Making Money Without Predicting the Markets

For the past week, the stocks that have been selected produced incremental profits again. One stock in particular, SORC, which was shorted on August 3rd, has lost over 50% of its value since that time:


Two posts ago I mentioned a book I was reading called, "The Way of the Turtle". I'd like to touch on another theme presented in that book in this post. The author, Curtis Faith, makes the point that it is not necessary to know what a stock is going to do in the future to make money trading it.

Although Curtis Faith was not able to predict stock market fluctuations, he still made $35 million in profits trading. How did he achieve this? He did so by trading with an edge, by trading with the trend.

With the stocks posted on this blog, I have no idea if they will continue to fall, or continue to rise. All I know is that there is an inherent edge in trading with the trend, and if you trade enough trending stocks, you will come out ahead.

Think about how casinos make money. When a gambler puts a coin into a slot machine, does the casino know if they are going to lose or make money on that coin? They have no idea what is going to happen. But the odds are built in their favour, so that when enough coins are deposited into the slot machine, the casino will come out ahead.

The casino does not feel upset when a large payout is made, since it is simply the cost of doing business. The same applies for trading. Losses are unavoidable, and are merely the cost of doing business, which means that an experienced trader will not get emotional about losses.

Here is this week's trending stock (or ETF):