Stock Market for investing in the year 2013.

In this video we ask what type of market we expect for the coming year in the stock market.

Will it be a bullish year?

Will it be a bearish year?

Will it be a frustrating neutral year that goes no where?

We look at charts, a poll of traders and a trusted cycle for clues.

For the poll referenced in the video, go to: www.facebook.com/TopDogTrading

I invite you to watch the video and post your own comments below.

Is Stock Market Trading knowledge now required to make money or can one still just rely on buying stocks in a trend trading investing environment over the long term?

A quick comment before we get to today’s topic about Stock Market Trading vs. Investing and whether one can simply succeed by buying stocks and rely on the upward trend trading bias of the stock market …

I want to thank everyone who voted for Top Dog Trading in the TASC Readers Choice Awards. This is an annual awards poll conducted by “Technical Analysis of Stocks and Commodities Magazine” (great magazine I personally subscribe to and recommend). Awards are chosen by the readers themselves – meaning the users of the products and services.

Generally it’s huge stock market trading companies and corporations with mega- marketing budgets that win these awards. But I’m honored and humbled to say that I was graced with awards in both categories for which I qualified:

• First runner up in the “Technical Analysis Websites” category.
• Finalist in the “Trading Centers, Schools, Training” category.

To be given such high positions along with, and even above, massive stock market trading companies is quite an honor and I thank all of you who voted for me.

NOW LET’S MOVE ON TO TODAY’S VIDEO:

It used to be presented as common wisdom that most people should not try to time buying stocks, but rather depend on the overall upward bias of stock market trading over the years, rely on the upward trend trading historical pattern, and perhaps even dollar cost average into the market over the long term.

In recent years many people are now questioning that “common wisdom.”

We’ll examine some of those concerns in this brief video. While it certainly won’t answer all questions about stock market trading or when one should be buying stocks, it will demonstrate why the old principles of investing are being called into question by many stock traders, both amateurs and professionals, today.

Thanks for participating in this discussion and please leave your comments below.

Stock market trading can be challenging. So people are always looking for a short-cut, an easy strategy to invest and trade stocks.

One of the most well-know of these “easy” strategies is the Halloween Cycle.

Because this stock market trading strategy is so well-known, it is worth our investigation. After all, sometimes stock market techniques work for no other reason than a lot of people are trading them. They become self-fulfilling prophecies.

This strategy for trading stocks is about as easy as they come:

Buy the stock market around Halloween (late October, early November) … and then in May, go away.

That’s all there is to it (though surely others have added their own additional rules as people always will).

If you look back enough years, there has been some historic evidence that this may not be a bad strategy. However we must keep in mind several factors:

1. Past performance does not guarantee future results (how many times have
   you heard that?!).
2. Market dynamics change from time to time.

So the question stands:

Is this a good, simple, easy stock market trading strategy you can use without knowing anything else about trading or investing?

Here’s a video where we investigate that question with a few examples from recent history.

Thanks for participating in this discussion and please leave your comments below.

Thank you all for taking the poll in the my last blog post (see the post immediately before this one). At this time over 2,000 people answered each question! That’s amazing and thank you for participating.

The results are clear – about 2/3 of the voters think humans are better traders than computers, and about 2/3 of the voters believe that the wide spread use of automated computer trading is a bad thing.

These results actually surprised me. With the rising popularity of trading “robots” that are marketed so heavily, and purchased so readily, I thought that most people would favor automated, computer trading.

But the response seems to indicate that the majority of us humanoids have a distrust of giving too much power to computers. Perhaps this is part of what made movies such as “2001 Space Odyssey” and “The Matrix” so compelling.

The debate is far from over and will continue to rage on since computerized trading is already firmly entrenched in the trading world.

As I read through the over 30 comments posted by you, I was very impressed with your insights. In fact, they were so good that you didn’t leave me much more to say! But since I’m expected to add to the conversation, here are a few thoughts:

As with many things in life, both sides have some strong points and some weak points. Here are a few of the most significant to me:

Robots (Computers):

• Positive:
• No emotion.
• Trade the rules consistently.
• They don’t get tired of watching the markets.
• Can process a massive amount of information fast, with precision and accuracy.
• Major companies use them successfully.
• Negative:
• Amateurs use them mostly unsuccessfully.
• Technology is not perfect and no program is without errors (“bugs”).
• People still monitor their computerized trading systems and often override them when the draw downs reach their personal emotional pain threshold. Thus they do not completely eliminate the interference of human emotion.
• The history of automated trading is far from perfect.
• They still require human oversight since they can encounter technical problems (loss of power, internet connection, etc.)

Humans:

• Positive:
• Someone who has mastered trading develops a feel and intuition for trading that is beyond even their own conscious mind.
• The human brain is still more powerful and complex than a computer. We still haven’t explored the full depths of the brain and it’s capabilities.
• Negative:
• We get emotionally involved which may lead to breaking the rules.

A few other observations I’d like to add:

• Major companies that trade massive amounts of money do use trading programs, and often use them to a great extent. With the tremendous resources they have at hand, both in the area of talent and capital invested in creating such trading programs, it must be acknowledged that alg0rithmic trading has a tremendous amount of validity.
• On the other hand, most amateur traders who buy trading robots are not successful with them. Such robots are not to be compared to the programs that professionals use. Therefore to say that you should use a robot because the professionals do, is not a completely valid point.
• Computerized trading is not THE final answer to trading success. If the markets were traded completely by computers, without any human traders, there would still be winning computers and losing computers since that is the nature of the market buy/sell dynamic.
• Trading programs definitely have a clear advantage over human traders with regard to trading the rules strictly, without emotion, and also with regard to their ability to access tremendous amounts of data to calculate probability scenarios (thus the reason that computers have been able to out-perform chess masters).
• Experienced traders, who have reached the level of mastery, trade based on factors that they are not even conscious of any more. They have internalized their knowledge of the market to the extent that much of their expertise lies in their unconscious. Thus, unlike the amateur, their intuition is to be trusted. This knowledge, developed through massive experience and putting in their “10,000 hours” is so internalized that they cannot even express it consciously to teach others or program into an algorithmic formula to be replicated through a trading computer.

So there you have it – the final definitive answer!

Has algorithmic trading changed the markets? Yes, absolutely.

Is it good or bad? I don’t think there’s a clear answer to that.

Is it better than human trading? It depends on the computer program and the human trader you’re comparing.

Does my Top Dog Trading method still work in this era where over 1/2 of trading activity in the stock market is made by computers? Yes, because my method simply measures the “Energy” in the market regardless of who makes the trade.

A trend (direction)  is a trend whether it’s created by computer trades or human trades … in a similar way whether a turtle is going East or an cheetah is going East … looking at a compass tell you they are both going East, because East is East regardless of what animal or object is going in that direction.

Thanks for participating in this discussion and please leave your comments below.