SCOTT WELSH TRADING BLOG

Overcoming the Biggest Obstacle

Stupid Is As Stupid Does

Sept. 30, 2020

In my years as a high-performance coach, I used to brag a lot.

Not about myself.

I used to brag about the kids when they did something amazing.

I’d bring the whole group together and give a five-minute recap on someone’s state championship or big tournament win.

Why?

It wasn’t to brag about the kid (although I was happy to give them a boost). It was to provide evidence.

She can do it. In fact, she just did it.

And you can, too. 

That was my best coaching tool.

The training the players received mattered, but I found it only made a slight bit of difference.

The big improvements happened when I told stories about people they knew. Once other players believed it could be done, they were able to do it themselves.

That’s why I wrote an email out of my normal schedule to you on Sunday about the liars.

I’m tired of hearing about buying-and-holding the market.

I’m tired of hearing about different state-of-the-art strategies of buying-and-holding different asset classes.

I’m tired of the All-Weather Portfolio and dividend investing and the FIRE (Financial Independence/Retire Early) movement. [Well, not the movement itself, just their “investing” methodologies.]

So what am I going to do about it?

I’m going to tell stories about successful investing.

If someone can do 30 times better than the market, then I need to talk about it. Maybe it’s my account that provides the evidence, or maybe someone emails me a success story and I tell that story.

If other people can embarrass the notion of passive investing, maybe you can too. 

Here’s one quick example before we go.

Remember the Weekly Pivot strategy we built from scratch a few weeks ago? What if we took that strategy and started trading it in 2003?

The stock market had just been eviscerated for three straight years. What if we were tired of that nonsense and used a sensible TRADING STRATEGY instead of sticking with the Experts’ buy-and-hold garbage.

And what if we compounded gains while using that strategy?

In every Benevolent Expert book, they trumpet the power of compounded gains, so let’s do it.

What if we traded 1 lot on the EURUSD on the first trade and then increased or decreased our lot size depending on whether we won or if we lost? Of course, a robot can do that for us.

Here’s what would’ve happened if we compounded our money on a basic strategy on a hypothetical $20k on only one instrument from 2003-2020:

IF we reinvested dividends and IF we didn’t have to pay taxes on those dividends, our $20,000 account would turn into $96,000 if we followed the Experts’ academically-certified advice and bought an index fund.

If we used one simple trading strategy instead, our $20,000 account would turn into $196,000 ($176k of profits plus our original account).

A trading strategy outperformed the market by more than 2:1.

Is that interesting evidence?

Keep in mind, that’s just using one chart. By using a trading strategy, we can add as many things as we like. We’re not just stuck with our original investment.

In our next email, we’ll add something else.

I wonder if that will work even better?

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.