Have you ever had these thoughts
- Why does it always go down after I buy?
- beats earnings and still down.. wtf
- terrible earnings and up.. huh
- good news and down… come on
- bad news and up.. this seems rigged
- I always lose
Have you ever told someone about your amazing gain but not reveal that you bought in way too early and your $1000 gain was only really a $22 profit?
Have you ever bought at the absolute top every single time?
Have you ever sold at the absolute bottom every single time?
Alright, here's the secret. The market is “rigged” in a sense. Probably the best comparison is to a carnival game. You have a chance to win and the carnival really doesn't care if you do because people seeing you walk around with big prizes just brings in more suckers. Don't get me wrong, as someone who took a $15,000+ loss during the gme trade restriction day I agree the market is probably more rigged than we know, but either way.. here is what you need to understand.
The reason you suck at trading is because you're always reacting late. You're literally trading against algorithms, and the people profiting from your dumbness are enjoying their boats and big houses while you go to work and provide them with cash flow to pay for it, all while getting ripped off by massively underselling your time.
Okay, but why am I always reacting late you might ask. Well, you need to think in terms of psychology and remember that it's a big fucking club and you ain't in it. You're getting the information late. So let's build a little story example to help understand. My company is named “42069” and we are a successful company trading at $10/share but used to be $20 and we are about to make a huge deal with an even bigger company (“69420”). A deal that is going to massively boost 42069's share price. Anyway, the important part to understand here is that THIS DEAL DOESNT HAPPEN OVERNIGHT. So in this story the ceo of 42069 was out at a rich dude party and at this party, this ceo meets someone high up the ladder (big shareholder) at 69420. Well after talking, turns out big shareholder sees an opportunity. Fast forward months of talking and meeting and lawyers, and a deal is made that will be announced Monday during the pre-market. Pre-market opens on Monday and price for 42069 is $22 per share, up from the $19 it was at on Friday. Boom Market opens you smash that buy button and maybe even see a pretty sizeable profit, but suddenly, boom. It drops, lots.. but that's okay right, it has to go back up. This deal is amazing for 42069, you think. Well, you're absolutely right about it being an amazing deal. Problem is so did all the people that got the news way faster than you.
Now let's look at our examples share price. At $10/share. We'll also jump to about two weeks after the rich guy party and mr vip shareholder has told all his very close shareholder friends his idea and they all see $$$. So now all the VIP's at 69420 are in the know, and they are gonna need lawyers, so now let's add some more mouths. As you can see where I'm going with this. People talk. So now, 1 month after the party, 42069 is trading at $13/share. And guess what, you're probably looking at this stock thinking “wow, I should buy but idk.. it's up a lot so quickly and I don't want to lose again.” So you don't buy. Meanwhile, our big company is now approaching our small company with a deal but they need time to review and counter and discuss, and now our example company is pushing $14/share, but you're still hesitant because it's up so much.. meanwhile the technical analysis community flags this movement and now they know something is up. They don't know what because remember, they aren't in the “know” but they can see it. Now our price is bouncing from $13-14 to $15-16 because more people are getting added in the “know.” So, here you are thinking ugh.. if it breaks 16, I need to buy before I miss out, and suddenly, boom, it hits 16.10 and you buy in only to watch it go back down to $14, where it will stay for a bit. Why did you lose in this scenario? Because everyone else was thinking the same fucking thing as you. Okay, no big deal right, I'm not down much, you say. I'll buy more you think and you add some money to your account and hit that buy button. This is it, the moment you've been waiting for, everything is going to be amazing you think. See, all these meetings the two companies have been having has drawn attention and people are starting to put things together, and the news agencies are trying to piece things together so they can get a story out. Meanwhile the share price is now at $16, and you've made a little money at this point, you can see it going much higher than $17, so you sell as the price is now at 16.80 only to watch it shoot up to $19. “Wtf,” you think, so you buy in thinking you've missed something only to watch the price drop down to $15. Fuck it, you think as you angrily click the sell button losing all your profits and more. Only to watch the stock cruise to $19 per share over the next week. See, during this time where you were anger selling, people in the “know” were talking to the media and things are being leaking and sources confirmed which means the big pump and dump you saw was a new group jumping in trying to get in early while and even older group just realized some big profits and then bought right back in again for pretty much the same price as before. Now you're sitting there all weekend looking at the price thinking “fuck fuck fuck fuck fuck” and suddenly you hear about a deal to be announced on Monday. Problem is you can't buy until after open and you're already angry. So, premarket on Monday comes, deal is announced. Price is soaring $22 at open. By the time you even click the buy button and get the order in you end up paying $25-26 per share, and watch it run. “OH boy, this is it,” you're thinking and see it go to 28 before a quick drop so you buy more and now it's off to $29, then $32. You're beyond thrilled only to watch a huge drop to $27, but soon back to $29 and you buy more because it has to go back, right?… Wrong, your dumbass spends the next 7 months watching new lows all while you keep buying the dip and justify it as a long term hold.
To sum things up. You're losing because you're always late to the news. Wealthy people talk and text just like anyone. Billion dollar trading funds are tapped into literally everything. And psychologically, your dumbass was fooled into thinking $29 was an absolute steal, while only a few short months ago believing $13-14 was a bit too much.
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