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The Factors That Impact Investing Success

Serge Berger is one of the first guests I had the privilege of interviewing and is THE first return guest on the show. Since the last episode, Serge is now part of a portfolio management business, Blue Marlin Advisors. They research, advise, and execute trades. Serge also runs The Steady Trader, where you can get daily trading tips based on his methodologies.

In this episode of How To Trade It, we discuss the importance of investing in the right asset class versus individual stocks. We talk about all of the factors that influence trading—including growth rate and timing—and where a new trader can get started. Don’t miss this wide-ranging educational discussion!

What factors impact investing success? @SteadyTrader shares his thoughts in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks #Investing #Invest #InvestmentStrategies Click To Tweet

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You’ll want to hear this episode if you are interested in…

  • [0:38] Serge is the first return guest on the show!
  • [3:00] What is an alpha type strategy
  • [4:27] How trading works with Blue Marlin
  • [5:47] The Steady Trader = Investment + trade alerts
  • [7:45] Where a trader should get started
  • [12:30] Timing is always a factor
  • [15:59] Allocation in the right asset class
  • [18:46] The basis for their analysis
  • [25:28] Rebalancing and managing a portfolio
  • [29:18] How to get a FREE eBook

Where a new trader should get started

Serge points out that some people like to pick up a book on technical analysis. Others like to go the fundamental analysis route. Others look at market structure. It depends on your personal preference. A lot of people start technically unless they come from a research background. Serge emphasizes that while it’s a good starting point, it’s not everything. Other factors must be taken into account.

The research they do is top-down—looking at macro factors, correlation factors, structural things, factor exposures, and of course the charting. A single factor model means your odds are reduced over time.

If you’re an investor, fundamental analysis will be more focused on a balance sheet. What are the equity ratios and debt to sales? For more proactive traders you may look at the rate of change, top line, or bottom line. You can trend-follow something over the years.

The growth rate is highly important

One of the most valuable things Serge has learned: Let’s say you buy Amazon stock. You’ll find it difficult to stay long when something goes parabolic. If sales increase at an accelerating rate you can stay long in that stock forever. The growth rate of the company is fundamentally important. It’s worth holding as long as the growth accelerates.

On the other hand, if you look at an industry like 3D printing, it’s a growth industry but it’s a niche. It will have more fluctuations than something like Amazon or Netflix. If you’re an individual trader, those moves can shake you out if you don’t know timing or risk management.

The growth rate is a highly important factor to consider when investing. Hear @SteadyTrader thoughts on the topic in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks #Investing #Invest… Click To Tweet

Timing is always a factor

Serge believes one of the biggest challenges is keeping your time frame right. If you’re a day trader looking at the fundamentals of the company and you’re bullish for 30 minutes, you’re comparing apples to horseshoes.

If you’re long a swing trade—you buy Netflix because you think it’s a great company—and you hold it for weeks or months, the fundamentals are irrelevant. If you’re looking to invest for the long-term you look at fundamentals and rates of changing growth. You can’t compare different timeframes. You must stick to the time frames that your analysis pertains to.

He’s found that there are times of the year you’ll make more money than others. One of the best traders Serge knows is a commodities trader. He trades 3 or 4 months out of the year. Why? Because he knows his odds are better in those months for the things that he trades. He won’t even look at the markets outside of that timeframe. He’s done that for 30 years.

Allocation in the right asset class is imperative

Serge points out that most investors make the majority of their money from long-term investment time frames. Being allocated to the right asset class is dramatically more important than being in the right stock. For example, if the financial sector isn’t performing well, you could be in whatever stock you want in that sector and it wouldn’t do well. If energy stocks are doing well, you could buy almost anything in that sector and do just fine. Individual stock picking for the average investor is a lot less important than being in the right asset class.

They always look at global growth, rates of inflation, regulatory issues, charts, seasonality, and more. But you can start just learning how to read charts. The longer the data of the chart, the more relevant it becomes. If you’re looking at the charting for a $2 billion small-cap company and you’re looking at it daily or monthly, the chart becomes less important. But if you’re looking at a stock like Netflix, the chart working out might be a lot higher.

The risk of over-trading

If you would have done 5 asset allocation moves in the last 10 years, you would have outperformed just about any possible trader, hedge fund, and annihilated everyone. A lot of people overtrade.

Serge was short some NASDAQ futures overnight. It hit his profit target. But they also had bearish positions from a swing-trading perspective. But the market continued to go down for several weeks. They captured more of the move on the swing-trade. There were stocks inside of that swing trade where they were long on the investment bucket.

Day and swing traders run the risk of over-trading. How? Find out from @SteadyTrader in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks #Investing #Invest #InvestmentStrategies Click To Tweet

Resources & People Mentioned

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Disclaimer: Trading carries a high level of risk, and may not be suitable for all investors. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment. Therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.