Gary's Greatest Hits on Trading

Finally, even if you are smarter than the insiders, and have access to all the important information, how much background work can you possibly do in any one day? Can you investigate two, three or five companies? Maybe if you're good, you can scour through 100 companies a year. And of those, how many are worth trading or investing in? Very few, right? So the real problem becomes the lack of opportunities. And a lack of opportunities means you have to hold each opportunity longer, and hope that turns into a winner.

Given all this, can you see how even the best fundy has to take an approach that is the opposite of consistent compounding?

3. Ah, but what approach provides plenty of opportunities every day? Technical analysis, of course, and, even better, you're on the same playing field as everyone else. Bells starting to ring?

4. I asked another student how many times he thought you had to be "right" as a chart reader in order to make money. I'll bet his answer was the same as yours: 51%. But, of course, that's wrong. The correct answer is that there is no correct answer. You could be right 1% of the time and be filthy rich. How? Let's say I did 100 trades last year, and won once. However, that winner netted me a 200% gain. The 99 losers? I cashed out each for a 1% loss. See the interplay between win rate and gain per trade?

5. Chart reading is all about patterns. And I guess, in the end, you either believe that patterns repeat or you don't. I, of course, think they do, and can't understand those who believe the opposite. Ever drive down a freeway and sense when there was trouble around you? Sure you have. That's pattern recognition. There was something about the way you and the other cars were moving that you found alarming, because you've seen that set of circumstances before.