The Market’s NEVER Wrong!

There is only one way to never be wrong: hold on until you win.

But remember, the market is never wrong.

Physical goods like commodities have finite supply. Though emotion and greed drive prices in the short term, supply and demand will eventually determine value.

An old trading axiom “Cure for high prices are higher prices” has an equal corollary that may be more appropriate in these times.

First off, remember back to $100 Oil and the investment in exploration. New technologies were developed to extract black gold in ways that were not cost effective at lower prices.

Oil sands, horizontal drilling, and fracking unlocked a bounty of oil that had never been accessible before. Companies spent billions of dollars on oil projects on promises of high returns on triple digit oil.

Eventually, these activities created a supply glut which hammered prices. Supply and demand are powerful forces that eventually win every time.

At the time, it was obvious that cutbacks in production would eventually reduce supply and support prices someday in the future. The exploration to production cycle in mining metals or drilling for oil takes years at minimum. A canceled venture or closing of a well will show up later when the supply equilibrium again gets out of whack.

High or Low markets will go…eventually, Supply and Demand determine price.

The amount of time it takes to find that balance can bankrupt stubborn investors. The market is never wrong – maybe incorrectly priced in some eyes – but that fight is hard to win.

The greatest investor in history Warren Buffett has the luxury of having enough money and enough time to be right… do you?

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Trading Tip of the Day: Is trading really a battle of wits?

Greg Guenthner
Most traders fail and give up before they ever make a profit.

Some new traders throw in the towel after churning their accounts for months. Others tap out after the sting of a big loss. Inevitably, a few gunslingers wipe out their hard-earned profits on a big bet gone wrong.

I don’t have any hard data that explain why so many folks fail to make it in the trading game. After all, there is no exit interview with your broker when you blow up your account.

But if I had to guess, I would say most traders don’t make it for one simple reason:

They try to outsmart the stock market.

Many market newcomers view trading as a battle of wits. They’ve determined that they need firepower to beat the market into submission. That means mastering complicated software and learning how to use countless indicators to pinpoint trade ideas.

Yet over the years, I’ve found that the more complex you make your trading strategy, the worse your results will be in the long run. When it comes to trading, simple is best.

Of course, simple doesn’t always mean easy. It’s not easy to implement a simple trading strategy. But with the right mindset and guidance, you can begin your own journey down the path to profitability.

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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