Bots and AI running the market - how to cope
For years we knew that a majority of trades on the stock market were automated computer programs by various entities. Now that they've loaded these machines with AI we're seeing a known phenomenon in the market. The phenomenon is about what happens when to AI computers talk to each other. Over time the messages get warped, unrecognizable. Images morph into something that doesn't make sense. That, in a nutshell, is our stock market. Good news is often followed with a selloff. Last night I heard about the Fed not raising rates so I bought at the open today...rolling the dice on something that has been predictable for years. But, my method on stocks is very different than what served me well over the past 30 years. I practiced trend following. I know some here are familiar with the Turtles, etc. Focused on price action. It was pretty strong for a long time. Now I'm trading within daily changes. I don't like it because it takes work, daily. A young engineer I hired is very good at writing executable scripts that are autonomous. He's a sharp kid. But, he sees what I see....what worked last month does the opposite now. The bots are garbling the narrative continuously. Now my take is pretty simple. If I can make a few hundred dollars in a day on a trade I take it. Like a little piranha taking a lot of little bites. It's tedious. The only rule I've really continued to cling to is political intelligence. Everything else isn't trustworthy anymore. Good earnings report? Get ready to dump it. CEO change out? Probably going to get turbulent. Poor earnings? Look for an opportunity. I will say...the old "buy the dips" can work as long as you're willing to risk "catching a falling knife". The only options method I've given any consideration to is the long straddle with something like Moderna. If there's one thing that stock will do, it's move. The indexes have been good and probably the only thing that young, busy people should buy....But, always set stops. The completely passive long-term investment method seems to be over. Which is sad, really.
Just my thoughts over my coffee this morning before I do a little work....
Just my thoughts over my coffee this morning before I do a little work....
You STOP wondering how they knew where your stops were.
I won't trade because the markets are so artificial.
I told my daughter. Buy the index ETFs. Dollar Cost Average.
And if you want a slight advantage and you are long term. Buy on the second down day.
For example, if you set aside $100 /mo to buy. You only buy $80 worth, save 20% for the down day strategy. (more if you are young and aggressive).
Then I explained why it works:
1) The markets are RIGGED to go up. They swap losers with winners to maintain it.
2) The market is MOSLTY an inflation hedge. (Why do you think they are BORROWING money and spent all their cash on AI... Because they are getting rid of paper about the be set on FIRE with inflation, and they would rather hold debt and assets)
Now, the best thing is to just buy. Don't Trade. Rebalance.
JPMorgan did an analysis. They found that the people who performed their best, were the ones who lost their passwords, and simply held.
steal your investment because they can see every stop.
As the computer said in Wargames
"A strange game. The only winning move is not to play."