How To Be Dead Wrong, and Still Have Profitable Trades (no options required)

July 20, 2017

Trades & Tutorials

By Geoff Bysshe


Traders must be able to make money even when their opinions are DEAD WRONG!

I’d like to show you how your trading can be profitable even when your opinions of the market are DEAD WRONG!

Wouldn’t that be nice?

It’s possible, and it doesn’t require a fancy options strategy, or any options trading at all!

Here’s what recently happen to me, and you can apply the same tactics to your own trading tomorrow.

And… if you’d like to learn how to do it even easier, make sure you attend our free live training here...

As you’ll see in the daily charts of the 4 major stock index ETFs below the QQQ (Nasdaq 100) got hit hard in the beginning of June. The other indexes also began a correction at the same time, but not as violently.

As a result of the QQQ’s violent top formation I concluded that the QQQ would not recover quickly.

I was WRONG. Dead wrong.
(but I’ve been banking big gains nonetheless!)

You’ll also see on the charts below that MarketGauge’s Price Performance indicator was bullish on the SPY (blue line over the red indicates the instrument’s trend is strong), but bearish on the QQQ during the markets’ respective pull backs to their 50-day moving averages.

Since the QQQ did suffer a decent decline that was much worse than the other indexes the indicator was correct. However, my opinion was for a longer term decline or consolidation in the QQQ.

Because of my assumptions about the QQQ’s having topped out, I bought the SPY’s retracement to its 50-day moving average. My thought was that if the markets had not all topped then according to our Price Performance indicator (shown on the chart above), the SPY would likely be the first one back to new highs.

That worked nicely.

But what about missing the move in the QQQ’s?

I was negative on the QQQ, but since I have our Triple Play indicators...

I looked at stocks that influence the QQQ’s index to hedge my thought that the QQQ was done going up for a while, and I found Facebook (FB).

Look at its chart below!

Notice how FB came back over its 50-day moving average right at the same time that its Triple Play Price Performance indicator turned bullish and days BEFORE THE QQQ recovered over its 50-day.

If you don’t have our Triple Play Price Performance indicator the more experienced trader could also have honed in on the fact that FB did not make a new swing low when the QQQ did. This was one sign that FB was ready to rally.

The MarketGauge Price Performance indicator then confirmed it.

So I bought FB as my hedge against my negative opinion of the QQQ.
That worked very nicely as well.

Lessons & Tactics I Learned Decades Ago On The Trading Floor
That Continue To Pay Dividends.

So now you can see how my assumption about the QQQ based on typical and legitimate technical analysis was wrong, because the QQQ has bounced back to new highs.

However, I knew, and now you know too that you can look for leading stocks in the QQQ to trade that have a bullish reading on our MarketGauge Price Performance indicator, and have a bullish retracement to its 50-day moving average (in this case), to find the trades that will explode higher if the market ‘proves your trader’s opinion’ wrong!

Additionally….

You may have noticed all the faded yellow circles on the charts of the 4 market index ETFs above.

Now that you know that our Price Performance indicator is bullish when the blue line is over the red…

You can see (in the circles) that as the SPY moved out to new highs, the SPY’s and QQQ’s actually switched their roles from as being the weakest to the strongest!

As a result of having this information, I was able to see that my opinion that the QQQ’s was the wrong place to look for trades needed to change!

This made it even easier to continue to hold my long Facebook (FB), as it exploded to new highs well ahead of the QQQ!

As a result I didn’t take profits at my first target and rode a full position to target 2 to bank even bigger gains.

A Quick Review

There are a several important take aways here:

  1. I recognized that my opinion of the market may be wrong right from the beginning, and I even set up a trade (Facebook, FB) that would likely work if my market opinion was wrong.
  2. I used our indicators to confirm and challenge my opinion. When the Triple Play Price Performance turned positive I recognized that my opinion was wrong and I adapted.
  3. The position I took in the SPY assumed that it would be the leader, but when the Triple Play Price Performance indicator favored the QQQ over the SPY, I didn't change my position. I held onto my SPY because the price action still supported it as a great trade in progress! Let the market action or targets determine your entries and exits. Indicators are for confirmation.
  4. Finally, often times the best trades are ones that you enter before the market looks "safe"! The QQQ was still looking weak and under its 50-day moving average when I entered FB. As you should know as a trader, had the market not recovered FB probably would have resulted in a loss. However, by getting in long before a breakout to new highs enables you to enjoy the breakouts without the stress of wondering if they'll fail.

I hope this helps.

If you'd like to learn more about the strategies, tactics and indicators described in this post tap on this link.

Leave a Comment or Reply

Your email address will not be published. Required fields are marked *