The Stock Market Academy
The only resource you need for deeply profound knowledge.
Think of trading the stock market as predicting a thunderstorm… no way I can tell you if it’s going to rain in 4 weeks, but I can tell you if it’s going to rain in the next 4 hours. But if you’re just beginning, or have yet to find long-term success, where do you even begin to learn new principles? I’m here to help.
There’s so much stock market data out there. And after years of research and trading, I realized only a few key data points really matter. The goal of this newsletter is to teach you those 5 things. With example after example after example, as they happen in real time. Delivered to your inbox. So you can sift through the noise, and focus on what matters. And learn how the stock market actually works. (believe it or not, you can DEFINITELY time the stock market; don’t listen to your professors).
In this newsletter, I will teach you market psychology, price patterns, price extremes, turning points, and determining the strength of a move.
Once you have these principles down, everything else is gravy.
I’ve distilled these principles down into 5 “pillars” we live by. Pillars of how to view markets, even if you’re a long-term investor. What you do with this knowledge is up to you. We don’t make trade recommendations, and probably never will.
My goal is to just show you the light.
With this newsletter, you’ll be able to answer questions like,
What is the underlying psychology of the market right now?
Are any patterns emerging that signal opportunity?
Are any price extremes signaling a reversal to the historical average?
Has power really shifted between bulls and bears?
And, what is the strength of this new move I just timed?
Most people can’t answer these. Heck, they don’t even know what to ask.
The 5 Pillars at the Stock Market Academy
Pillar 1. Mind of the Market. Identify and fade the herd mentality, by taking the opposite side of the general public.
Pillar 2. Chart Patterns. Spot obvious price floors and ceilings, and learn how people trade the “bounce”.
Pillar 3. Murphy’s Law. Discover trade setups where price — after going up or down in an abrupt manner — swiftly reverses short-term.
By analyzing the mind of the market, upcoming patterns, or price extremes, we next look for a shift in power.
Pillar 4. Shift in Power. Learn to discover when the bulls or bears wrestle control from the other, based on proven price reversal patterns. A shift in power is the final signal needed for entry to dive into the market.
Pillar 5. Authenticity. Know when the move you just timed is real or not, by analyzing breadth and underlying price momentum.
If you’ve made it this far, feel to dive in further below (warning: it’s very detailed).
Pillar 1. The Mind of the Market.
This newsletter will teach you to fade the crowd by understanding activity in the options markets. All you really need to know is that buyers and sellers act on fear and greed in the market, each at an extreme in the market. And each of their individual decisions and emotions make up what we call the “mind of the market”; a collective consciousness of all market participants, at any point in time. And that “mind” has a certain pattern, that often conforms to the nature of psychology (i.e stocks move in the same ratio as do the angle of petals on a sunflower, and the tides of the ocean. It’s called Fibonacci, Google it). It’s imperative that you believe an activity among humans with tons of participants, will follow a natural order of things. That is true in the markets, any markets and all markets. With fear and greed at the extremes. Think of the markets like a school of fish or a “herd” mentality. By analyzing the CBOE put/call ratios, we can identify whether the “herd” is crowded in one direction or the other. It answers, “are bulls about to fall off a cliff?”, but cannot answer “Where have all the bears gone?”. We teach you how to find opportunities to “fade” the public, and take the opposite side of the trade (similar to when you hear Vegas “moved the line” on a big sports game. Same idea, with very, very powerful data). WARNING: Without understanding trading psychology by analyzing put/call ratios, you stand no chance in successful trading in an algorithmic trading world. All trading is, an amalgamation of our emotions, systems, opinions, etc. boiled into one thing: price pattern behavior. The psychology acts in patterns that represent themselves on the charts. This is the #1 core tenant of our trading philosophies. Understanding market psychology, no matter what level you’re at, is absolutely imperative for understanding how to profit long-term. In other words, you cannot be a long-term successful professional trader without first understanding the psychology of every individual investor (and that is simply, fear and greed at the extremes; what happens in between is conjecture). You’ll be able to identify all of this in seconds, once you learn what to look for. Included in this section is trading psychology for self-control (how to acknowledge and extinguish, and trade in the zone, with feelings of greed and fear). Recommended reading: Mark Douglas’s books on trading psychology; any mention of Algos in Options Trading for Dummies by Joe Duarte (who is an M.D. by trade and fantastic author of Stock Market Timing for Dummies).
Pillar 2. Chart Patterns.
Chart patterns, like trendlines and support/resistance, are another phenomena of mass psychology. They are a very popular and powerful tool among traders everywhere. This is the proverbial “buy the dip” trading strategy. You simply “buy” the trendline or support. So imagine a stock price goes down. Many traders around the world plot “trendlines” into the future on their charts. As price approaches that trendline, they all “buy”. It’s “reflexivity” or “manifestation” as some would call it. By paying attention to trendline bounces we bring into existence the future. Here is how it works: When price approaches an up trendline, they act on it as price “hits” the trendline after a sell off, i.e. they buy. So you will often see a “bounce” upward, off of the trendline. Trendline bounces are great high-reward, low risk trade set-ups. Similarly, in a downtrend, you can “sell” the bounce off the upper trendline. If you see price approaching a trendline, and the put/call ratios are telling you the “herd” is at an extreme, you must be extra attentive for a counter-move. Remember, we’ll teach you how to identify opportunities to fade the crowd. Included in this section are chart patterns like the head and shoulders and double bottom/tops.
Pillar 3. Murphy’s Law.
What goes up, must come down. “Low volatility begets high volatility, and high volatility begets low volatility” (says John Bollinger in Bollinger in Bollinger). The calm before the storm, or vice versa. By knowing when price hit an extreme, and is bound to revert to it’s mean, offers significantly high reward/risk trade set-ups. With confirmation from price action, and momentum/breadth, knowing how to play volatility is key. This newsletter will teach you to identify volatility extremes (high or low), in order to identify reversals or breakouts. Often times, volatility extremes occur at trendline bounces, strengthening the signal. Positioning yourself for a big move in either direction (up or down) is a fantastic high reward, low risk strategy you can employ (more on this later). Better yet are reverals.
Pillar 4. Shift in Power.
Japanese candlesticks are very powerful price patterns between buyers and sellers, often signaling a short-term reversal. It’s like seeing clouds in the sky before a thunderstorm. You can’t say what the weathers going do in the next 4 days, but when a storm is brewing, you can tell me what’ going to happen in the next 4 hours with a good batting average. That’s what candlesticks do. Originating in Japan rice markets in the 1700s, an Emperor’s son used them to profit in rice trading. Steve Nison introduced them to the West in the 1990s, but not many people actively trade them. Japanese candlesticks are a plotting method that allows you to identify the high, low, open, and close (HLOC) of the stock for the day. By seeing the price action in between the open and the close, it becomes apparent when a reversal is likely to occur; especially if a Candlestick Reversal happens at Bollinger. Candlesticks are very, very, very powerful, not just because of their reliability in short-term move prediction, but because it at times feels like a license to print money, and that can have very damaging effects on your trading. Don’t be greedy. Just understand it’s an endless opportunity.
Pillar 5. Authenticity: Momentum & Breadth.
When stocks have been moving in a direction for a while, they may run out of momentum. And when breadth is “deep”, that means the sell off is almost over, or the buying has just begun. We teach you to identify these opportunities… when bears exhaust themselves by analyzing market breadth, and when a reversal or breakout is likely by analyzing price momentum. Very simple and easy to recognize tools on every chart.