If you are new here, please read the paragraphs below for the first and only time. In the future you can just go ahead and download the latest “free research.” The downloads are sporadic and unscheduled. They are posted when something is worth mentioning and the writer feels like creating a research quiz. Odds are this will be once a month or once a quarter.
Why all the best stock research is free?
What is research in stock trading and how is it used? Put yourself in the seat of a CEO of any major company. A typical CEO is the key decision maker. He makes his decisions based on all the information he is given. The information he is given is produced by all kinds of studies, research, mathematical models, probability outcomes under various scenarios and experiments, etc. The point is that the research is done by those who dig up all kinds of pertinent and impertinent information. Along the chain of information being passed up the ladder, someone in the middle tiers discards what is considered to be impertinent information and the CEO gets to hear, read and listen to what is believed as the most pertinent information. Based on all the information, presumably from the smartest people working for him, the CEO then makes a decision. The decision he makes is not taken lightly. A high degree of intellectual manpower has been put to use to present the information at his fingertips.
The scene from the movie, “Margin Call,” depicts a researcher named Peter Sullivan who digs up a crucial piece of information about the scale of MBS risk (Mortgage Backed Securities) during the 2008 financial crisis. When asked about his background, Peter says,” I have a doctorate in engineering from MIT with a bachelor’s from Penn.” And he goes on to say, “My thesis was on how friction ratios impact steering in aeronautical applications under reduced gravity loads.” To which, it is remarked in the movie, “So you are a rocket scientist?” Not just any rocket scientist, Peter is an Ivy League grad (University of Pennsylvania) with a PhD from MIT. Both schools being considered cream of the crop.
While this may seem like a Hollywood dramatization of some odd reality, it does show a good enough reflection of reality in the sense of illustrating the brain power the big houses on Wall Street have at their disposal. Peter Sullivan’s character was just one talent. Imagine an army of thousands and thousands of such folks working for hundreds of houses. That is the kind of research provided to the fund and money managers who are the key decision makers of when, where, what, how and why they buy and sell what they buy and sell.
What these big money managers are buying and selling is not openly available information. They take great pains to hide their actions, yet big money cannot hide its appearance or disappearance. It takes some nuanced skills of observation to unearth the hidden.
In your own stock operations, you are the CEO. But yours is a one man operation. Just you and you alone. All alone against a sea of money managers. All those guys have the best research and information. You, on the other hand, have nothing except for perhaps some stock ratings service, where the department and the people using an algorithm that sets the stock’s rating having never ever successfully carried out a winning stock operation. Right away, you are at a disadvantage. In many ways, not having any services is much better than having a stock ratings service. Not listening to others is about the best decision you can make when dealing with stocks. Because no influence on your decision-making is better than a bad influence on your decision-making.
Is it not funny how easy making gains in the stock market is purported to be when you read these ratings services? But that is a discussion for another forum, and undoubtedly a lesson that only makes sense to those who are capable of self-honesty and have tried all kinds of services only to find that none of them work. The Wall Street machinery has among the best salesmanship talent that there is. Once they get a hook into you, you will not be left alone until every dime has been extracted. The sale of hope is eternal because hope is eternal.
As a lone operator and being solely reliant on your own observation skills the only way you can be in the same league as the big money managers is if you can observe what they are doing and what they are trying hard to hide. After all, their decision is based on the best research. And if you can figure out what they are doing, you will also be basing your decisions on the same best research as the fund managers, but for you the research will be free!
The one key difference between you, the sole operator CEO, and the other big trading firms’ or hedge funds’ CEOs is that that we cannot face deep drawdowns. That only works for those trading firms with really deep pockets, especially when it is someone else’s funds as is the case with these trading firms. The sole operator CEO in us has to have significant profits first to be able to withstand drawdowns because we are using our own funds and that says we are at a disadvantage compared to professional money managers. That means the first few moves we make need to provide for a decent enough profit so that any drawdowns or reactions do not trigger a stop. This further means that many times a good looking chart has to be passed and no action can be taken as the stop may be too far away. The key decision here is to always place the stop at the right spot. The sweet spot. Far enough away where a reaction does not take the position out, yet close enough to not give up the gains. A stop cannot be some random percentage below the buy price. That makes zero sense and guarantees an almost a hundred percent certainty of the stop being hit. The stop must be a certain percentage below a certain discernible specific buying support where the manager handling the stock will support the price. But how to figure out where the manager will support a stock? Moreover, the determination behind the support changes from phase to phase. In a bull phase the supports come quicker and with more conviction. In a bear phase, there is always a better buy at lower prices and the support comes later and with less conviction.
Think about it. If things were as easy as it is made out to be, everyone would be doing this stock market stuff and we would have no other industry. No engineers, no doctors, no lawyers, but a population of seven billion stock traders on the planet. Because making a living off the market is so easy, why bother chasing a career in those other fields.
Which brings us back to the first step – how good of a decision-maker are you? Because the big money is made by holding a winning stock through some reactions, sometimes even quite severe reactions, and then holding the stock for some reasonable duration of time. If big money cannot be made, why even bother dealing with stocks? Stocks are bad. The only reason one should even consider buying a stock is if it has a better than even odds of handing us big money.
All of this requires a few years’ experience of observing, experimenting with stocks and actually learning while experimenting. But it can be done and thus proving to yourself that the best research in the stock market is free. You just have to learn to unearth the clues. What point is there in spending precious time and energy on things everyone else already knows? What makes the big bucks is what very few know and can figure out. And the actual decision-making must be executed in a way that very few do. Do you really think we can be smarter than an army of Peter Sullivans? But we can surely see what decisions are being made based on what the army of Peter Sullivans have found out. And it matters not what the Peter Sullivans of the world have found out in research really. The only thing that matters is what actions the fund manager takes based on what research he has been given. And far more importantly, what and how you execute your actions are critical. If you do what everyone is doing, there is zero chance for success. Not only in the stock market but in almost any endeavor.
If you have made it this far, it has become obvious to the reader that what logic and reasoning work in real life does not work in the stock market. That is called being a victim to our human element. A lifelong, no matter how young or old, full of life experiences and mind programming that cannot be undone. Using life experiences, real-life logic and mind-programming we have been subjected to while making decisions in the stock market is a path to becoming a pauper. It is just a matter of time before the market extracts all your trading capital. Along the way, she will tease you with some crumbs of paper profit, just enough to let you hang on for a bit longer. However, if you learn to play the game the right way, the wins will follow.
Download below the current example and test yourself if you can use the best and free research through observation and deduction. Like the process of developing any skill worth developing, it takes time to become better than average at it. It is not easy to let go of the inner self’s need to feel and believe that one is smarter than the market. And that ego is the biggest weakness of humans obscenely exploited by the Wall Street machinery.
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