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4 Rules You Must Know to Beat the Market

Want to become a good trader?

Then you need to become a sponge. You need to absorb a ton of information—then make sense out of it all. And today I’m going to show you how…

Ned Davis, founder of Ned Davis Research Group, is going to help. He’s been in the business 35 years. He’s seen it all – booms and busts, bulls and bears. And he’s proven he knows what it takes to make money in the market.

“The markets are fascinating,” Davis recently told Sarasota Magazine. “One year, you are an expert on oil. The next year, you are learning all about housing. The next year it’s Ukraine, the Middle East, Ebola, because that’s affecting the market. In this business, if you like to learn, you’re learning something new every day.”

Like any great investor, Ned Davis works with a set of rules. Nine to be precise. And today we’re breaking down the first four. So pay attention! These are the rules you must master if you want to succeed—no matter if the market’s going up, down, or sideways.

To help you out, I’ve added my own comments to this trusty list. That’ll help “translate” Davis’ rules into our own Rude trading strategies.

Let’s get started…

  1. Don’t Fight the Tape

That’s an old Wall Street saw you might have seen before. What does it mean? It simply means you need to go with the trend when investing and trading. If you “fight the tape,” it means you make boneheaded moves like investing in stocks that are in a downtrend. Many traders think they’re being contrarian when they’re really being stupid. Don’t trying to swim against the current. You’ll drown. But you have no idea how many people try.

  1. Don’t Fight the Fed

You don’t have to like everything (or anything) the Fed does. That’s fine. Think I do? But when it comes to your trades and investments, go with the flow or risk getting flattened. Period. The Fed’s a hammer. You’re a nail. Deal with it.

Davis is a bit more technical…

“Remain in harmony with interest-rate trends (rates dropping is good; rates rising is bad. Money moves markets. Stay in line with monetary trends (money [minus] economic demands equals liquidity left over for financial markets).”

Too fancy? Just read my take again.

  1. Beware of the Crowd at Extremes

All trends eventually come to an end. And Davis says we have to look for psychological extremes and prepare to exploit them. When a trend gets really frothy, the bubble’s probably about to burst. But this also works the other way around. When no one (and I mean no one) wants anything to do with a stock or industry, chances are it’s getting to a point where you should buy. Trouble is, it’s all hard to measure. That’s why you need to…

  1. Rely on Objective Indicators

You have a “gut feeling” about a stock? Then go take an antacid or something. Remember, the market makes fools of most people most of the time. And guess what—you’re “most people.” Never, ever, ever, ever think you can outsmart the market. Instead, rely on your charts and indicators to tell you when to buy and sell. It’s the best defense you have against your emotions—which are your biggest trading enemy. Don’t ever “trade your gut” or else I’ll come over there and give you a whippin’.

Alright, those are four rules you need to master if you want to succeed in the market. Want the rest?

Tune in tomorrow. Same bat time, same bat channel…


Greg Guenthner
for The Daily Reckoning

P.S. Tune in tomorrow. Same bat time, same bat channel. If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakening e-letter, for FREE, right here. Stop missing out. Click here now to sign up for FREE.

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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