Come with me if you want to live

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“Come with me if you want to live.” – Arnold Schwarzenegger, Terminator 2

When I was younger, I could do anything.

I could do anything because I tried nothing of significance.

Everything I had done up to my early twenties had a safety net of some kind.

In my twenties, I thought I would be invincible trading the markets.

Those fancy Wall Street types didn't know jack shit about technical analysis, that's why they were “only” making 20% a year.

Seriously, that's what I thought.

The first time I read Market Wizards, I squandered the valuable lesson — that 20% a year returns over a decade or more were EXCEEDINGLY rare.

Little did I know that teams of scientists were already using machine learning in the 90's to beat the markets and make billions.

In fact, one guy saw an even bigger opportunity and quit his cushy machine learning job at major hedge fund to start a little company called Amazon.com.

You may have heard of it?

So here I was, armed with a few silly books on technical analysis, a brain full of get rich quick motivation, and the dreaded foreshadowing of working as a corporate drone for the rest of my good years acting as lit dynamite to get my ass in gear.

Just because you put on a cape and tights doesn't mean you can fly.

I promptly lost my borrowed nest egg of a few thousand dollars.

Poof. It was gone.

Markets don't give a flying F about you. They don't care about your feelings or bills you have to pay.

It doesn't have a problem with making the rich richer, and screwing over the vast majority of people at major turning points.

It's the damn Terminator if you turn your back for a second.

So don't forget what you're dealing with.

The moment you let your guard down, Skynet the market will try to waste you like your name is Sarah Conner.

Right now the market is going up, and milestones are getting hit often enough to lull the masses into a false sense of security.

Overconfidence precedes carelessness.

Obey your stops.

Take the trades you're supposed to take and nothing more.

Trade only what you can test.

Only fools turn short-term trades into long-term liabilities.

Even bigger fools average down.

When the music stops, park your butt into a seat and stay there.

So far, one of my music players has ground to a complete halt — the SMI's.

They don't like stocks or bonds. Not even less risky short-term bonds.

The SMI strategy is in cash.

Which right this moment doesn't seem smart at all.

It went to cash too early after a great multi-quarter hold of SPY in 2017.

Nothing is perfect, but that doesn't dismiss the fact that there are glaring internal problems with this rally that on average (80% of the time) result in a decline.

Other music players like Atlas Order, DB Transactions, and Value Swing keep trucking higher and are giving zero warning of impending doom.

Then again, they require more attention and offer more complexity (and higher reward) than the SMI.

But no matter which strategy you are trading — yours, mine, or others — make a commitment to it…and never ever let your guard down if you want to survive in this business.

Trade smart,

Dan “Prince of Proof” Murphy

PS. It's Sunday…let's leave this conversation on an up note with some memorable quotes from Arnold. Click here