Our two big “edges” as traders

They each give us a huge advantage… [Justin Spittler's Trade of the Week] Our two big "edges" as traders Being a trader has many benefits. Flexibility is a big one. Earlier in my life, I was a slave to a regular job. My earnings were capped by the number of hours I was physically present at work. Being a trader freed me. All a trader needs to potentially earn money is a laptop and an internet connection. I can be just as productive while visiting my family in Omaha, Nebraska, as I am sitting by a pool in Colombia, South America, where I spend a lot of time. But flexibility and independence are only side benefits. Above all else, trading allows us to identify and enter moneymaking trends EARLY—when the biggest profits are on the table. That’s our first key “edge.” This edge has allowed me to be early to some of the biggest moneymaking trends of the last 10 years, including the pot stock and crypto booms of 2017… and the 2020 tech stock boom when many “work from home” stocks shot to the moon during COVID. Edge #1: Trading allows us to get into money-making trends early. How many times have you heard a compelling story about a stock… Only to look it up and see it had already soared 200%... and the opportunity had passed you by? I’ve lost count of how many times that happened to me early in my career. What I didn’t yet understand is that news is slow. By the time you hear about a trend in The Wall Street Journal, it’s almost always too late to profit. As traders, we don’t wait around for the news to tell us about opportunities. We find them and anticipate them before the TV-watching crowd is aware. Let me show you how this worked in the real world during some of the most tumultuous markets of the past 20 years: the early days of COVID. Markets plunged in the early days of COVID. After the initial shock, the world raced to sort out how things would change. Tech stocks, growth stocks, and many “work from home” stocks staged rallies that boosted their stock prices 200%... 300%... even 400% in a year or less. Problem was, if you had waited for the “fundamentals” of these stocks to alert you to these opportunities, these moves would’ve passed you right by. Take telehealth company Livongo (LVGO), for example. It posted better-than-expected Q1 earnings on May 6, 2020. First-quarter total revenue was up 115% year over year. “Fundamental investors” who waited for these results got into the stock at around $48/share. But my readers got in three months earlier at $27.60/share because its chart was showing incredibly bullish signs. As I mentioned in my recommendation, shares were steadily climbing since bottoming out in October 2019, and LVGO was emerging as a true leader. On October 30, 2020, Livongo was acquired by Teladoc (TDOC). Because we got in early, our total gain as of that date was 406%. Had we waited for the “fundamentals” to confirm our thoughts that LVGO was a good trade... we would’ve missed most of the profits. Edge #2: Trading lets you effectively manage risk. Most people think trading is risky. These people are correct. Trading is risky. But when done in a disciplined manner, trading can be less risky than long-term, buy-and-hold strategies. Conventional wisdom has this backward. I’m a big believer in Marc Andreessen’s concept of “strong opinions, weakly held.” Marc is an all-time-great investor and venture capitalist. Although he has conviction in his best ideas, he’s always willing to change his mind when the evidence changes. This is where chart analysis shines. You see, investors suffer from all sorts of cognitive biases. Confirmation bias is probably the costliest one. This is when you make a decision and only seek information that confirms your decision. It’s why people who make bad investments often end up “stuck” in them and end up taking huge losses. Instead of selling when a position is down 10%... 20%... 30%... some investors will ride a stock down close to zero… because they refuse to change their minds. Here’s an example… In December 2020, I recommended Digital Turbine (APPS), a company that helps developers feature certain apps when a device is being set up for the first time. Digital Turbine was quietly conquering this market. Its sales had grown 38% per year since 2015. It was coming off a strong quarter in which revenue surged 116%, while its earnings per share jumped 124%. You could have bought the stock based on these strong fundamentals. But that would have been a losing strategy… Digital Turbine reported Q1 2021 earnings in June. The results were solid. Sales surged 142% during the period. And yet, I encouraged my readers to sell. Why? A stock’s reaction to earnings is far more important than the actual numbers, and APPS was selling off hard after it released earnings. We sold promptly, locking in a 36% gain. And it proved to be the right move. APPS went on to drop 43% over the next nine months. These days, it’s essentially free to buy and sell a stock. Most popular brokerages have slashed commissions to zero. If you buy a stock at 10:00 am, you can sell it at 10:01 am without incurring any fees whatsoever. In other words, it’s essentially free to change your mind. As traders, we can exercise this freedom often. Tomorrow, I’ll share one of my favorite trading tools... It’s a unique way to essentially “front run” hedge funds. (This has nothing to do with SEC filings like “13Fs”)... But master this tool, and you’ll be able to pinpoint and buy the right stocks before the smart money pushes them higher. More tomorrow... Justin Spittler Chief Trader, RiskHedge If someone forwarded you this email and you would like to be added to our email list to receive Justin Spittler's Trade of the Week every week, [simply sign up here.]( This email was sent to {EMAIL} as part of your subscription to Justin Spittler's Trade of the Week. To opt-out, please visit the [unsubscribe page](. [READ IMPORTANT DISCLOSURES HERE.]( YOUR USE OF THESE MATERIALS IS SUBJECT TO THE TERMS OF THESE DISCLOSURES. Copyright 2023 RiskHedge. All Rights Reserved RiskHedge | 1417 Sadler Road, PMB 415 | Fernandina Beach, FL 32034