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Neither the Hunt for Game nor Investing Is a Free Lunch
11/06/2017 2:38 pm EST
The hunting-investing analogy may not always hold, of course. A pack of wolves may take the stragglers of the herd, but investors can bag big gains by going with leaders as they emerge, asserts Jackie Ann Patterson of divergence-alerts.com
Whether or not we pick up a rifle in the fall, as humans we seem to have hunting in our DNA. The thrill of the chase is a popular phrase because it applies to many, many situations including investing and trading. To maximize success, let’s see what we can learn from great hunters this season.
Make the first step knowing yourself. Are you in it for entertainment or food on the table? Up in Montana as elk season opened this year, I observed two types of hunters. One set out on horseback armed with patience, warm clothes, and a rifle. Others came with a recreational vehicle towing an all-terrain vehicle and what looked like one of everything from Cabella’s. I haven’t run the numbers but I’m pretty sure a year’s worth of meat costs less than the going rate of a camper, so I’m guessing the second set of hunters is in it primarily for entertainment.
Likewise, if you get your jollies collecting business information that doesn’t lead to money-making decisions, bevies of experts clamor for your attention -- and your dollars. Meanwhile, the internet brings actionable data at low, or no cost to those who are quietly on the look-out for solid investments.
Ask yourself what is the minimum you need to know about a company or ETF to decide if its worthy of your money and your time. If you’d like to know more background stories or enjoy following charismatic personalities in the media, nothing wrong with that. Just don’t let the extra information lull you into believing you know more than you do.
Let’s not forget that stalking is at the heart of the hunt. Just because you want to eat elk doesn’t mean pulling the trigger on the first thing that moves. Successful hunters spend the time and skill to pick the exact animal they want and wait for a clear shot. Pulling the trigger too soon and missing can cost them the prize as can waiting for the absolute perfect situation that never materializes.
This is the hunter’s equivalent of a trader saying price is important. A market on a temporary downtrend may make a great buy – when it starts moving back up.
A current example is the energy sector which got quite beaten down. Funds trading energy stocks such as Energy Select Sector SPDR ETF (XLE) and iShares North American Natural Resources ETF (IGE) showed MACD positive divergence on the weekly charts as a sign of re-awakening momentum.
There exist cases where the hunting-investing analogy may not hold, of course. A pack of wolves may take the stragglers of the herd, but investors can bag big gains by going with leaders as they emerge.
For example, NVIDIA Corp. (NVDA), one of the leaders in machine learning, showed incredible strength in 2016. After consolidating in early 2017, its been on a tear from April to the present. Investors who bought the breakouts in NVDA have had happy hunting indeed.
All in all, neither the hunt for game nor investing is really a free lunch. Hunters have a relatively short season but spend the months preceding readying gear, studying animal movements, and taking target practice. For us non-hunters it’s easy to overlook the effort of butchering a whole animal, then preserving and preparing the meat.
I have found at times that investing can be some of the hardest “easy money” I’ve ever earned. To help myself and my clients, I’ve distilled copious market information into a weekly newsletter for investing in ETFs and stocks.
To find out more about hunting with market-wide indicators, strong momentum, and positive divergences, please click here
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