Manage episode 259643129 series 2134820
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This is a short little episode that can make you a ton of money if you do the work. What I'm talking about I call trading triggers. A trigger is, something happens which results in something else. Basically cause and effect. Right? For example, if I lay down in my bed, I will fall asleep. Cause and effect. If I eat McDonald's every day, I will get fat. Right? Cause and effect. It's pretty normal. It doesn't necessarily mean it's going to happen every time, but it happens most of the time. There are lots of things in economics that are cause and effect related, such as supply and demand. Right? If there's too much supply, prices will go down. Too much demand, prices will go up. That's cause and effect. Trading triggers are events that happen in real life that we can capitalize from, because these events happen over and over again, and the reaction of the markets is usually the same.
For example, I'll give you a trigger that I have noticed works almost every time. That is, whenever there is a hurricane, and of course hurricanes happen often, not every day, but they do happen often, the price of wood or lumber will go up. Because if there's a hurricane and there's destruction, they're going to need a lot more lumber than anticipated, so that's going to increase the demand, and the supply stays the same, so that's going to raise the prices of lumber. So many times in the past when I have seen a hurricane that is going to be doing some damage, I've gone into the futures markets and bought either lumber or lumber options, call options, betting that the price of lumber will go up. Hasn't always happened. Maybe there wasn't enough destruction, or it was already anticipated and priced in, but many times I have made a pretty penny.
Now, I can't make a living trading this one particular trigger because there aren't that many hurricanes. Thank God there's not that many, destruction in the world. But there are many other triggers that happen over and over again that we can do some research on, identify, and then figure out what is the likeliest situation that's going to happen based on what's happened in the past. Right? Some triggers could be, what happens when the Fed lowers interest rates? That's happened many times in the past. There's a history there. We can do the research and figure out what happens. What stocks do best? What stocks get hurt? How can we make money off of this particular trigger? What happens in a bear market? Right? We don't get them that often, but when we do people know, bear market, it's a good time to buy. That's a great trigger right there.
Stocks are down. Buy more shares. Now, that's the opposite of what most people do. Most people are selling into a bear market because they're afraid. But any guru will tell you that you should be buying when there's fear in the streets, right, or blood in the streets. Fear in their eyes, or whatever. I don't know. Whatever the saying is. But when people are scared, that's when you should be buying, because that's when it's cheap. What are the other triggers that you can identify, and maybe there are triggers that you know that nobody else knows. It might be related to your industry. It might be something that you have noticed, or you have experienced in the past. Identify some of these triggers. Do the research. What happens most of the time when this trigger occurs, and figure out a way, based on what happens, figure out a way. How do you make money off of that?
I've shared mine with you about the lumber. Feel free to use that, and if you identify some, I would love it if you would share them with me. Right? If you notice something ... This is one of the reasons why I say that you need to have a watch list and you need to focus on the companies on your watch list, and trade, the majority of your trades should be on the companies in your watch list because you're going to develop a sixth sense, and you're going to start seeing triggers based on that company. If they have, for example, earnings announcement and they don't do so well, you're going to know how the stock is supposed to behave because that happens every quarter. Right? You'll see that happening. You'll know how the stock is supposed to behave.
If it doesn't behave the way it's supposed to, then maybe the trigger's broken, and you need to get out of that stock, or the stock is broken. That's one of the reasons why I tell you, make sure you have a watch list. It's very important. Please do not be out there trading every single stock in the universe. Okay? But what are the other triggers out there? Find them. Identify them. See what happens. See what the result is, what the effect is when that trigger happens. Some other examples of triggers could be ... We already talked about natural disasters. We already talked about bear markets. We already talked about the Federal Reserve and interest rates. It could be related to seasonality. Some people say there is seasonality in the stock market, so seasonality with oil. Every year in the summertime people are driving more, so gas prices go up.
That's one type of trading trigger that you could be trading. That's a very common one that people know about. But that's an example of what you could take advantage of. So if you're in the oil markets, you probably know this, know more details about it than the average person. If you're in the furniture business, maybe you know some trading triggers that are related to furniture that nobody else knows. Maybe you are in the medical business, and you see an uptick in, or you've noticed that there is a shortage of cotton swabs. I don't know what that could mean. I'm not in the medical field, but if that happens, maybe you could do a little research and say, "Okay. Why is that happening? What's the effect?" Maybe that means that people are getting sick. Maybe the shortage of cotton swabs is the effect and the cause is that more people are getting sick, or there is a particular disease that they're getting sick with.
Kind of like the COVID-19, the coronavirus. Right? A lot of people getting coronaviruses. What's going to happen? Well, we're going to need more face masks. We're going to need more ventilators. Okay, so who's the company that makes the ventilators? Let's buy their stock. 3M is the company that makes the face masks. Let's buy their stock. Right? Procter & Gamble makes Charmin toilet paper. Let's buy their stock. Coronavirus definitely was a trigger. Based on that, it impacted the economy in several different ways. We've all lived through that. We've all seen it happen. Heaven forbid there is another virus, there is another outbreak of corona, or a different type of corona. You can be ready to capitalize on this. Now, please don't send me hate mail telling me that I'm profiting off of other people's illnesses, and disasters, and all this stuff. These things are going to happen anyway.
I'm not praying for them to happen. I don't want them to happen. But if they are happening, as investors and traders, our job is to make money from what happens in the world, good or bad. That's what I'm trying to educate you on. So identify as many of these trading triggers as you can. Have them on a list. Make a list. Keep it by your desk. Whenever you see one trigger going off, what's going to happen? What and how do we profit from it? If you identify some, please, please, please share them with me. My email is firstname.lastname@example.org. I would love it. I'm trying to put together a massive list. I might even come up with a product or something like that where we'll share them with people. But for now, I'm just trying to come up with some for my own, and if you could share yours, that would be wonderful. All right? So find your triggers, start making some money. Remember, trade with the odds in your favor.
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