The Hidden Trading Secrets of Wall Street (Part 4 of 7)
We've all heard it said "Can't see the forest for the trees..."
But is there anyway this could apply to our trades and how we see what is available to us?
The answer is YES! And it does in fact address one of the biggest challenges traders have: getting perspective on their trades enough to know where they actually are.
In this 4th installment of our trading secrets you will discover how to get the proper perspective on your trades so that you can identify the actual trend and the actual direction of the trade.
Here's What You Will Discover:
- Know your trading location
- How much time you need on a chart
- My personal story of how not knowing this lesson caused me to blow out my entire account!
Hello and welcome back to the seven trading secrets. My name is Jeremy Whaley. I'm your host. And we are continuing to work through
These secrets of trading
That will make you so much better, that the professionals don't even want you to know them because you're not going to need the professionals. Once you learn these incredible secrets. Now, in this particular secret, we're going to get into a secret number four, which is know your location, know your location. That might sound a little bit weird. What do I mean by know your location? Well, have you ever been lost in the woods? Never been out there like you're walking through the woods and you, you can't seem to figure out which way you're going, because everywhere you turn, all you see are trees. Does this ever happen to you? We bought some land a little while back and, uh, right after I bought the land, I decided I was going to walk around the perimeter of the property and, you know, see this new acquisition that, that I had purchased.
Well, I started walking and before I knew it, I was actually lost on my own property because I couldn't see any reference other than the trees themselves. And so I actually got my phone out and I was like trying to track with the GPS on my phone. Where was I? And where I finally ended up was a totally different piece of the property. I'm still not even sure how I got to that piece of property because I was lost in the woods. I was literally lost in the woods. You know, what's crazy about when you're lost in the woods. What's crazy about it is all we need to do sometimes is to zoom out just a little bit and we can realize that, wow, there's a road, there's a pathway. And for most people, that's what they're looking for in the market. Most people are just looking for the pathway, but they're looking in the wrong spot for some people, if they would just turn around, they would realize there's the road right there.
If they could just zoom out just a little bit. And sometimes we need to zoom way out. Sometimes with zoom is way, way, way out. And we realized that wow, turns out. We thought we were lost in the woods. And we were actually right next to the water. We were right next to maybe a major pathway. Most people don't fail to pick winning stocks because they're incompetent. That's just the reality. Most people fail to pick winning stocks because they lack perspective. This is such a valuable lesson that I kind of even need to slow down and let you let that sink in. People don't fail to pick winning stocks because they're incompetent. They fail because they lack perspective. That means for many, the difference in making money and not making money is not about new shiny strategies. It's not about the hot new stock that's going to go from $10 to a hundred dollars is not about any of that stuff.
That's so distracting. The difference that makes the difference for so many people that would make the difference is to simply get perspective. So let me show you a couple of examples here, and maybe I can drive this principle home. This is a stock chart right here. And if you look at this chart, you might be thinking to yourself, okay, that trade looks a little scary. It's run up and now it's coming down. And if you're like most people looking at this trade, ah, it looks a little bit scary. It looks like it's good. We're going to crash, right. Well, you wouldn't be wrong if you're like most people, at least it looks like it's going to crash. But what if we zoom out just a little bit, take the same trade and let's just zoom out a little bit. And ah, there's a little bit of perspective.
Now we see that this is actually a bullish trend and that is maybe reversing or maybe [inaudible] trend that might continue a little bit, but it certainly a lot different than when you're zoomed in. Right? So close that that's all you can see. And yet that's what most people do. You'd be shocked at how many people I get onto a zoom call with to do some private one-on-one coaching. And when they pull up their charts, they're looking at the first example, they're looking so close that there's no way they can get any perspective when the reality is on this stock, on this trade. Even this picture that you're looking at is way too close to really get a perspective we need to zoom way, way out. And then you realize, wow, this is actually a bullish trend that just totally gives you a whole new buying opportunity because it just pulled back and how it's actually ready to continue to the next wave.
Wow. Little perspective tells a big difference. Doesn't it a little bit of perspective. I'll tell you a personal story on this back in 1999, a little bit after my first trade where I lost some money, I, um, decided to trade a little stock called Cubist pharmaceuticals. Now Cuba's pharmaceuticals was at the time, uh, only trading for about $7 a share. And I didn't have a big trading account, but I had enough. I had a little over $2,000 in my trading account and I was really excited about this particular stock. And I was excited because I'd seen some people talk about it and they kind of pumped it up. And this is in the middle of the.com boom. So pretty much everything was going up. And now you have to understand at that time I, um, you know, we didn't have cell phones the way we have them today.
We couldn't trade from our phone. I didn't have a laptop. I was actually still in college. And the only access to the computer I had to get to my trades was actually in the college computer lab. And so between my classes, I would like run to the lab and I'd log in to my trading account. And, uh, I was trading with a broker called sure trade at a time. And if I remember, I think we were paying $9 per commission for that, you know, today we'd love to have a $9 commission, but back then, those were really cheap. But we were like, Oh, this is so great. Uh, those, you know, the early days of online brokers. And so I had bought this stock Cubist pharmaceuticals, and I bought it for about $7 and 85 cents a share roughly in that price, maybe it was 70, 75 or something like that.
And this was my first time that I actually traded with margin. Now, if you've never traded with margin, then, um, you probably don't know some of the pitfalls of margin. I certainly didn't. I had just heard about it, but here's the bottom line. Whenever you trade the margin, you can get twice the buying power. So, you know, I put up the money for a hundred shares, but I got 200 shares and I was all proud of myself here. I'm trading on margin. I, you know, I'm really trading some pharmaceuticals. I mean, these are, these are going to be really big, right. And so, you know, I, I placed this trade and I'm in a total excitement about it. And, you know, I watched the trade, I go to class, I come back and it's up a little bit, it's up to like eight, 15, eight 30.
And I'm like, Oh yes, that's it. That's it. You know, this is going to be really, really big. And of course I had 200 shares, so it was really starting to move and I had a couple hundred dollars profit. Then I go to another class and, you know, the stocks down to like $7 and 40 cents. And then I kind of freaking out, I go to another class. Well, the bottom line is I I, between classes and all this stuff, eventually I sold and I sold it a loss and the loss was big enough that it messed up my ability to trade on Mark. Okay. Now fast forward or just a little bit. This was in like maybe October of that year, roughly might've been September. I can't quite remember, but it was in the fall of 1999. And, um, just, just after I finally sold out and I wiped out my account because I lost all this money on margin and it was all because of an emotional decision literally by Christmas of that year.
So within two or three months, this stock that I had 200 shares at less than $8 a share was trading at over $30 a share this stock went up by a factor of 200%. Like it totally blew the lid off. And it was actually a great trade. In fact, it went on eventually this company was acquired by Merck for over a hundred dollars a share. And I owned a couple hundred shares at less than $8 a share. But of course I missed out on all that. While some people made a ton of money, I blew an account out. And that was the first trading account that I'd ever blown out. I went on to blow out a couple other trading accounts, cause I didn't know some of these secrets, but that was the first one that I ever blew out. And later in hindsight I discovered is I freaked out because I was zoomed in, I was zoomed in too much.
All I was looking at was that intraday movement. I was looking at like a five minute chart and I couldn't see the perspective of where the trend was going. I couldn't see the perspective of the stock and I could have just zoomed out and seeing the perspective instead of losing my account and actually going broke, I could have actually made three times the amount of money I've put into the trade. That's the difference? That's the value of getting some perspective. And this is a really valuable lesson. It's something I learned early on. Actually I didn't really learn the lesson until maybe another two years when I finally learned the lesson. Um, but once I understood this lesson, I never forgot it because what I learned is we always want to take a really, really big picture so that we can see the complete perspective. And then we can zoom in.
There's nothing wrong with zooming in, but you need to know. So your location, you have to understand where you are in the big picture so that we don't find ourselves fighting the trend so that we don't find ourselves trying to place that bearish trade in a bullish trend, trying to place the bullish trade and the bears trend fighting the market, fighting the momentum, power versus force, the same stuff we talked about in secret number four. Um, so your number. Yeah. So your number three, excuse me. Um, the same stuff we talked about in yesterday's video. So you don't find yourself doing that. One of the secrets is to out, this is so, so valuable. Sometimes it's not just, you know, six months, it might be a year or two or three or four before you can really see the full perspective of the trade, but once you zoom out and once you have that full perspective of the trade, now you can come back and you can be more surgical about it.
And I promise this is going to be one of those secrets that absolutely will help you be such a much better quality trader. Okay. So that is the concept of knowing your location, zoom out, don't get so narrow focused that you can't see the forest because of the trees don't get so narrow focused that you can't see the road right behind you because you didn't turn around and look at it or you can't see the complete path because you just simply didn't zoom out enough. All right. That's secret number four and Oh, secret number five is coming up. You're going to absolutely love it, but you know what? This is it for now. So maybe review the video if you need to, and I'll see you on the other side,