Tik-Tok Traders, the legit real-life money glitch and why technical analysis is easier than you think
How to make a ton of money trading stocks without past knowledge
The money hustle is intense. Stock trading is becoming mainstream. We have talked about this before. My general feeling towards this is super positive, that is why I have embarked on a crusade against snake oil sellers that distorts the genuine efforts of new traders to make money.
So our friend Alex claims to be making a TON of money. Evidence of it? Nah…Zero. Null.
But he brings an interesting subject to the table, the study of price patterns for profit. Does it work? And should you do it?
Two things you should know about Technical Analysis
Technical what? All this charting and pattern finding has a name, and it is as old as the market itself.
We “humans” love patterns; they help us make sense of the world. Although there is lots of randomness in our lives, some things like the seasons and lunar cycles happen at predictable intervals.
Take that concept to stock trading, and you get Technical Analysis.
The art of finding stock patterns through randomness.
Once you label something as “art,” you know that there will be subjectivity involved. Technical analysis is not the exception. Just explore Tradingview for confirmation. (Hint: Try to find a long and short idea for Apple stock)
Lesson 1: There’s no chicken of the golden eggs
You have probably seen Daniel Mac asking many seemingly rich folks in supercars, What do they do for a living? And I have noted something odd.
I have yet to encounter a big bunch of them, saying, well, you know… I have this Trading View Indicator that is making me a lot of money buying and selling stocks.
Sure there are finance guys, but not so many traders. If you happen to see some, please let me know.
The point is, the chicken of the golden eggs is not a TradingView Indicator.
Does this mean the indicator does not work?
Most work in trending markets, which is odd, cause in an uptrend or downtrend market, you don’t need an indicator. You could just, look at the chart.
And then there’s the human part; just as we are good at seeing patterns, we are equally good at doubting the “stupid machine.” So the next time the stock plunges, you might be tempted to take profits, even if the indicator has not triggered a sell signal.
Logically you would need to automatize your trading to remove the human component. And you know, there were a lot of people taking this seriously, only that as Quantopian found out, it just doesn’t seem to work.
Lesson 2: If you have found it, keep it secret
Let us assume for a second that you have found it. A time-tested, robust indicator that correctly predicts uptrends and downtrends. What do you do next?
a) leverage and profit
b) share it
There’s only one right answer. And it is not b). Why?
Sharing it destroys the effectiveness of the indicator. If too many people push the trigger at the same time, well, that just creates a lot of volatility.
$GME kind of volatility, and it is generally hard to profit under such conditions.
Bottom line
Technical Analysis is easy. It’s all about pattern detection. It is profiting from it which is hard. 😉
I have yet to find a reliable stock trading shortcut to make tons of money. This does not mean such a shortcut does not exist.
After all, there are a lot of Quant shops out there. My view on this is that their advantage if any relies on their special positioning in the market infrastructure and mostly shows as intermediation.
That is by providing price improvement to retail customers, amongst other services.
But the real question is,
Where is your time more valuable?
Learning how to draw lines in stock charts, an endeavor that seems to be a minimal “rich people generator” or perhaps, learning, exercising, helping your community? etc.
Could you perhaps automate your stock trading savings and let time do the rest?
I’m happy to hear your comments and your approach to investing!
