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The Fatal Amateur Trader Mistake

Right now, the media and nearly every financial outfit is promoting how the market is stagnate and that no one is making money in this environment. The fact is, those who get sucked into this media hype are the amateurs and ill informed. The Pros are trading, while the amateurs are sitting there listening to the talking heads. Just take note of my Select Sector Financial Slct Str SPDR Fd (NYSEARCA:XLF) example which I explain below. Your first step to making money in the markets would be to turn off the TV, tune out the media and don't take stock tips from the bagel guy! The only thing you need to do is stay focused on what works and has worked centuries, reading the charts. The charts will give you a clear picture of what is happening, without emotion, without noise.

The media has a great way of discouraging people from learning and taking control of their own financial independence. Then you have all of these financial institutions who want you to blindly hand over your money to them, so they can gamble it away. History has repeatedly showed us examples of how both the media and large financial institutions are not the answer for those looking to protect or grow their hard earned money. Do you recall the epic collapses such as, The Tech bubble of '99-'00, the Financial Crisis and many others; on all instances the public was caught on the wrong side of the trade, after massive run ups in the markets. All of these market busts wiped out all, if not most of the publics original investments, while top executives of these major financial institutions walked away with millions.

As investors or traders we must follow charts as they don't lie to us. The charts will not feed us information because they have an ulterior motive. Such as the media selling a popular "headline," or financial institutions who may get higher commissions on risky (or any) investments; the charts are a true representation of what is happening and what is coming. When read correctly, charts have a much higher probability of predicting future price moves than any other means. Therefore, charts allow us to position ourselves on the right side of the trade.

Let's take a quick look at how trading based on the charts has performed versus other means...

Just a couple of weeks ago, Elite Round Table members were alerted to short Merrill Lynch Semiconductors HOLDRS ETF (NYSEARCA:SMH). Shortly after the position was entered, the popular ETF fell and the trade was closed out for a 2.86% net gain. Around the same time period, while many uninformed traders would have bought (gone long) Macy's, Inc. (NYSE:M), our members were alerted to short the name at a price of $58.30. We exited the Macy's trade prior to the earnings release for a net gain of 4.8% within 10 trading days. We were closing the trade for a profit, while the amateurs who treat investing like gambling were placing bets based on Macy's earnings. Why do I say trading earnings is gambling? Just ask yourself, how many times have you seen a stock go lower on great earnings, or higher on poor earnings? The answer is simple, this information was baked into the cake, and the cake is the charts. Again during April, as media started to panic over a mild pull back the markets were having, that panic gave a clear signal a bounce was coming. We scanned the charts, and determined that SINA Corp (NASDAQ:SINA) was a great trade at a price of $50.27, which is where we entered. Yes you guessed right, within three trading days the trade was closed out for a net gain of over 11%.

This Tuesday, I alerted my followers via twitter and our members forum "Traders Life 24/7" that $22.31 will be a resistance level on the Select Sector Financial Slct Str SPDR Fd(NYSEARCA:XLF) which tracks financials. A few hours later, the popular ETF pierced the $22.31 level by one penny, and sold off all day long even as the markets moved up. Days prior to today's move, I posted the XLF chart which alerted me to the level and another high probability trade. There is no guessing or gambling when it comes to trading the charts. These are just some of the latest examples of real trades we have taken by utilizing the charts of stocks. If you followed the media hype or many of the "Pros" on TV, you likely would have been on the wrong side of these trades. If you read the charts as we did, you would have earned great profits in the past few weeks.

So, when considering the facts, why would anyone stay on the sidelines, follow the herd or the hype? Why not trade and profit consistently like the professionals who utilize the charts? If you are reading this now it must mean that you have some concern with your finances, and that is great. However, your finances are just that, YOURS! So as I said in the start of this article (which may have turned into a personal rant against the media hype and greedy institutions), do not be the amateur or the ill informed who blindly follow the herd. Take control of your financial future by learning to read the charts and avoiding the noise. Once you break out of the mold, and move from the amateur investing minded to the informed, you will see the markets in entirely new light. Stock charts are right there in front of you for you to learn and trade from, start utilizing them now.

Kiliam L.
Elite Round Table