to the emotion of the moment?

Take note the giants in the investment world, they are not trading blips on the charts.  They are investing in the reality of where the market might be really be going.  You trade futures you say and it does not apply to you.  Sure it does, just on a shorter time frame.  Always think sustainability.  No matter if it is for year, month, week, day, hour or minute we need to think about the sustainability of the momentum.  

We use a lot of technicals on our website and in our trading, but when you stop thinking about long term effects, you are only getting a part of the picture.  Finance majors are well trained at looking at the historical and future long term effects and I often site their lack of trading knowledge.  Well, the inverse is just as true, a trader also needs to have some knowledge of fundamentals.  He does need that of those finance majors, but he does need a grasp of what fundamentals are and how the events in the world affect those fundamentals and how fundamentals affect sotkck price and desirability.

Final comment

  Think, reason, does it make sense?  You might be wrong, but you wont be caught lacking because you did not consider “what it is or is it”?

See you on the other side,

Gary Odom

Trading With Albert Einstein

In the past, some 2 years or so ago, I spoke about a young man at a Christmas party.  I had the pleasure to meet him again this past Christmas Eve. Our conversation was interesting for he brought to my attention something I had not thought much about.  Since I have a lot of confidence in my algorithms and how well they work, I gave little thought of explaining to others what they were based upon.   

I truly do not believe that understanding the construction of the algorithms would be of any merit to anyone, but I do understand the curiosity of wanting to know.   Well, he wanted to know and though there was not a lot of talk about it, it brought to mind something else.  Something far more important and I thought I should share it with you.  So, at the end of the day for better or for worse you can thank him for jogging my brain.

Theory Of Relativity

Albert Einstein and his Theory of Relativity; that is what was brought to my mind.  Yes, I know my mind sometimes works in weird ways.  In any case, you may know, Einstein’s theory is broken into 2 general categories, that of general relativity and that of special relativity.  Now, do not freak out because I am not going to attempt to explain either of those to you.  But I am sure you much of the theory relates to time.  That was what popped into my mind, TIME and how important it is, how much of it is misunderstood, how it relates to trading and that I have not said much about it.

So, about time, is it so important in trading?  We know price is the same on every chart, no matter what the time or tick we are working with.  Though that is true, time explains why a lot of things occur on those charts.  There is a concept called “fractals”.  What are fractals?

Fractals

Wikipedia offers this definition:

“In mathematics, a fractal is a subset of a Euclidean space for which the fractal dimension strictly exceeds the topological dimension. Fractals appear the same at different levels, as illustrated in successive magnifications of the Mandelbrot set; because of this, fractals are encountered ubiquitously in nature.”

My easier definition is: Fractals are infinitely complex patterns that are self-similar across different scales. They are created by repeating a simple process over and over in an ongoing feedback loop.  You will see that, in trading, fractals are related to time.

In some ways fractals are similar to Fibonacci whereas they start small and grow, but in different relationships.  In our case of Fractals, we establish those relationships by how we set up the scales, as referred to above, or in our case, time on our charts.  Let us say we are using 3 charts with times of 5M / 15M / 45M or 20M / 1H / 6H, but since the trading day is about 6 hours you could call it 20M / 1H / Day where each succeeding chart is enveloping previous bars into the current bar at a ratio of 3 to 1.  

It might look to you that price is moving differently on each chart, but it is really moving exactly the same.  So, in reality, you could day trade off of the day chart since price is moving the same as if is on the 3 minute chart. It is sometimes difficult to imagine, but the movement we see on the 3 minute chart is the exactly the same on the 1 hour chart or the Day chart.  But we see it first on the shortest chart and there is the rub.

 Though the price is the same on the longer chart they do not play the same role in momentum or cycles. Time absorbs the retraces of the shorter chart and they become less visible on the longer chart.  That offers an opportunity for price to continue without so much notice of when it did not. 

Affects of Time

Time has the effect of smoothing out the charts and the movement of that very same price that is reflected on each chart.  That is the reason swing trading has historically produced better results than day trading.  Longer time offers more stability as it offers fewer occurrences to react to.  As traders we often over react and even over trade.  Longer charts tend to reduce that activity.  This is also why I thought of Einstein and the theory of relativity as we are now talking about the relativity of obvious observation and how it relates time.

Maybe that is why so many concentrate on the shorter charts.  Price, though the same on all charts, captures more attention on the short chart.  It holds a bigger percentage of the data in the bar than it would in a bar 3 times or even 9 times larger than itself.  Thus the movement and the computations of momentum and cycles are quicker.  Remember, though they are faster to accelerate they also are faster to stop or reverse. The longer bars absorb the volatility of the shorter bars.  Remember everything that happens in the shorter bars happens in the other bars as well, but it shows less because of the reduced significance in the larger bars.

So, what do we do with all this information?  First, determine how much risk you are willing accept regardless of the time of the chart.   Then look to the shorter charts of what might be the future movement of price.  If it is true, each succeeding bar will confirm that in time.  Keep in mind that the pattern reflected on the shorter chart may or may not be reflected in time on the longer chart, but if it does, it confirms the move with a bit more certainty. 

We could continue to look for confirmations with larger and larger time periods until we are, in fact, looking back as to what has already happened.  So, obviously, somewhere in this process we have to set a degree of risk that we are willing to accept in the trade as there is no absolute certainty.

Time and Exits

Without some reference point to determine an exit, you really cannot compute an exit even when you know your risk tolerance.   But the Stress Free modules will provide reference points to compute exits and these exits will be based on your accepted risk tolerance, a computed volatility or a measured momentum as per your choice. Your chart choice will determine the end results of your trade. 

Fortunately, the TW Trade Manager gives you the ability to see the differences time makes on the screen and how it affects exit points.  One would think that a risk based exit would be the same, but the reference point will be different on longer charts than shorter charts and will produce remarkably different exit points.  Time is what it all hinges on. 

When using the Stress Free trading system, I set entries on the 2 hour chart and exits on the day chart.  Since price is price, it works exceedingly well.  I pick up the sooner appearance of an entry on the 2 hour chart and work with previous closes on the Day chart which is consistent with short chart being filtered of exits that are too quick, and that works because price is still price regardless of time.

There is much more to discuss with time, but (forgive me for this) time being of the essence, I will call and end to this summary review of time.  We could go much further looking at the envelopment process of the bars as it relates to fratals and the overall effect on predicting possible price movements, but that is a subject for another day.

Post Script- I know some of you are Tick chart traders and the relationship of time does not work in the same way as your scale is now the number of Ticks per bar rather than time.

See you on the other side,

Gary Odom

Will the Stock Market Crash If President Trump Is Impeached?

The following is not original but rather excerpts from postings one might find with a bit of a search.  In any case, it is interesting reading and thus I have re-posted for you.

House Speaker Nancy Pelosi said Congress should pursue an impeachment inquiry of President Donald Trump regardless of its impact on financial markets’

Pelosi also said the markets will do what the markets will do, regardless of who Democrats pick as their 2020 nominee, and who wins the presidential election. She said she wouldn’t blame Elizabeth Warren if markets reacted negatively to her possible nomination.

“I said to the members, we cannot be undermining the markets here, but you can’t be the United States of the markets. It’s not that. It’s the United States of America,” Pelosi told a roundtable with Bloomberg reporters and editors on Friday.

Pelosi’s comments came the day after the House voted to formalize the impeachment inquiry of Trump. The president, who often brags about market performance during his tenure, said impeachment is “hurting our Stock Market.”

Despite Trump’s claims, impeachment proceedings haven’t shown up in stock prices. Better-than-expected gains in U.S. jobs in October and signs of progress in trade talks with China Friday sent the S&P 500 almost 1% higher to a fresh record.

https://moneymorning.com/wp-content/blogs.dir/1/files/2019/10/Trump-smirk-300x200.jpg


That said, the president’s impeachment inquiry will have an impact. And investors can take measures to prepare themselves for anything in this uncertain market. That starts with sticking to cold, unemotional facts.


Here’s what we know about the impeachment plan, including what it’ll mean for the stock market based on historical facts. Just because impeachment may not cause the next stock market crash doesn’t mean it won’t affect your portfolio…

What Impeachment Means for the Stock Market

First, if you’re reading the signs and anticipating the worst, just know that the stock market hates uncertainty.

Investors were already uncertain about trade with China, and now they’re uncertain about the possible impeachment of a president. And if you add yourself to the fold of worriers, you’ll fall too.

So it’s important to remember that we have things to be certain about. Here’s some precedent to help us figure out what to do with our money.

In 1974, when Richard Nixon was under pressure before finally resigning his office, the economy was not very good even before his scandal broke.

The 1973 Arab oil embargo was a huge shock. Unemployment was rising, “stagflation” – the combination of a stagnant economy with inflation – was the buzzword of the day, and market leadership by the “Nifty Fifty” was gone.

In 1998, when Bill Clinton was actually impeached by the House, the global economy was still reeling from the 1997 Asian Currency Crisis. Commodity prices were also down, led by oil.

Fast forward to today, and the economy is at or near full employment, we’ve got no inflation whatsoever, businesses are still confident, and wages are still rising.

Think about it for a moment. The stock market set all-time highs in June and came close again in September.

That’s quite a different backdrop. At the very least, it means that the economy is prepared for the worst-case scenario.

But based on precedent, the worst-case scenario is not very likely. We’ll tell you why, and then we’ll get into what it really means for your money.

What Exactly Is Impeachment?

The first step of impeachment is for the House of Representatives to investigate alleged “high crimes and misdemeanors” committed by the president. If it finds sufficient evidence, it votes to pass the articles of impeachment, which are formal allegations of wrongdoing.

If the vote passes by simple majority, the president is officially impeached.

Next, the Senate conducts a trial. If convicted by a vote of two-thirds majority, the president is removed from office. Neither Bill Clinton nor President Andrew Johnson in 1868 were convicted by the Senate.

If you follow politics, the odds of the Republican-controlled Senate voting to convict are small. Therefore, the removal of U.S. President Donald Trump seems unlikely.

But what if it happens?

Vice President Mike Pence will become president. And likely there will be little change in economic policy.  So nothing happens to the market.

Based on what we read in the articles, it appears it is best to study and practice good trade techniques and consider the fundamentals of the market rather than worry about rumors of gloom and doom. Who sits in White House after the presidential election will likely be of far more importance to the markets than the impeachment proceedings.

Happy Trading,

Gary Odom

A Market Snap Shot

This morning opened up with several scan results, but most were volatile issues that I chose to avoid. The only symbol with good results from the analyze tab had other issues. Here is a screen shot of that scenario. To begin, the analyze tab.


Looks good right? Yes it does but look at the sector.

That is not encouraging as it is the lowest positive result for the last 12 months with only Energy being lower which is actually in the negative.

In addition if you take a look at the charts you can see it may have difficulty making any progress in the near future.

One can clearly see that this is a zone of contention and price has failed to make any real move since 6/17/19. Also, one can see that there is about a $5.00 spread between the two SRT Zones. This does not reflect to me as a security that I could expect immediate price escalation. In my opinion, $5.00 on an $86.00 stock is just not enough return. Even at that, you would have to catch it just right to get that return as price has retraced multiple times and that would take you out unless you allowed the risk to be equal to the return and that is not a good idea.

I have mentioned before the importance of avoiding trades may be more important than knowing when to take them. This is one I would avoid for the reason given above.

Keep an eye out for the new Stress Free Video as it will be there first part of the week.

The Holy Grail of Trading- or is it all scam?

Based on my incoming emails, there are many to lay claim to the Holy Grail of Trading.  So, who has the best approach?  Is there such a thing, as a one and only or the very best of the best when it comes to trading?

Certainly! The truth lies more in your mind than it does in the mind of others.  Your Holy Grail will be what works for you.  To simply take what someone else is doing and claiming it as your own method is a fairy tale at best and a lie to yourself at worst.  But we do wish that could be true, do we not?  If that were true does that not discount the value of years of experience actually trading successfully?

Where to Go From Here

So, I suppose now is the time to throw your hands in the air and give up, right?  Hold on quick draw, there is more to consider.  What if you are able to see what others are doing and see how it feels and see how it works?  Same thing as claiming what they have as your own you say?  On the contrary,  by trying to fit it into your own personal profile of temperament, patience, knowledge level, fear level, trust in your system, chart smarts, and trading experience you, are not accepting it but rather gleaning from it what might be to your advantage and refining your approach. 

How Soon Can I Start

You do not have to wait years to begin trading, but you do have to go through the basics. You cannot wait until you know it all, else you will never begin.  Becoming a trade wizard is a growing process and we all begin at the beginning; there is no short cut.

Is It Really That Easy

Herein lies the caveat, is the source offering you information through their tools or is what they offer a 1,2,3 step by step that purports to give you guess even for the uninformed?  If it is the latter, beware.  If you are looking for ways to be more successful trading, look for those tools that will aid that person as described by your personal profile to help you develop your own methodology tailored to you. You cannot deny who you are.  It is very difficult to repackage yourself, though there are some things you can do.

How To Fix It 

With experience you will learn to trust your own workable system that will help you reduce your fear of losses.  And when you find patience, it will become your best friend.  The more you understand the more patient you will become.  Confidence builds patience and patience promotes consistency.  Consistent realistic results, as you define them, are what you seek.

What Happened To Me

When I go back over my swing trading history, it shows scores of losses that far outnumber the number of gains.  But the value of the gains are much greater than the losses.  My personal profile is comfortable with accepting many minimal losses against fewer greater gains.  As long as the ratio holds true, I will always be profitable.  I use my system to insure that always happens.

Life Is Easier Now

My system tells me, not only when to get in, but when to get out.  All of that information is computed before I actually enter the trade.  At this point trading is simple, uncomplicated and stress free.  When I traded futures it was not so.  I still made money, but it was a stressful experience.  My personal profile was uncomfortable with that scenario and much like leaving a job you do not like, I left a trading environment that did not feel comfortable.  It was sometime later that I discovered that most day traders are not successful; it was the old 80/20 rule where 80% of the money was made by 20% of the traders. I was one of the 20% and yet I had to move on.

Learning Comes In Stages

In the beginning, I thought day trading was the way to go.  That was before I worked out my personal profile.  Anyone who offers you tools to support you and your personal profile might be offering you a chance to improve your trading results.  That is the reason I started Tested Wisdom.Com.  It was to provide resources to traders that want to develop their own proven methodology, in other words their experience and our tools would provide them with their own Tested Wisdom that evolves into their own system.

The Next Step

So my first suggestion to you is as follow:  Work on your personal profile and define who you really are.  Be honest with yourself. I know that can be hard, but since no one else will see it let it happen.  After accepting that profile you can find tools to help you work around some of those sticky traits and some tools that might actually help you overcome those negative traits.  Remember this:  Short of being a sociopath all new traders shared some of the same traits.

Let Us Know

If you care to, investigate what we have to offer.  If you have questions, do not hesitate to ask.  We are just traders and we are not so important that will not take time and try to help you.  People still matter and believe or not so do traders.

How to Play the $12 Trillion 5G Revolution

I can no take credit for this article, though I see where it might have value. So, I have posted this for your review in hopes it might offer you additional insight to use as you choose.

Few tech trends have fueled as much excitement as 5G, the global push to bring us faster and more efficient Internet. Representing the next generation of mobile Internet, 5G is expected to create $12 trillion in new economic activity. The cloud-based mobile technology will disrupt existing markets and create new investment opportunities. 5G is still in its infancy – the first networks went online less than two months ago – but investment plays are already popping up.

This article is a primer on this emerging technology and how to integrate 5G into your investment strategy – capturing your slice of a multi-trillion revolution. What does 5G mean for economic growth? 5G technology (short for “fifth generation cellular network technology”) was first developed in late 2017, with the first networks coming online earlier this year. South Korea became the first country to launch 5G – according to a report from the BBC, more than one million South Koreans have already signed up for the service, outpacing the uptake of 4G back in 2011. Since then, the US, Bahrain, Switzerland, and the United Kingdom have all launched their own networks.

In a few years, it will be the global standard. 5G is going to generate massive economic growth. According to The 5G Economy, a widely-cited study by IHS Markit, Penn Schoen Berland, and Berkley Research Group, the new technology could enable $12.3 trillion in new goods and services by 2035. That’s roughly equal to US consumer spending in 2016. About $3.5 trillion will be generated by the 5G mobile value chain alone. For that to happen, a lot of new infrastructure needs to be built. Annual investment of about $200 billion is needed to reach the $12.3 trillion mark. The infrastructure push is already creating lots of opportunities for stock market investors.

What makes it different from 4G? The main difference is capacity. 5G is almost entirely cloud based. That makes it more efficient, with the extra capacity translating directly into faster speeds. 4G connections usually offer download speeds of about 20Mbps, allowing the user to download a two-hour movie in about 30 minutes. 5G will deliver speeds of 500 to 1500Mbps, enough to download that same movie in about 25 seconds. But 5G promises benefits beyond faster downloads.

Better coverage is another factor. A single 5G cellular tower can cover roughly 100 times more devices than can a 4G tower. Coverage areas will expand significantly. Latency will also decrease. Industry jargon for the time between a user issuing a command and the device giving a response, latency promises to be 1 millisecond or less in 5G-connected devices.

This real-time interactivity will enable innovations like the Internet of Things (IoT) and self-driving cars, driving much of the economic growth associated with 5G. Then, there’s the estimated 90% reduction in energy usage from 4G to 5G. According to the report from IHS Markit, the battery life for some low-power devices could be up to 10 years. This will allow IOT-connected devices to operate for longer without human assistance. And don’t sleep on IoT, which could now kick into high gear. 5G, with its increased capacity and faster response times, is well-suited to enable Internet connections between devices. GSMA estimates there will be 25.2 billion IoT-connected devices by 2015 (up from 9.1 billion in 2018), growth largely driven by 5G connectivity. ETF trades to watch 5G isn’t yet available to most consumers, but it already presents opportunities for ETF traders.

The following ETFs show the most promise as 5G networks roll out over the next few years. First, start watching the Defiance 5G Next Hen Connectivity ETF (FIVG). This ETF launched in March and directly tracks the Bluestar 5G Communications Index. The Bluestar covers companies that directly contribute to 5G network development. Leading assets include XLNX (5.93% of total assets), Ericsson (5.75%), and Skyworks (4.99%). The ETF is currently trading at $23.96, down slightly from its opening on March 5.

Next, look to the ALPS Disruptive Technologies ETF (DTEC). The DTEC has outpaced the S&P 500, gaining 22% since the start of the year. It is roughly indexed to the Indxx Disruptive Technologies Index, which covers companies using disruptive technologies in several areas. Each of these areas – IoT, healthcare, Smart Grid, Cloud Computing, AI, and more – are poised to benefit from 5G. Major holdings include Okta (1.42% of total assets), LendingTree (1.25%), and Silicon Laboratories (1.22%).

Another fund to watch is the Pacer Benchmark Data & Infrastructure Real Estate ETF (SRVR). Now trading at $30.34, the SRVR is up 32% since the year began. The fund includes data center operators (ex: Equinix) and wireless communications real estate (ex: American Tower). These subsectors will get a turbocharge from 5G, which is why the SRVR is outpacing the S&P 500 nearly threefold.

The ARK Fintech Innovation ETF (ARKF) could also get a boost from 5G. The ARKF covers Fintech service providers (mobile banking, lending, money transfers, etc.). These companies, including TenCent Holdings (6.44% of assets), Apple (5.56%), and PayPal (4.12%), stand to benefit from 5G. With faster Internet, lower latency, and better coverage, 5G will allow Fintech providers to deliver better services to more clients. As of June 19, the ARKF was trading at $22.51, up 10.3% from its launch on February 4.

How to trade the Huawei controversy While the future is 5G, uptake is being slowed by the ongoing US-China trade dispute. This has serious implications for investors, especially in the short term. On May 15, the White House announced a ban on US companies doing business with Huawei, a Chinese mobile tech manufacturer. Huawei is the world’s largest provider of communications equipment and, prior to the ban, Huawei was building 5G networks in countries around the world. The ban is politically motivated. The White House placed Huawei on the “Entity List,” a group of 190 companies and individuals considered to be security threats. Huawei is a private company that nonetheless has close ties to the Chinese government.

By preventing it from building 5G networks, the White House hopes to deny Beijing the ability to control the international communications space. The ban has been mirrored by countries including Australia, New Zealand, and Japan, with others (UK, Canada, France, Germany) considering similar bans. Whatever one thinks about the politics, the dispute has been a drag on stock markets. It has slowed buying of US semiconductor stocks, including for the chipmakers mentioned in this article.

While one can’t quantify exactly how much the ban has affected semiconductor stocks, it’s no coincidence that Qualcomm, Xilinx, and Skyworks each tumbled after the White House announced the ban. The book is yet to close. Some analysts speculate that a US-China trade deal (if it happens), will involve lifting the ban. Earlier this month, Russell T. Vought, the acting director of the White House’s Office of Management and Budget, asked for a two-year delay, arguing that the ban puts too great a burden on US telecom manufacturers. However, even if the ban continues, the 5G revolution is already underway.

While you are here, since you are already on the website you might want to register to be included on our email list if you have not already done so. I won’t pester you with daily emails, only when I think I have something of value that might be of interest to you. This articles is an example of that. Just go to the home page and subscribe.