Nick’s Note: There’s an old poker saying that goes, “If you can’t spot the sucker at the table, it’s you.” The same logic applies to the stock market.
So how do you avoid being the “sucker” at the table? We turn to our Wall Street insider, Jason Bodner, for the answer…
Nick: Thanks for joining me today, Jason. You say the main obstacle most investors face is their own emotions. And right now, there’s a lot of fear in the markets.
The darkest cloud hovering over us is the trade war between the U.S. and China. You have an interesting theory about it. Can you share it with us?
Jason: I just find the timing a little suspicious…
If you look back a couple weeks, the media mainly focused on the Mueller investigation… President Trump’s tax returns… and Congress issuing a subpoena to his son Donald Jr. All of this was bad news for Trump.
So what does President Trump do? He fires up his Twitter account on an early Sunday morning and reignites the trade war with China.
The media loves covering the trade war just as much as all the other scandals surrounding the Trump administration. That’s because if it bleeds, it leads.
Plus, President Trump had little to lose… He knew the stock market would take a hit after his tweets… But so what? It was near all-time highs. What’s a 4% drop? It’s nothing. The stock market and the economy are still strong.
Nick: You worked for years as a trader for top Wall Street firms like Cantor Fitzgerald. So you know how to read between the lines.
But most investors don’t have your background or experience. To them, the trade war seems like a powder keg ready to explode.
Jason: That’s exactly how the media wants us to feel. They know they get more viewers when they appeal to your emotions, rather than your reason.
If you know nothing bad is happening, you won’t watch them anymore. You’ll move on to the football game or the Kardashians… or whatever you watch.
But if you think there’s catastrophe lurking, you’ll stick around—maybe watch some commercials—and see what trouble lies ahead. That’s why the fear sells so well.
And Wall Street takes advantage of it…
You see, the big firms use algorithms and high-frequency traders to scare average investors, too.
Think about it. You wake up the morning after President Trump’s tweets kick up a hornet’s nest with China… and see stocks plunge 2%. You’re going to panic a little.
Now, you may wait a week to see if the tensions pass. But if the next Monday comes around and the market falls another 2–3%… you panic-sell.
And high-frequency traders use algorithms to pound the market lower and lower on bad news to get you to do exactly that. When prices drop low enough, they can buy the dips and profit as the market recovers.
Right now, it looks like May 13 was a low for the pullback. Anyone who sold then made the wrong choice.
Nick: How can investors avoid being manipulated by the news?
Jason: There’s an old poker saying that goes, “If you can’t spot the sucker at the table, it’s you.”
It’s the same in the market. If you can’t articulate your “edge” in the market, you don’t have one. And if you invest based on emotional whims, you’ll lose to Wall Street every time.
Every PBRG newsletter has an edge. Teeka has a huge informational edge in the crypto space.
And I’ve built an edge with my proprietary system, too.
I scan hundreds of data points on nearly 5,500 stocks every day. And I’ve built algorithms that find the outliers in the market. These are the stocks that have a high probability of taking off over the next six to nine months.
That’s a huge edge—and one that I plan to ride into my retirement.
Nick: How can people invest without emotion?
Jason: In Palm Beach Trader, we have a defined exit plan using stop losses before we even enter a position. We don’t exit early because of news, market fluctuations, or anything else. It’s just noise that detracts us from our goal: to profit.
Most investors would be better off ignoring the news and flipping the channel to their favorite shows. At least the Kardashians won’t make you want to sell your stocks.
If you want to be successful in the markets, know your edge and stick to it. Don’t let anything else cause you to deviate. That’s the true secret to not being a sucker.
Nick: Great advice. Thanks for your time, Jason.
Jason: You’re welcome.