Warning: Following my trades may be hazardous to your financial health. See Disclaimer.

Monday, May 14, 2012

On The Coattails

Over the years, I've subscribed to numerous investment and trading services, and followed forum posters and financial bloggers.  Yet I find myself constantly phasing out the old and ushering in the new.  Why?  Because none of them consistently work to your satisfaction!   Most of them out right caused you to lose more money than you would have otherwise.  Some of them don't fit your trading style -- pumping-and-dumping penny stocks , making too many trades, making too few trades, etc.  Sometimes, you feel betrayed by some posters because they did not post when they bailed, leaving you holding the bag.  Most posters look impressive and make calls like geniuses when the market goes up, but when the market corrects, all of them suck wind.  There are exceptions, but they are hard to find.  I am equally guilty if any readers make trades as a result of reading my posts.

As hot as the_real_fly was in the beginning of this year, every single move he made in the past month has been wrong.  His calls on YELP was particularly disastrous.   I wrote a post earlier this year on "mean reversion" as applied to one's trading success (see here).  At the rate the market is going against his longs, my theory may actually come true, that the_real_fly is going to lose most of his 20% year to date gain soon.  UPDATE: Fast forward 3 days later, he is now up 6% year to date.

TraderFlorida has been hot since I've "monitored" him over the past months.  He's calls on AAPL short has a success rate of 95%.  But should I be leery if I start following his trade that thing would start going wrong for him and the market starts moving the_real_fly's way?  You bet.   The proprietary long term indicator called the market top and the bottom with 100% success rate, but 7 months ago when I finally decided he's got the market edge, Operation Twist started and his leading indicator went upside down.  As a result, I lost big over the grueling 6 month shorting when the market had one of its biggest rallies in history -- all because of the false confidence level based on the leading indicator's past performance.

There is no holy grail on the coattails of others.  You must own your trades, even if you get in because of someone reputable. That means you still have your own target and stop loss in mind.  That's my two cents for the day.

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