Welcome to Trade the Moods. What will this site bring to your investment toolbox? Let’s explore.
Think about it. A system that will tell you precisely what state your investment is in. In this instance AAPL is in the Bear state. The Bear state is normally the state when your investment would be in cash or possibly a short position. Figure 2 is a screen shot that give us much more detail about the current health of our AAPL investment.
As you can see with this shot, TtM gives the reader much more information regarding specifics of a particular symbol. We can see that AAPL is not only in the Bear state but also in the Anxious mood. What that means is that AAPL is not really a good candidate for investing at the current time. I would only invest in a security when the mood is Happy (in the Bull state) or Angry (in the Bear state). Why show the intermediate moods – because the mood will tell the reader what is going on with a security. It is great to know when to invest or exit a position but it is just as useful to understand what is going on with that investment between those end points. I use the intermediate moods as an indicator of when it is time to possibly pull back on an investment. Occasionally, if a stock has a history of never climbing back to the optimum mood (Happy/Long, Angry/Short) I’ll exit the position when it falls off that optimum mood. As an example:
Let’s say we entered into a short position when AAPL transitioned from the Bull state to the Bear state. We made some money while AAPL was in the Angry mood but then the TtM monitor (SMM) indicated the mood was something other than Angry (Cynical, Anxious, Complacent…). My experience with AAPL is when it starts heading north towards the Happy mood (which is the transition mood between the Bear and Bull states) it almost never falls back (to the Angry mood). Why wait for a state transition; just sell it and reinvest when AAPL transitions to the Bull state. I did just this and as of the writing of this update made 15% on the stock. I had no indicator other than TtM to aid me in making this decision.
More to come….
In the mean time, please take a look at Today’s insight for what’s going on in the market from the Trade the Moods (TtM) viewpoint.