Yes, You Can Effectively Trade Stocks Using Astrology
Astrological market timing sounds ridiculous, but any system can be used to trade stocks as long as it contains certain attributes.
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According to an article on Axios, the DJIA tends to fall on or after the day of a total eclipse. There is some statistical evidence of this relationship, but the DJIA barely moved this past week when there was a total eclipse on Monday. However, it did drop very sharply on Wednesday. Was it just a coincidence, or can the planets, stars, and astrology be used effectively to trade stocks?
There have been several well-known market timers that use astrology. Arch Crawford was legendary and recently retired after a successful 40-year career. WD Gann developed a system that uses angles and a wheel of price and time that is rooted in astronomy and natural cycles. A large community of traders still uses Gann's theory.
I don't fully understand these systems, and it is difficult to believe that they could work. The idea that you can trade based on planetary movement is very hard to appreciate, but there are some traders who swear by it and produce good results.
Charting the Solar System
Some traders may contemplate the stars, while others would never dream of buying a stock that isn't at new highs with great relative strength. Some traders love the idea of buying names that are trading at lows and struggling to hold support. Similarly, some folks think it's all about fundamentals, while others look solely at charts.
The truth is that there is no approach to the stock market that is inherently superior. There are many different ways to tame the market beast and produce exceptional returns, but all effective trading systems have similar attributes, even those that effectively use astrology.
There is an endless number of trading methods and approaches, and the key to all of them is to have some sort of system that imposes discipline on you.
Your system might be complete and utter nonsense, but it can still work if you have a methodology that forces you to act as conditions and prices change. If you cut losses because of sunspot activity or the latest trends in women's fashion, you might succeed simply because you're using some form of discipline.
There are basically three components to any effective trading system: A buy trigger, a loss trigger, and a profit-taking trigger. If you have parameters that deal with all three of these, your trading system might work no matter how nonsensical it seems to someone else.
At the heart of any system is the protection of capital. If you address that issue, the things that trigger your moves won't matter that much. In a 2019 academic study, researchers looked at 2 million sales and 2.4 million buys made by institutional portfolio managers between 2000 and 2016.
These managers produced positive results from their buying decisions, but when it came to selling, the stocks that they sold outperformed those that they held. The study concluded that if these professional money managers had simply sold stocks at random, their selling results would have improved.
The point is that it really didn't matter what method was employed to trigger a sale. As long as the system required a sale for some reason, that was all that mattered.
What's important to recognize is that while market conditions determine what systems work best, these conditions constantly change. So, there will be times when chasing relative strength is the way to go, but other moments when buying weakness will produce big gains. There are even times when following astrology will generate exceptional returns.
Discipline and Consistency Are What's Important
What I want to stress is that discipline and consistency are far more important than anything else. If you have an approach that forces you to cut your losses and control risk, you're likely to do better than 80% of traders out there.
Most traders fail because they don't have the discipline to stick with a systematic approach. They allow their emotions to drive their decisions and end up compounding their losses. But if you want to be a successful trader, the secret to success is to simply jump in and use a single approach that has a plan for buying, selling, and protecting capital.
Of course, you can adjust your system as market conditions change and you become more knowledgeable. But make sure you have rules to protect your precious capital - and that you stick to them.
At the time of publication, James "Rev Shark" DePorre had no position in the securities mentioned.
