Endless Money

I’ve been a value investor for the last 12 years and counting, and I love it. It’s how I’ve built a substantial part of my wealth.

Value Investors have a certain reputation. Typically, we deeply understand financials, operations, strategy, market dynamics, potential threats and catalysts in the macro environment, and most importantly how to value what a company is worth, vs. what its shares are being sold for.

No, those two numbers are not the same thing.

We not only want to pay less than something is worth, but we want a margin of safety that minimizes our risk in getting our returns. We want a bargain and are patient and buy when everyone else has given up on the stock or the sector, and we make large profits because of that.

As a result of this consistency in being able to pick winning plays that make large returns, and know when they’re ‘on sale’, we’re often seen as something of purists. We understand stocks at a deep company level, not just as numbers on a screen.

But, if I had a nickel for every time I heard from other ‘purist’ investor’s how much they looked down on day traders …well, I could probably buy out Elon’s stake in Tesla, and have enough left over to hit that underwear sale at Walmart!

What they don’t realize is if you’re a bargain shopper who loves a deal, (like all value investors are) then you’re likely going to be a great day trader.

The reason for that is very simple, you’re looking for some of the same things. You’re just using a different yard stick to find them.

More on that soon.

So why did I start day trading? Something that is seen by the general public as about as risky as gas station sushi???

I’m glad you asked!

Investing has been good to me, and if you follow what I teach in my courses, I lay out how to be very successful at it. However, the returns can take a little time to accumulate as the market starts to realize why that value play you bought at a bargain, is actually worth more than what you paid.

So, what do you do while you wait?

To me, that only has one answer…make more money!

This was the situation I was in while waiting on stocks to fully value. In addition to my swing trades (more on that topic in a different post) I started to dig deep into day trading.

I started like anyone else, by researching it. And that… was eye opening.

The moment you type ‘how to day trade’ or similar into a search engine, you are inundated with how impossible it is, why no one makes any money at it, how its riskier than 10-day old seafood, and why the method you should use should conform to what big investment sites say to do or you’ll lose your shirt.

I tend to question everything, and the more I researched the more something wasn’t adding up.

It seemed odd to me that while all stocks moved up and down every day, there were so very few people who were able to capitalize on any of those movements consistently. If the stats off of Google, and various ‘name brand’ investing sites were to be believed, this day trading business required the luck of a Leprechaun to ever succeed!

According to them, only 1% of day traders are profitable after fees.

Really? 1%? I am something of a math nerd, and this number struck me as impossible given that 100% of tens of thousands of stocks go up or down enough to profit substantially from each and every day.

Something didn’t add up.

Either everyone who did this was hopelessly inept and should never be anywhere near the market, or the method they were using was completely flawed, or the stat itself was total bulls**t.

I concluded that it was a little bit of everything, ignored the stat, and focused on the ‘WHY’ it was seemingly so hard.

On that working premise, I started to come up with a way to capitalize consistently on the fact that stocks of all types have gains and losses each and every day, and that those movements were significant enough to make material dollar gains. I just needed to establish a repeatable method to be there when it happened.

First, I completely rejected the method that the major sites/experts all said was the ‘right’ way to trade.

Let me explain how I arrived at that.

According to them, you should not put more than a small percentage of your account into any one trade, set tight stop losses, and diversify your risk by being in a number of trades in different sectors.

Sounds great on the surface… but let’s break it down so you can see the flaws.

If I have a $10k account for example and divide that amongst say 8 trades, then the chances of having all of those 8 positions being winners is pretty much zero. No matter how good you think you are.

So, let’s say we have 3 wins, 3 that lose money, and 2 that pretty much break even. That’s more real world.

Well, because we’ve divided our account into such small bites, the wins will likely be immaterial, as most stocks even on a good day never move more than 1% or 2%, so in real dollars it doesn’t add up to much in gains. Then we have to subtract our losses, and our net gain gets even smaller.

So now, in order to make any real money, I’m forced into the position of having to go back into the market, which increases my risk of giving that small gain back just in hope of getting the gain I was after in the first place!

Worse, if I have a small account, my tolerance to that risk of loss is even tighter as I could easily blow up my account from nothing more than over trading.

No wonder no one wins in this method. Its virtually impossible to. 

The takeaway I arrived at? Diversification is great long term, but it is absolutely the wrong thing to do in day trading.  

So much for the method being espoused by the ‘experts’.

I then looked at behavioral errors, as it seemed obvious to me that with that many traders supposedly failing, the only common denominator had to be basic human behavior.

Much of technical analysis we see today on stock charts is actually the visual representation of human behavior that Charles Dow first recognized the patterns of in the early 1900’s….and human behavior, particularly the mechanics of fear and greed, doesn’t change.

So, armed with all of the above I started to test my theory and home in on a set of trading rules that would keep my own behavior in line.

As successes started to build, I narrowed that down to 8 core concepts.

  1. Enter a trade only at the bottom using a defined, repeatable system that can apply to any stock, and in any market.
  2. Go ‘all in’ on that position and never be in more than 1 or 2 trades at any time
  3. Use mental stop losses only, and don’t leave a trade unattended
  4. Follow a set of trade rules that govern when you enter, exit, and what to do if a trade turns against you to manage risk
  5. Set a daily target, and when you hit it…walk away.
  6. The less you trade, the more you earn.
  7. Set a core rotation of no more than 5 stocks you go to consistently
  8. Cut losses quickly

I established that if I buy the bottom (much like I did for years in value investing) but on an intra-day move, I consistently win. Further, I was able to develop a means of reliably seeing and capitalizing on this bottom regardless of the stock, industry, or surrounding market conditions.

Moreover, by going ‘all in’ on that bottom, (no diversification) I was often able to meet my target in just one or two trades. This minimized my risk substantially as counter intuitive as that seems, as I was putting probability on my side and…the less you trade, the more you keep.

I found that once you see how to find the bottom and the opportunity, you can’t unsee it, and you start to see the potential everywhere you look.

You feel like Neo in the Matrix!

Yep, I established that the way to make money every single day was to do absolutely none of the things the ‘experts’ said I should.

I detail all of this in full in my course, Learn To Fish Part II.

What I also established, was a way to make endless money, not just an occasional win.

That was huge!

Think how freeing having the skill to create an endless income stream you can access from anywhere, actually is. What it can do for you and your family, or your freedom?

As proof of how it works, I started my day trade account with $5k around April 2020, and using the method I established, it is now in excess of $500k as I write this in October 2021. I went from making about $100 – $200 per day to now making $3k to $5k a day on average.

That is a massive growth rate by anyone’s standard.

I also realized another truth.

Day trading was actually the safest form of trading if done right.

(Man! ….I hope that wasn’t a good shirt you’re wearing as I said that. I’m sure heads exploded everywhere….don’t worry, it will probably wash out…maybe.)

Forget the commonly held view that it’s risky or gambling or any of that nonsense put forth by people who have never tried it, don’t know what they’re doing at it, and if they did try it, they simply followed trends and alerts and very predictably…failed.  

Let’s get past all of that, focus on the why, and break down why it is safe, logically.

You, and only you are always in control. No one else.

Your position in anything is never subject to the whims or irrational decisions of others. And the market loves irrational decisions.

The value of your account when you close the day is the same as when you open it the next.  And, because you are always ending or starting the day as cash ready to deploy, you are largely immune from, but can readily take advantage of adverse changes in the broader market.

The method is designed to take advantage of the bottoms those adverse changes create. Leaving you to fully profit from them, without risking factors outside of your control

As all of this came together for me, and I was able to add to my investing wins with daily income that, on an annualized basis, was now in the hundreds of thousands, I felt like I found the Holy Grail!

This was endless money, in its truest form.

And now, I’m sharing it with you.

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