Never Predict With Money on the Line

I’m sure you’ve heard the statistic that 90% of traders lose.

One of the biggest reasons I actually make money trading is because I stopped trying to predict and started reacting. All it takes is slowing down a little.

When the PDT Rule Went Away, THIS Pattern Opened Up

The Big Picture

Here’s my 10,000 foot view of the stock market. It’s my little secret for success.

I have no idea what’s going to happen tomorrow.

Here’s what I don’t know:

• I don’t know what the biggest gappers are going to be
• I don’t know what the news is going to be
• I don’t know if any one stock is going to go up or down

I’m totally okay with not knowing.

This is one of the most common mistakes new traders make…

The Prediction Trap

Most people love predictions, and it can be fun if your prediction comes true. But when it comes to trading, predicting gets you in trouble.

Nobody knows the future. Not the talking heads on TV, or the loud guys in chat rooms. They’re all guessing. They just try to hide it behind confidence.

The problem with predictions is that it becomes emotional. You get attached to the outcome.

The attachment to being right is what keeps people stuck holding a loser.

How To Break Free of the PredictionTrap

I don’t anticipate or play guessing games. Instead, I react when the chart and indicators tell me the thesis is confirmed. It’s the whole game.

If you buy early because “it’s going to the moon”… You’re anticipating.

I teach traders to react. In other words, we buy because the stock is already moving.

When you anticipate, you’re trying to predict the future. When you react, you let the stock show its hand first, and then you join the trend.

So, how do you train yourself to react instead of predict?

One simple rule…

Wait for Confirmation

Don’t buy just because you think a stock is going to break out. Wait for it to actually break out on volume and then go.

The same goes for selling. Don’t sell just because you think it’s stopping. Instead, wait for confirmation.

With both buying and selling, I prefer to use the tools I’ve created. For example, my Oracle algo shows where there’s support and resistance and gives me a signal for when to buy.

Take a look at ClearOne Inc. (NASDAQ: CLRO) from yesterday (Oct. 26). It’s a clean example:

CLRO was setting up nicely during premarket trading. But there was no need to chase and no need to predict. Once it hit the signal, it ran to just below Oracle major resistance, which was the target.

Waiting for confirmation allows me to let the stock move first and then react.

My Take

It might feel slow in the beginning, but I like to think of it like the US Navy SEALs…

Slow is smooth, smooth is fast.

If you feel rushed in trades, it’s not going to end well. Now, you might miss the exact bottom and top. That’s good, because over time it’s unrealistic to catch the top and bottom. We try to trade the fat confirmed middle of the move.

Watchlist

There was nothing super compelling yesterday afternoon. It was a case of you get what you get, and you don’t complain, okay?

As it turns out, CLRO was my Daily Double Down alert yesterday.

I alerted CLRO for a squeeze style play yesterday afternoon. If it continued sideways into after-hours trading without squeezing, we could see a day-three surge today.

On My Radar

• Anthropic’s IPO filing didn’t shy away from its existential risk narrative
• Elon says, “guppy-level death and consolidation” for neoclouds.
• The FOMC will announce its decision on interest rates tomorrow at 2PM ET. If you want my prediction, re-read this entire newsletter, okay?
• Get 12 months of Monthly Money Flows for just $1 (I highly recommend this)