10 Market Lessons I Learned in 2015

Here are 10 lessons I learned in 2015. Some are new, some I had to relearn:

1. I am most creative and work better after a workout – after a run or some other aerobic exercise.

2. My best swing trade ideas are usually profitable almost immediately after I enter them. Those stocks that don’t follow through and go sideways, end up costing me money on average. Such realization helps me to cut my losers quickly and to add to my winners.

3. No market approach works all the time. I knew that before, but 2015 cemented it in my mind. I even wrote a whole chapter on it in my book “The 5 Secrets to Highly Profitable swing trading.

4. Drawdowns are inevitable, but their size could be managed.

5. Market timing is even more important than equity selection in a range-bound choppy market like 2015. There are times to be extremely aggressive and leveraged in the market. There are times to play defense and stay mostly on the sidelines.

6. Money is always going somewhere.There are always trends, but not all of them are easy to ride.

7. Revenge trading usually does not work. It is better to take some break from the market.

8. Never say never. Never turn a trade into an investment.

9. One good trade a day could allow you a comfortable life, but you might need to have 2-3 small losses before you get to that trade. Be prepared. Have a list of stocks in play.

10. Being aware of where the general market is in its price cycle is extremely important.

What are your market lessons for 2015?

8 Misconceptions about Financial Markets

  1. “You are not as bright as you think you are. The human brain is not built to trade stocks.” – Never mind that the human brain is also not built to drive a car, play tennis or ride a bicycle. Those are all skills that could be learned.

  2. “This stock is already down 50% and it is a solid business. There is no way it can go below this level. If it does, the market is broken.” – just before the same stock drops another 30% and you panic and sell. If you don’t know why you are in stock, you won’t know when to exit, which means you will only sell when the price action scares you. Never say never and always have an exit plan.

  3. “There is no way this piece of crap stock could go any higher. It has already tripled in the past year” – just before it doubles again and squeeze all short-sellers.

  4. “This highly successful hedge fund billionaire is super-bearish. It is time to go 200% long and show him who’s smarter. “ – pick carefully your contrarian indicators. Some popular hedge fund managers are rich for a reason. They will not be right every time, no one is, but odds are that they know what they are doing.

  5. “Despite recent evidence of the opposite, Oprah’s, Hillary’s and Icahn’s tweets don’t move markets. They are an utter waste of time, garbage signals that mean nothing, but hey look at Fibonacci extensions of the moon cycle. I can’t believe more people are not paying attention to them.” – Technical  and sentiment indicators work when enough people believe and act on them. None of them have 100% success rate. The success rate of all varies substantially depending on the market cycle.

  6. “Look, stock picking is too hard. Read my 1000 posts on why you are a terrible stock picker and why you should let me invest your money in a well-diversified equity index for 1% annual fee.”

  7. “This company missed estimates”. – Really!? Imagine if I try to guess the exact score of Superbowl and if I don’t end up being right to blame the teams that they missed my guess.

  8. “All VCs are greedy pigs because they keep great companies private for too long and don’t leave any profits for public investors.” – Never mind that many of those VCs took huge risks and have dedicated staff that actually helped those companies to become great. Never mind that probably 6 out of 10 of their investments will end up being zeros or that it it’ll take 7 to 10 years of waiting to see a payback.