DeHaemer’s 55 Rules of Trading Part 4

DeHaemer’s 55 Rules of Trading Part 4

I’ve read hundreds, maybe even thousands of investment books over the years. What has struck me is that in almost everyone there are one or two chapters at the beginning about how to make money in equities.

You diversify, you use time to your advantage, you don’t bet everything on one idea, you husband your wealth and take calculated risks. Most of these chapters essentially say to put money into your 401k every paycheck and let time and interest make you a millionaire by the time you are 48.

And they are right. The average historical gain of the S&P 500 index is 11% a year. If you have a long-term outlook and start investing at 20 at 60 – you’d have $4.6 million.

The real trick is getting to your first $100,000 as soon as possible. After that, you need to get to $400,000. That’s where your investments really start to take off, and if you are young enough, you don’t really don’t have to put anything else in as your returns will be larger than your contributions.

All of that said, that’s not how people like Warren Buffet did it. No, he made big bets on high-confidence investments that paid off huge over decades.

He also sits on cash when stocks become too expensive and has tremendous patience waiting for value to come to him. Like a pitbull with a bone, he won’t let go even when others are making tremendous money on high flyers and market darlings. Warren knows that at some point, the market will come to him with incredible deals.

Because at the bottom of markets, cash is king and those with cash get to call the shots.

That said, you should know that all of Wall Street isn’t against you so much as that they are for themselves.

However, since it is a market, that usually means that when they win, you lose. Keep a weather eye on the sharks and charlatans.

Here is part 4:

Rule #31: There is no correlation between consumer confidence and the stock market.

Rule #32: Analysts from brokerage firms have bought and want you to buy.

Rule #33: Analysts from brokerage firms are selling and want you to buy.

Rule #34: Analysts from brokerage firms want you to sell so they can buy.

Rule #35: A Chinese firewall is as useful as a Chinese fire drill.

Rule #36: Watching CNBC has never made anyone any money. They cheer when markets go up, and sling doom when it is down. This is the opposite of how good traders think.

Rule #37: The only sure way to become a millionaire in the markets is to start out a multi-millionaire.

Rule #38: You are not Warren Buffett. You will never be Warren Buffett.

Rule #39: Successful options trading is like walking in front of a slow steamroller and picking up dollar bills. You can make a lot of money, but you have to be fast and consistent.

Rule #40: The idea that 90% of options expire worthless is a myth. According to the CBOE, between 55% and 60% of options contracts are closed out prior to expiration.

Rule #41: Visiting companies and talking to CEOs makes me overly optimistic about those companies. The media is the same way.

All the best,

Christian DeHaemer

Outsider Club

DeHaemer’s 55 Rules of Trading Part 4

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