How to not be Fooled by the Stock Market

The stock market is no longer simply about buying stocks you believe in and selling those you don’t. Today’s stock market is full of promotion and false statistics. This is the negative affect of the information age as many people have used these mediums as a way to spread lies that play into their personal agenda. This, though wrong, can’t necessarily be stopped as everyone has a right to say whatever they please. However, what we can do is educate people on how to not be caught up in these webs of bad statistics. 

One of the biggest scams going on in the investing world is “the perfect trade” scam. Basically, websites will get massive lists of people and send them their “magical” stock picks. Then the people on the list of the winning stock are split again and another pick is selected for each group. This goes on until people are willing to pay for these picks and the scammers run away laughing all of the way to the bank. This scam is talked about more in depth here. http://skepdic.com/perfectprediction.html. These people are able to skew their statistics by being incredibly selective with who they email, and by the end it looks like they have a 100% success rate and people are willing to give them as much money as they want. 

Instead of trying to find the magic key to success, you should spend your time learning how to invest properly long term. Sites such as Mike Swanson’s site. http://wallstreetwindow.com and his short selling course http://wallstreetwindow.com/beta/posstocks.htm teach you how to invest rather than just giving you the “key to success”. The goal for you, as an investor, is to look for sites that educate and possibly make life more difficult for a short time, while you learn, rather than finding sites that say they will solve all of your problems in one go. 

I personally just went through the course with a fine tooth comb and I have to say that I learned a lot. I went and backtested some of the things he discussed in the course and developed my own screen based on Mr.Swanson’s principles. These are the results.

That’s a perfect short strategy! Our backtester only takes on long positions, in this case, the more money we lose the better and we’re really close to the 100% mark.  Now, these results weren’t found using any magic formula by Mr.Swanson,  instead they were found through the implementation of the ideas presented in the course. Now, it doesn’t necessarily have to be through his course that you learn. Really, as long as you are learning and the information is reputable it doesn’t matter where you get the information.

About Aaron G

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2 Comments

  1. Aaron G Eric Darnel says:

    I am curious if you would make public your screener?

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