Brandon Wendell, CMT
Brandon Wendell
Investors and traders are always seeking the next big thing or trying to get rich by taking hot trades without calculating the risk. While this may work occasionally, it is not something that you can depend on regularly. To truly build wealth and income from market speculation you need two things: a rule-based strategy and the discipline to follow that strategy.
Many people don’t feel you can calculate risk effectively enough to be a consistently profitable market speculator. That is not the case. When you learn a strategy that allows you to know exactly how much your maximum profit as well as your maximum loss might be, that’s the definition of calculated risk. When the odds are in your favor, you win more than you lose, and you can become consistently profitable.
Traders need to minimize distractions and have a set of rules to follow. When you know your rules, and trust them, you can place your trade and let them run knowing that no matter the outcome, it was part of your plan.
Online Trading Academy’s Patented Core Strategy is designed to place the odds in your favor by mimicking the actions of the trading institutions who are responsible for moving the market prices themselves. Following this simple set of rules does put the odds in your favor and changes the game from uncalculated risk to high probability market speculation.
Take, for instance, the type of stocks to trade. Many people try to pick what are called penny stocks. They select these stocks because they are inexpensive, so they can buy many shares and hopefully strike it rich with a sharp rise in their stock. This is uncalculated risk because these stocks are too volatile and there is no guarantee that their stock will rise in price, it’s a shot in the dark.
Speculation on these stocks using the Core Strategy I mentioned above would also not work. There is simply not enough institutional participation. In the following data for SIRI, you can see even though the stock has a float over one billion shares and a market cap over $32 billion, institutions only own 19% of the shares. This is hardly enough to find high probability, low risk, high reward opportunities on a regular basis.
Compare this to the stock for EBAY. The market cap is only five billion more than SIRI’s and there are a lot less shares available. But EBAY would be a much better stock to trade and invest in since it has an 88% participation by institutions. This means that you can clearly see the patterns made by institutional buying and selling and therefore put the odds in your favor to trade it by using Online Trading Academy’s rule-based strategy.
Trading and investing with a rule-based strategy changes uncalculated risk into high probability, high profitability market speculation. Put the odds in your favor by learning the right way to trade and invest and joining a community of traders that can not only help you learn the strategy but maintain the discipline to follow the strategy on a regular basis.
On a personal note, I am writing this article in an airport lounge in Lisbon, Portugal on my way to Nice, France to get married! While you are reading this, I will be enjoying my honeymoon in Southern France and Portugal. Thank you to all friends and family who will be celebrating this joyous occasion with me. And thank you to all of my readers who enjoy the bits of knowledge I share to help improve your abilities in the financial markets.
Read the original article here - Speculation Means Taking Calculated Risk
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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