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- The Rich Don't Trade Financial Events
My first time trading event was several years ago when I was still actively trading crypto. There was a coin that was going from ERC20 to their own mainnet. I bought some in hope that the price will surge and I'll make huge gains.
I have always been a careful investor though. So I didn't buy quantities that would hurt me financially if it went sour. The event came and I barely made a profit. It was barely marginal. In fact, my win was that I avoided a loss.
Since then, I have made it a point of duty never to trade financial events. I asked someone better than me at trading (who had more volume) if he ever traded any event profitably. His answer was no. He lost money on every event he traded.
The Nvidia Earnings Call Saga
On this day of writing this, Nvidia will report earnings. And people are ready to trade the stock. In fact, it is the most traded stock in the last 24 hours. But there is one thing I know so well, lots of people will lose money.
Even professional traders will lose money today. This is not because Nvidia will surge or crash. Instead, it is because people buy for FOMO and panic to sell. And that is guaranteed to be a losing play.
People buy because they hope it is going to go up. And when it starts going down, they will panic sell. Some will short because they hope it will go down, and then get wiped when it starts going up.
You will never see me near things like trading the earnings call of any company. But I have a guesstimate of how the Nvidia stock price will go today.
First, it will go down. This is because the company is likely to miss or cut its forecast. But then, I have a sneaky feeling that it will trend back up after a while.
Why? Nvidia is not where it is today by accident. Some forces are responsible for keeping it there. And I guess those forces are not done yet. So, regardless of their earnings performance, I still expect the stock to stay up, until…
And that is until the rate cuts begin. I could be wrong, but this is what I can assume is going to play out.
Have a Strategy
The way to make a big fortune in the stock market in a very short time is to use another person's fortune to make risky bets and get lucky. That is it. And from my studies, the length of a lucky streak is often 5 years or less.
This is why smart people who realize how lucky they are quit the market very early. I consider Peter Lynch a genius because he knew when to quit. And he had a strategy.
The way to succeed in investing is to have a strategy. And I designed one for anyone willing to play the long game a few weeks back
Conclusion
The rich don't trade financial events. Warren Buffett doesn't. Ray Dalio doesn't. All the investing titans that have been around for decades don't. They all have their own strategies instead.
Don't try to time the market. Don't assume you know what is going to happen. Stop trying to get rich overnight with stocks. Instead, have a strategy that you follow judiciously.
I'll admit that sometimes it is fun to make risky bets. But never do it because you want to make the money. Do it because you want to have fun and losing that money doesn't have any effect on your finances.
Don't trade Nvidia's earnings call. Or any other company's earnings call for that matter. They are games that are almost impossible to win.
Stay rich.
HINDSIGHT ADD-ON: While Nvidia raised their forecast (meaning that my guesstimate was wrong - which further proves my point), my prediction of how the stock will perform was absolutely right. First, the stock went down. Then, it shot up. These events are highly unpredictable. Avoid betting on them
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