Trading the Smart Way: Harnessing Strength Over Chaos
Why Simplicity Beats Day Trading Madness—And How to Use It to Your Advantage
You know, when it comes to trading, I like to keep things simple and straightforward—just the way nature intended! My favorite strategy? Pairing up the strong against the weak and then checking in at set intervals. Now, you can do this every day if you're feeling extra ambitious, but that's a bit much for my taste. Personally, I like to take a peek weekly, monthly, or at most, quarterly.
The system I’m outlining in this newsletter is all about this approach, especially in the wild world of Small Caps. I’ve been tinkering with a simulated version over on Collective2, and it’s pretty fun to watch it play out. The best part? You can apply this strategy to just about anything—stocks, ETFs, even forex. All you need is a plan to figure out what you want to go long on and what to short.
Right now, I’m cooking up a book that dives into this method using only the stocks in the DJIA. Why the DJIA? Well, it's just 30 stocks, nice and manageable! But don’t worry, you can adapt this to any group you fancy—the 7 major currencies, the Nasdaq 100, the S&P 500, the 17 sector-based ETFs, and so on. The trick is having a solid way to pick out the strong from the weak.
Now, let me tell you why I like this approach. I’ve seen so many people glued to their screens, day trading, scalping, and tearing their hair out. They’re spending money on courses and books, chasing the next big strategy, but at the end of the day, they’re often not making much—if any—money. It’s like they’re stuck in a hamster wheel, running hard but getting nowhere. And believe me, I’m not mocking anyone here because I’ve been there too. I was caught up in that world myself at one point.
But then I thought—do you really think Warren Buffett participates in that kind of nonsense? The man didn’t become one of the world’s richest by staring at his screen all day, sweating over minute-by-minute fluctuations. Instead, he looks at the bigger picture, taking a more measured approach. That’s what I aim to do with this strategy: focus on the strong versus the weak and avoid getting sucked into the chaos of constant trading.
I’d really love to hear your thoughts on this—feedback is always welcome!
Sounds good, what's the strategy?