I get to eat some humble pie.
As many of you know our "Trade Triangle" technology issued a signal to go short crude oil on 6/4. The question was whether this was a good signal or a bad signal. The truth is it was a good signal, why do I say that? The bottom line is when you're trading with discipline you must take the signal and try not to over think it. If crude oil had moved down to $120 and then down to the $115-110 level we would have looked like heroes. Instead crude oil had its largest percentage move in seven years.
The last two days in crude oil have been extraordinary by anyone's imagination and you have to respect the market.
One of my heroes in the market was a gentleman named Bernard Baruch. You basically don't hear about him anymore, but his teachings about the market are extraordinarily useful. You may want to read his book, "Baruch: My Own Story," which I highly recommend.
One of my favorite sayings that Baruch gets credited for goes like this: "The main purpose of the stock market is to make fools of as many men as possible." Well that certainly happened to me this week on the blog when I issued that signal on crude oil. Would I do it again? You bet, because I know the odds are in my favor in the long run.
If you've been reading this blog for any length of time you know that we stress diversification and discipline in trading. When you do that, you really do win out in the long run. We have had hundreds of profitable signals trading crude oil and our gains in crude oil in Q3, Q4 and Q1 have been outstanding. Now, I agree with you with this last trade in crude oil was a doozy. But only seeing this occur every 7 years is not such a hardship.
Many traders would be afraid to take the next signal right after a big loss, but sometimes that's the best time to do so. Many of you may remember the gold signal and how that worked out.
The key to the market, is to be consistent in your approach. Many traders will trade a market and then suddenly say it's not working, and go onto something else. Then the very market they were following has an enormous move that they were waiting for.
Getting back to our sell signal in crude; would we take the same signal again? Absolutely! Not to take the signal would be a mistake because that could have been a signal that could be very profitable for us. No one knows the future, the only way to successfully achieve profits in the marketplace is to approach it with a game plan and a roadmap that has been successful over the years. Traders come and go, but human emotion is the one constant in the marketplace.
As we have stressed in our Traders Whiteboards Series, diversification, discipline and the use of stops are some of the most powerful tools you can employ in your quest to make money in the market. It doesn't matter if this is crude oil, Apple, Dell or the Euro
Another one of my favorite Baruch saying is this, "Do not blame anybody for your mistakes and failures." He also said this: "Whatever errors I have committed, whatever follies I have witnessed my private and public life have been the consequence of action without thought."
Here is my last comment on the Bernard Baruch and you can apply this to any market: "Without control over your emotions, there is very little chance for profitable success in the stock market."
Well that's about it. That's about as much humble pie as I can eat at one sitting.
Every success in the markets, have a great weekend.
Adam Hewison
Co-creator of MarketClub.com
