Trading and investing are the processes of buying and selling financial assets for an anticipated profit. Before describing this process in detail, it is worthwhile asking a certain number of fundamental questions for a good understanding of the concepts associated with trading and investing.
What is the ultimate purpose of investing and trading? The answer is to make money, period. How do we make money? We do it by buying low and selling high or by Shorting, meaning selling high and covering (buying) low. How do we know when the market is low so that we could buy or cover, and high, so that we could sell or Short? These are excellent questions. How do we know the right timing for buying and selling the financial instruments? The main purpose of Money Printing Strategy is to answer these questions as specifically as possible.
The cause of making money is not the price we pay to buy something but the delta (difference) between the price we sell and the price we buy. Do we agree on this? It is essential to understand that the delta matters, not the buying or selling price alone. For example, when someone says, “the price is low,” he expresses an extremely bogus statement. To be more accurate, that person must also say the predicted selling price to enable the assessment of the associated delta. Now we know that the deal could potentially be profitable. Even this statement is quite bogus. How profitable is it? We still don’t know how long it will take to sell the item for a potential profit. The profit won’t be the same if it takes one month to sell the item or five years. We know that the invested money could alternatively bring interests if deposited in a “safe” bank account. Now, even if we know the buying price, the selling price, and the duration, the deal would still bear some uncertainty because we don’t yet know the level of risk. In other words, what could happen if the deal brings losses and if so, how much?
The main objective here is to understand that if we want to make profitable trades, we need to know (1) the buying price, (2) the selling price, (3) the duration, and finally, (4) the potential losses.
Now this statement is complete and accurate. Anyone can independently calculate the deal Reward-Risk Ratio and subsequently may decide to take or leave it.
Any advice that would recommend you a financial investment with a statement in which at least one of the previous four elements is missing, should be treated with skepticism. Let’s be logical. Would you buy a car, if you know that it is not finished and ready to drive? For example, if the tires, steering, breaks, engine, or the fuel tank was missing? Well, regarding trading, if you are unable to calculate the Reward-Risk Ratio of a proposed investment, it is like buying a car, which is not ready for driving.
You may now implicitly guess the main goal: There are good brokers and excellent financial advisors out there who know precisely what to recommend to their customers. However, some advisors may misuse the lack of knowledge of their clients and may propose deals that are profitable for themselves, not for their clients. Do you personally know a professional of such kind?
Personally, I feel shocked each time I hear from renowned financial experts when they answer the question “where the market is going for the next month?” by “I don’t know,” and immediately adding, “no one knows the answer.” The Money Printing Strategy experts do know the answer quite often. Sometimes the Money Printing Strategy doesn’t know the answer due to unclear or conflicting signals. In this case, the Money Printing Strategy would recommend to staying away until the signal is clear enough.
When some experts say, “you invest now and in ten years the markets will be up,” this is a naïve and irrelevant answer. You could possibly get such answers for free from a good friend who has never invested in the financial markets. With such kind of answers, you can be quite sure that those experts are making money through commissions they get from your business, not by trading or investing for themselves. Furthermore, by following their customary advice to “invest now,” you can be quite sure that the probability of getting a good value for the Reward Risk Ratio of trade on that specific date, would usually be poor.
There is a good reason behind why “they don’t know” and why they say “no one knows the answer”. This is because they are using the fundamental analyzes for their predictions. While fundamental analyzes have the potential for now and then to predict the future market trends, they are unable to predict the date or price of the market trend reversals with enough accuracy to enable profitable trades in the long run. The main reason is that fundamental analyzes may take into account dozens of different qualitative parameters that cannot each be objectively quantified.
The main purpose of Reward-Risk Ratio is to determine the short time windows when the reward is maximal and the potential losses, minimal. As a consequence, you would open or close positions only during those specific windows. If an opportunity is missed out, then you would have to wait for the next time window. The Reward-Risk Ratio rejects recommendations of experts when they always say “buy now” for the simple reason that the weak ratios provide a “No-Go” signal for the criteria number 16 of the trading checklist. The goal is precisely to prevent the opening of risky positions. With this knowledge in hand, you could easily challenge the professionalism of trading or investing advisors. When watching the CNBC or Bloomberg, I often wish their hosts could initiate a conversation regarding the Reward-Risk Ratio or accurate timing for opening or closing trading positions…
Another argument often used by some financial advisors, traders, or investors to demonstrate their professionalism, consists of saying that they have been in this business for 20, 30, or sometimes even 40 years. While this argument may be objective, it is irrelevant what concerns the performance of the strategy they use. Using the S&P-500 as a fair reference of their past performance is bogus too. When the S&P-500 gains 10% over a year and the professional 15%, she or he is indeed beating the S&P-500 by 5% and her or his portfolio grows by 15%. However, when the S&P-500 loses 10% over a year and the professional 5%, she or he is again beating the S&P-500 by 5%, but the portfolio loses still 5%. True professionals demonstrate the performances of their strategy by providing objective and verifiable figures. Measurement of performances is done not by telling how long they are in this business rather by demonstrating the net gain per trade they have achieved since they started to trade. To calculate the net gain per trade figure, you need to know (1) the total number gaining trades, (2) the total number of losing trades, (3) the total number of trades, (4) the total amount of gains of gaining trades, and (5) the total amount of loss of losing trades. To calculate the net gains per trade, you subtract the total amount of loss of losing trades (of (5)) from the total amount of gains of gaining trades (of (4)) and you divide it by the total number of trades. The result represents the amount of net gain or loss of the strategy per trade. When a professional is unable of giving you any of the five figures, you may consider her or his statements as bogus. Again, would you buy a new car without a steering, fuel tank, break or tires?
True experts will tell you precisely, (1) the predicted pattern of the market for your interested financial instrument, (2) the date or price of the Support level, (3) the date or price of the Resistance level, (4) the position opening price, (5) the position closing price, (6) the potential duration of the trade, (7) the level of risk (loss), and finally, (8) the strategy to manage losses.
Money Printing Strategy provides a detailed description of the processes that leads to answer those questions for the Dow Jones in terms of (1) trends, (2) patterns, (3) prices and (4) dates and durations in chapter 12. Figure 12.3 summarizes and illustrates the outcome for the market trends until the end of 2019.
You will find the measurement of the MPS performances through MPS Performances by Using a Demo Account.
The Money Printing Strategy TradeAlerts (TA) services provide regular trading recommendations based on the Money Printing Strategy.
A major goal of the Money Printing Strategy is to increase your awareness to think for yourself independently and without the need for external advice.