If you’ve spent any amount of time studying the stock market, you’ve likely come across this age-old debate: technical analysis versus fundamental analysis.
Most investors fall into one camp or the other — but neither side wants to admit that the other might be on to something.
For the uninitiated, fundamental analysts determine a company’s value — and what they think its stock price should trade at — based on things like earnings, revenue, debt and book value.
Meanwhile, technical analysts look at charts to see where a stock’s price currently is and where it’s likely to move in the future based on certain indicators.
These have really been the two schools of thought for as long as Wall Street’s existed. But if each one was enough, then everyone would be making money and would never have to worry about anything.
Neither approach paints the entire picture. And that’s why I’ve developed a third school of thought that I like to call psychological analysis.
When it comes down to it, one of the hardest things for any investor to do is check his or her emotions at the door … especially when their hard-earned money is on the line.
That’s why successful traders are the ones who find ways to manage their emotions.
But the really successful traders?
The Warren Buffetts and George Soros’ of the world?
Well, they not only find ways to mitigate their own emotions. They also anticipate how their competition (other investors) will react in certain markets using something called investor psychology.
Then they plan accordingly.
In fact, Warren Buffett famously said, “Be fearful when others are greedy, and greedy when others are fearful.”
Sounds easy enough … until you go to put it into practice.
That’s why following a proven investing approach is so important. When you have set rules to follow, it helps to take the emotion out of your trading. And it gives you an edge over other investors with less follow-through.
I created an investing system called AMPD with this thought in mind.
Here’s what it stands for:
Put it all together and you’ve got the basis of psychological analysis.
When you combine this with the two tenants of fundamental and technical analysis, it gives you a much clearer picture of the stock market and everyone who’s participating in it. Now, instead of being rivals, each school of thought works together and brings context to the other.
To be clear, I’m not claiming that this system is 100% full proof. There will always be trades that go against you — no matter how many ways you’ve analyzed the stock market.
But following these steps and planning accordingly will put you ahead of 90% of the other investors out there who are trading based on emotion and headline news.
Considering how crazy 2020 has been, and the market’s reaction to it, a little security in a sea of uncertainty could go a long way toward saving your portfolio…
And making you a ton of money in the process.
In fact, members of my Alpha Trades service — where I put the principles of AMPD to work — have already had the opportunity to bank several large gains following my unique trading approach.
Over the past couple of months, some of these trades have included 106%, 167% and 178% winners!
One of the companies that performed really well for us was Peloton Interactive Inc. (Nasdaq: PTON).
When the coronavirus hit at the beginning of the year, I started focusing on stay-at-home stocks like a hawk because I knew that certain companies would do well in an environment where everyone was stuck indoors.
So, I started looking around the market and figuring out which areas would benefit the most from this new way of life. And home exercise equipment maker Peloton more than fit the bill.
I waited until Peloton had finally crossed my Alpha Line indicator before telling my readers to buy into it on September 9. Less than a month later, we sold our October 16 $95 call options for a whopping 178% return.
The chart below shows you how the stock popped in just a few short weeks:
Of course, this is just one example of the types of returns that you could expect to make in Alpha Trades. There are many more — I just can’t cover them all in one article.
If you’re interested in learning more about psychological analysis and AMPD, consider signing up for Alpha Trades today.
You’ll never have to worry about day trading in this service, or spending hours at your computer looking over complicated stock charts.
In fact, I’ll send my analysis to you over the weekend when the markets are closed. That way, you’ll always have time to analyze what happened the week before while planning for the week ahead.
To see if Alpha Trades is right for you, simply click here.