“There is nothing new in Wall Street. There can’t be because speculation is as old as the hills.”
-Jesse Livermore in the classic 1923 Edwin Lefevre book, ” Reminiscences of a Stock Operator”
Here are some simple and indisputable facts about the market over time:
- Markets change
- Rules change
- Industries change
- The players change
But there are two constants throughout that never change: fear and greed.
They don’t change because human nature doesn’t change.
From generation to generation, we are all hardwired to act, react and overreact; to misconstrue current trends and under-appreciate future realities.
This is how it can be that something written about trading at the turn of the century and through the Great Depression can still be every bit as vital for those of us braving a new millennium.
Speculation and Profit
Speculators are not interested in putting their money into a stock or commodity for a long time. They want to see a good profit quickly – on a time scale of minutes to months.
If their money does not quickly perform well in a situation, they move it into another situation.
The Momentum Trade Alerts service that I run is built on this very foundation, putting money to work and getting a return as soon as possible.
The key to successful speculation is not just picking the right stocks, ETFs or sectors, but rather a sound risk-management and money-management plan.
Going into each situation with a plan (that you follow) is how the battle is won.
In today’s video, I want to give you a deeper dive into my world by looking at two trades that I recommended in the last few weeks. One trade resulted in loss while the other was a huge winner.
It’s important to note that speculation as a profession is vastly different than, say, those who buy a stock because they got a tip, have a feeling or are chasing hype. Those investors are more like people who go to the horse races and bet on the ponies.
Most race-going members of the general public will bet on every race, whereas the professionals will only bet on those races in which they have identified an attractive overlay. This might result in the professional only betting on two or three races during a 10-race day.
Knowing why you are putting money at risk with a sound risk management plan is the difference maker between the race-going investor and the professional.
Which one are you?