Growing up in northern California by the Sacramento river, every year we used to watch the futile efforts of salmon swimming upstream to spawn, or lay eggs - flagellating their poor bodies against rocks, rapids, and even a check dam. Only very few made it up all the way each year. I was reminded of this when 60 Minutes ran a segment on how technology was not only replacing many jobs in the U.S., but allowed Artificial Intelligence (AI) computers co-located next to the NYSE on Wall Street- to automatically shave points thousands of times a day.
A century ago traders/investors had to compete against blind pools and insider trading before it was legislated against (?) in the '30s; nowadays traders have to still compete with dark pools and tens of thousands of insiders, including Congresspersons, their staffs, families, and friends, as well as institutional money managers, automated trading, market makers and specialists (?), etc. It is said that if one is sitting at the World Series of Poker with MIT Ph.Ds, veteran poker players, etc., that if you don't know who the "Patsy" is, you're the Patsy!
Studies have shown that the more frequently the average trader trades, the worst their performance. Here again, like salmon, only a few survive, usually after they have lost a bundle learning how to implement option strategies, technical analysis, etc.
It is also said that everything we have learned in life's lessons about honesty, common sense, etc is directly opposite from skills needed to make money trading. Which is why Contrary Opinion (Sentiment) is useful.
Not that I am recommending buying a few stocks and ignoring them for life - a Buy & Hold strategy, although a good case was made for this by Sam Stovall of Standard & Poor's at the recent Money Show - for people who are not interested in investing. In the eleven decades since the Dow Jones Index was formed, there have only been less than two dozen Bear markets - no more than two per decade, no less than one. Each one has resulted in a V-spike back up at some point to higher levels - obviously, since the DJIA has gone from 100 to over 15,000 during that span.
Incidentally, just before these big selloffs the market has parabolically risen, much like the recent Bull phase we are now in, with most selloffs in the Sept./Oct. period. So if one is not suited for daytrading, but is leery of Buy & Fold!, the two strategies I have been writing about meet the Intermediate period, with reward and safety. I have been asked to speak on my DITM ( deep-in-the-money covered calls) plan and my LEAP option strategy (also covered calls) at the October options meeting on October 26 at Fort Mason, San Francisco. Information is also available in my blogs on Sentiment and DITM:
The option group mentioned above, the S.F. Bay Area Option Group, is having its monthly meeting this Saturday ( on its usual Saturday morning after the 3rd Friday of the month).
Saturday 9-21-2013, from 9:00 AM to Noon,
Room C-235, Fort Mason Center, San Francisco