Managing Editor’s Note: Our colleague Jason Bodner uncovered shocking details about an obscure stock market anomaly that he calls “glitch.” When it triggers, certain stocks can shoot up as high as 825%… 2,105%… or even 4,496% or more.
Now he says the “glitch” is set to trigger again on August 14. So if you have any kind of money in the stock market, you need to hear this important information.
Tomorrow night at 8 p.m. ET, he’ll share the whole story. RSVP with one click right here.
People often ask me how I identify promising trades.
After all, I have access to lightning-fast information, sophisticated charting packages, and powerful computers. To be fair, they’re all useful tools. But in my experience, these don’t provide my biggest edge.
Markets are constantly changing, and new technologies emerge. Plus, algorithmic trading and artificial intelligence are increasingly influencing and driving trading decisions.
But against that backdrop, one thing never changes… human emotions. Whether it’s good-old fear, greed, panic, pessimism, or blind overconfidence, emotions don’t change. The same emotions that drove markets when I first started trading professionally are still driving markets today.
Yet surprisingly, it’s something that many traders miss or choose to ignore.
When you’ve traded through the ’87 crash, the dot-com bubble, the Global Financial Crisis, COVID – and countless corrections in between – you begin to appreciate that markets have a habit of repeating themselves.
It’s not because history necessarily repeats itself. Rather, people make the same emotional mistakes time after time.
I’ve watched investors become overly optimistic near market tops. They start to dream that the market might go up forever. Similarly, they become overly fearful around market bottoms, growing convinced that stocks will never recover.
Other times, they chase momentum. Investors will pile into the same winning stocks long after the easy money has been made. But while momentum-driven algo strategies eventually switch directions, humans often don’t, getting attached to yesterday’s winners.
Professional traders don’t try to eliminate emotions – no one can. But they learn to recognize recurring emotional patterns before they become obvious to everyone else.
They’re constantly checking how markets react to events, rather than simply trading off the back of the headlines.
The market is constantly leaving clues about investor sentiment.
This can be vital for company earnings. For example, if earnings beat expectations, how did the stock react? Did the stock rally, sharply sell off… or simply do nothing at all?
Each of those responses gives you a different take on where that stock sits in the sentiment cycle. For example, if a stock sells off despite a big earnings beat, perhaps all the good news has been priced in and expectations are running well ahead of reality.
Or the market could be worried about something else – such as management spending too much on AI. That was one of the factors behind Tesla’s and Alphabet’s sharp falls last week.
Maybe bond yields are rapidly climbing, but investors aren’t yet paying any attention. They’re too focused on how much money they’re making, ignoring a warning about a potential reversal.
Or oil prices might be surging again, but investors are again ignoring warning signs about resurgent inflation – they’re too optimistic about another potential peace deal.
All these various reactions often tell us far more than the news itself. They tell you which emotions are driving the market – which can give us an edge in trading.
Keep in mind, I’m not trying to trade every move. I’m waiting patiently for situations that stack the odds in my favor – such as patterns that I’ve watched play out countless times before.
While nothing is guaranteed, it helps build a clearer picture of how investors are thinking.
Folks often think successful trading is about making bold predictions. But more often than not, it’s about recognizing familiar situations, understanding the emotions driving them, and patiently waiting until the odds move in your favor.
Markets are constantly changing, but human nature doesn’t. Once you understand that and apply it to your trading, you’ll have a better chance to spot opportunities that others overlook.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
