Apple's Got Its Mojo Back
This column was originally published on RealMoney on Nov. 7 at 8:53 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
If you read many of the columns on RealMoney, you'll note several writers voice a reliance on their feel for the market. From fundies like Jim Cramer to technicians like Rev Shark, "the gut" seems to be an important aspect of trading. This approach is summed up by a recent email I received from long-time reader C.I.:
Gary, I believe picking stocks is as intuitive as it is analytical. With 20 years investment experience, I have learned to trust my "gut" and it usually does not let me down. When my gut feel is wrong, I have a greater degree of comfort in my decisions, even though they may be wrong, because I listened to myself and acted accordingly. If I am going to lose a football game, it won't be because my best running back did not have 20 carries and someone else was calling plays. C.I.
First, let me state I agree with C.I. Relying on your intuition and feel does work in the market. Let me also say I believe it is inferior to a pure statistical method. I make that statement for two reasons.
One, if you rely a lot on intuition and are objective about testing it, I believe you will find it is accurate no more than 50% of the time. In my experience, most people are biased when remembering how right their gut was and tend to ignore all the times they were wrong. An accurate accounting will usually prove sobering.In addition, even if one's intuition is helpful, it is still inferior to a raw statistical approach because while a gut-feel player may be right more than he is wrong, that advantage is mitigated by the fact he doesn't take as many trades as pure-data man. As an example, gut feel may look at 100 trades, take only 20 that look great, and be right on 15 of them. Pure data, however, might take all 100 trades, and be right on 50 of them. So while his batting average is lower, the sheer number of his attempts can result in overall higher profits. Finally, I've found the intuitive approach hard to pin down. If my trades didn't work that day, was my feel off? Was it the market? Or did I simply have an upset stomach? Without pure data to test, it's difficult to say. Of course, one has to always do what's best, and if that requires you to use your gut, so be it. Over time, though, I believe that approach will cost you profits. Today, the Nasdaq, Apple Computer (AAPL), EnCana (ECA), Sirius (SIRI), Golden West Financial (GDW) and Kohl's (KSS).
Charts produced by TC2000, which is a registered trademark of
And that is the final word from Cameron Indoor Stadium, where everyone is loving my Blue Devils to take the NCAA hoop title. Like I said last year, though, I think they'll come up just a bit short, this time to Michigan State. P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
It's always been my opinion that it pays to have more -- not fewer -- expert market views and analyses when you're making investing or trading decisions. That's why I recommend you take advantage of our free trial offer to TheStreet.com RealMoney premium Web site, where you'll get in-depth commentary and money-making strategies from over 50 Wall Street pros, including Jim Cramer. Take my advice -- try it now.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV