According to some, all the advantages on Wall Street go to the “big guys.”
The big guys have big tech budgets. And a big research staff to investigate companies. And close relationships with big investment banks. And big, powerful computers to execute their trades.
But the big guys, aka “elephants,” also have a major disadvantage. They are SO damn big, it’s very hard for them to do anything quickly. (Have you ever seen an elephant turn on a dime?)
Worse still, most of these elephants are wrapped in red tape. Not only do they have to move billions when they buy or sell a large stock position, they have to make their most important decisions by “committee.” This slows things down even more!
Because of their size, these elephants leave massive footprints when they enter or exit a stock… and there is nothing they can do about it.
Take Will Danoff, for example, the manager who runs Fidelity’s largest mutual fund. Poor Will has to allocate roughly $85 billion (at last count) into the stocks he likes. Think about what that means.
To move the needle on a position, Danoff has to put a billion dollars in, minimum. If he really likes the stock, he has to shovel in a lot more.
Warren Buffett, back in his younger days, wrote to investors how the partnership funds would invest up to 40 percent in a stock Buffett really liked. Danoff can’t put four percent in, let alone forty, without causing an earthquake.
To buy without running the price up too much – or to sell without running it down – elephants like Fidelity use desk traders and algorithm programs to buy or sell shares over periods of days, weeks, or even months at a time.
Bottom line: These guys can’t move fast if their life depended on it… and when they pile into a favored area of the market – elephants travel in herds as you know – they stomp the ground until it shakes.
Institutional investors are like elephants in another way. They are so big it makes them very hard to kill. The elephants have trained their masters (long-term investors, also large in scale) to accept mediocre performance and poor risk control because, for pension funds and the like, this is the only game in town.
The Fidelitys of the world will always have huge clients (who have nowhere else to go), and huge research teams, and huge embedded staying power advantages in the “long term investing” game. (And don’t feel sorry for poor Will Danoff. He’s compensated ridiculously well for his awful job.)
So with this in mind, we have to ask… are you trading like an elephant, i.e. plodding and slow? And if so, why?
Conventional wisdom says that long-term investing is the only wise path for the small investor. Making decisions very slowly… taking action slowly… and diversifying into lots of names, or buying big lumbering funds that do the same thing.
But this doesn’t make sense – except for the elephants who want your fees! – because it overlooks the core advantages of the individual trader or investor: speed and flexibility.
As an individual, you can do all of the following (which the elephants can’t):
▪ Concentrate your portfolio in a handful of “best idea” positions
▪ Pyramid a small position into a large one
▪ Take profits quickly on a blow-off top
▪ Go aggressively short in bear market declines
▪ Cut losses quickly and exercise swift risk control
▪ Hold mostly cash when market conditions are poor
▪ Transition from cash to heavily net long (or short) extremely quickly
▪ Track the elephants and exploit their telegraphed signals
In any competitive endeavor, the key is identifying and exploiting competitive advantage.
And for the individual investor or trader, speed and flexibility – coupled with the ability to wait patiently in cash, then dial up exposure in just the right spots – are advantages the “big guys” will NEVER have…
At Mercenary Trader, we specialize in such advantages. We know we aren’t elephants… and use our embedded “little guy” edges (including the ability to track elephants) to maximum effect.
Just to be clear, we’re not talking day trading here. The majority of our positions are held for a period of several days to weeks. And we broadcast our trade setups an hour before the New York open each trading day.
If you want to stop investing like an elephant… and start better exploiting your natural advantages as an individual (speed, flexibility, and the ability to dial up or dial down exposure quickly), you can see exactly how we do it – and what we’re doing with our own capital – via 14-day free trial of the Mercenary Live Feed.
There’s no obligation, and a lot to gain by leaving the elephants in the dust…
Now — ready for your no-obligation, no risk free trial? Just click here or on the Live Feed trial box below!
To your trading success!
Jack & Mike, founders
p.s. As mentioned in the tutorial video, seats are limited — We reserve the right to close the Live Feed to new subscribers at any time. We are also forced to periodically raise prices (due to supply and demand), and have already done so twice. But if you sign-up now, you can lock in the current rate (which is still incredibly deal) for a guaranteed two years. Don’t wait – check out the video and get your free trial today!