TLDR:

There have been several classic signs of weakness in the markets over the last week:

• All US Sectors are down compared to a week ago
• Most stock markets globally are lower than a week ago
• All major currencies are down against the USD
• Bitcoin is down 1% and altcoins down 11% compared to a week ago
• Gold, platinum and other precious metals are up

This feels like a risk off scenario to me, so pay close attention and don’t be surprised if we see more weakness over the coming week. Of course it could be temporary and reverse – always let your trading systems do the work. Also make sure you have trading systems that will profit from extended weakness in the markets.

US Markets: The Nasdaq 100 Index is holding on for now – still moving sideways while the rest of the US market is slipping. Any more negativity and even the mighty tech index might start to slide as well. Sadly, nothing lasts forever, and this runup driven by big tech may be giving way to a correction.

The US market was down last week across the board – all indices and all sectors… so much for diversification right? Well if you trade multiple markets this can be less of an issue but sometimes the markets just switch to risk off for a while and we have to live with the correction.

It is important to keep perspective on the markets though as despite the correction last week, US stocks are still up very strongly over the past year… I see too many traders freaking out about short term moves and forgetting about the long term trends.

The long term trends are where the big money is. Trend trading works and is an extremely powerful wealth building strategy, but to capitalize on it we need to be able to sit though the short term volatility and not panic.

SIDE NOTE: I have had a lot of people ask me how I am producing these awesome dashboards of stock market performance. I use the XLQ addin for Excel which allows me to pull a wide range of stock / index / commodity / forex and other financial data into Excel. The cool thing is it can pull data from Norgate Data into Excel(which is what I have used for the table above) , Yahoo and a variety of other sources into Excel too. It is hugely useful for tracking your positions, open trade profits and a range of other reporting functions that traders need to do. Check out XLQ here and get a $50 discount.

Speaking of trend following, some strength in certain sectors of the ASX (see below) is giving us some nice trades in my ASX trend trading system – ASX only traders have had a rough couple of years so it has been nice to see some solid gains in our longer term ASX systems.

In the table below you can see the change on the week for crypto and also fiat currencies. Focusing on fiat first – It always concerns me when I see this sort of pattern. All the major currencies are down against the USD, which means there has been a flight to safety which is usually bad for risk assets like stocks and crypto. This is consistent with what we have seen in US stocks this week as discussed above.

You will also see that cryptocurrencies have had a correction this week, with the brunt of the correction. However again perspective is important – how big is this correction compared to the move of the past few months?

The chart below shows Bitcoin’s huge runup since the beginning of 2023, and in this context, the last week of correction is just noise (so far).

A critical message this week is to keep everything in perspective and not panic about short term fluctuations. If a week like this in the markets rattles you then you are probably using too much leverage.

Your Trading Psychology

One of the most challenging psychological biases I see in traders is the recency bias… and the propensity to chase the assets / sectors / stocks that have performed best recently.

One crippling way this manifests is traders getting up the courage to start trading, or launch into a new market when it is at all time highs. Then several months later they find themselves still in drawdown wondering what happened to their dreams of making money in the markets.

The lesson here is to build your portfolio of strategies for the FUTURE, not for the PAST.

When I develop trading systems I am looking for strategies that fill gaps in my portfolio, not strategies that profit from the hottest market or sector from the last month.

Aiming to develop a diversified portfolio of strategies like this ensures that you establish a well diversified portfolio that is more likely to perform well into the future and helps you avoid being in what feels like perpetual drawdown.

So the message is…

1. Don’t start trading a market just because it is at all time highs, and
2. Don’t start trading a system just because the most recent month’s performance has been super strong

These are a sure way to find yourself in drawdown.

Instead start trading a new market or system because it adds diversification value to your portfolio of strategies looking at the long term performance of all your systems.

Thus even though the crypto market has had a pullback recently (especially in the altcoins) it might be a great time to think about diversification from stocks into Crypto.

To further enhance diversification potential we have 9 different crypto systems (long term and short term, long side and short side)… Check out The Crypto Success System to learn more… and yes we can even show you how to fully automate your crypto trading!

Trading Tip

Over the years I have had many traders ask what is my ‘secret sauce’… the stuff that I don’t teach that has been critical to my long term success.

Whenever someone asks this question they seem to be assuming that there is some indicator / system / trick that I am holding back and not sharing publicly.

Well I am finally going to reveal my secret sauce here in public for everyone to see.

Are you ready?

It is PATIENCE

What?

Yes, that’s right, you heard me – Patience.

I am sure you are thinking “Damit, there must be some secret indicator that Adrian hasn’t shared that will skyrocket my returns if only he would tell me what it is!”

No – there is no secret indicator.

The secret is patience.

Here is why you need patience to succeed as a trader. You need patience to…

• wait for the signal to buy a stock
• hold stocks that are going nowhere waiting for an exit signal
• hold stocks that are shooting for the moon so you don’t bank profits too early
• hold stocks that fell as soon as you bought them but haven’t hit their stop yet
• try countless trading rule ideas to find the one that improves your system
• try countless trading system ideas to find the one that passes all your tests
• keep following your systems despite being in drawdown for months
• keep focus & discipline when you haven’t made a new equity high for months
• to work through your doubts and uncertainty so you can maintain confidence

I am naturally not a very patient person, but in the markets I am very patient… that is my ‘secret sauce’. Looking at the instant gratification society we live in there is no wonder most traders fail!

If you want to win long term then you need to cultivate your patience too. There is one thing that really helps with patience, and that is confidence! Confidence in your strategies, in your approach, in how systematic trading helps all make having patience easier.

The great news is that The Trader Success System gives you that confidence, so you too can foster the patience you need.

Warren Buffett was right when he said:

The stock market is a device for transferring money from the impatient to the patient

Welcome to trading where the answer is rarely what you thought it would be… but it is always what you need to hear

Member Wins

This week I want to call out one of our amazing Trader Success System members, Michelle D who is doing fantastically well – she has been following the courses in the Trader Success System in order, implementing along the way, asking great questions and generally just being a perfect student!

Michelle is fascinated by the markets and loves learning about trading. Whenever she doesn’t understand something she asks a question and she has a belief that she will figure it all out and will be successful.

Michelle I love having you in the TSS Community – well done on your progress so far and keep up the great work!

I know many of you have done other (non EST) trading courses and been disappointed…

Here is my promise:

The Trader Success System is the last stock trading program you will ever need.

We empower you to become a master of systematic trading and after completing our program you won’t need any other course ever again.

If you want to master systematic trading FAST, comment with the words “THATS ME” and I will talk to you about how The Trader Success System can help.

If you don’t want to learn fast, if you think you can get rich quick, if you don’t like math/spreadsheets/numbers/analysis, are scared of computers, are too embarrassed to ask questions or if you are not passionate about the markets The Trader Success System is not for you.

News and Announcements from EST

We are working on a bunch of cool things behind the scenes at EST, but nothing that is ready for prime time quite yet…

In particular we are looking at several more signal service options piggybacking on the popularity of our awesome Dolphin and Ultimo signals services.

Our next signal service to launch will be a weekly stock trend following system which will make live very easy for those of you who don’t want to do the work yourself but still want to benefit from trend following the fastest moving stocks on the ASX.

We also have several more crypto systems which will be available as a bundle in the near future… watch this space.

On the Home Front

Last week Stephanie and I spent two days working from the beach… I thought I would try out the stereotypical image of laptop at the beach trading that you might have seen from scammers on social media.

Of course I wasn’t doing any trading – my VPS in the cloud does all that fully automated and I don’t have to touch it. But I did do a lot of ‘thinking work’ as well as quite a bit for the Enlightened Stock Trading business. I won’t say they were my most productive days ever, but it was nice to have a change of scenery, and it did stimulate some creativity that I didn’t get sitting at my desk.

That’s all for this week – Remember the secret sauce – Patience – it will make all the difference in your results.

Adrian Reid

Founder – Enlightened Stock Trading