Investing Differently: An Uncompromised Retirement (Part 1)
I am going to teach you how to see the markets from a third dimension using INNER-Market analysis. It’s the study of what affects price movements, things like volume, cycles, volatility, and market sentiment. Each area provides excellent insight into when the price of any asset should move, how far, and how fast. By knowing this type of information with a high degree of certainty, we can benefit greatly and enjoy an uncompromised retirement.
I am going to show you the difference between single-price analysis and INNER-Market Analysis. If you place your hand over one of your eyes and try walking around the room. With only one eye open, your field of vision is limited, and your ability to visualize your surroundings is severely restricted. Most importantly, you have no depth perception. This is how most investors make their trading decisions, with a one-dimensional view of their investment. Now drop your hand and look around the room with both eyes. You can instantly see where everything is located and, most importantly, the distance from you. You benefit from the three-dimensional depth of the room and all its furnishings.
If you have ever been to a shooting range, then you likely observe that 99 percent of people fire their pistol or rifle with only one eye open. But those who have been highly trained often fire with both eyes open for a clear field of vision.
Would you have an advantage if you tackled your trading the same way, with both eyes wide open?
INNER-Market Analysis adds depth to your trading decisions. So as we go through this topic together, remember to keep your eyes wide open and have a clear field of vision. The best traders in the world have an uncanny ability to see the unseen. And this is because they understand and use all the related parts of a particular investment. They understand what drives the price and have created a trading strategy that keeps the odds greatly in their favor. This means more times than not, you can forecast market movements and be appropriately positioned prior to a move.
INNER-Market analysis gives us great insight. Don’t limit yourself to single-price analysis to determine market direction. Many popular single-price-based indicators are useful to one degree or another for analyzing market behavior. But they are most effective when used in combination with INNER-Market Analysis to get a three-dimensional view of the market. This is not a case of “either-or.” Single price indicators should be used as a confirmation filter for INNER-Market analysis. In this manner, marginal trades can be filtered out and avoided.
This distinction can be visualized by contrasting the rectangle on the left side (representing single-price analysis) with the three-dimensional cube on the right side (representing INNER-Market analysis).
INNER-Market analysis should be your foundation for analyzing the market. It has the strengths of single-price analysis while adding multiple other dimensions to the analytic framework so that the behavior of the market can be analyzed internally as well as externally.
Market Analysis Styles Comparison
I have outlined some of the distinctions, from a practical investing standpoint, between INNER-Market analysis and single-price analysis in the table below:
One mistake some Investors make is not doing anything at all. Either they struggle to understand the trends and potential at any given time and freeze with analysis paralysis, or they use the old-fashioned buy-and-hope strategy, which carries a very high level of risk for all investors over the age of 50.
There’s a fine line between action and inaction and understanding when you should revest your assets. Moving your money into assets that are rising and ditching assets falling in price is the best way to take advantage of tax loss harvesting and for your account value to rise, even when the prices of stocks and bonds are falling. But analysis paralysis is never good because it can get you into a cycle of waiting and holding, which can be highly stressful and costly during market corrections.
Most investors and traders do not realize that exiting losing positions and booking the loss can be a good thing. In this article, Your Trading Losses Explained, And How to Turn It Into Profits, you will get a better understanding of how this works. You will learn how to leave the old buy-and-hope strategy and start investing in a way that only holds assets in your portfolio that are rising in value. It’s the polar-opposite of how everyone else invests and experiences the market.
Let’s go a little deeper into analysis paralysis, because if you manage your investments, and rode the stock and bond market down in 2022, then you are victim, and you needs to resolve this before the next stock market correction takes place.
Analysis Paralysis occurs when an individual becomes so lost in the process of examining and evaluating various points of data that he or she is unable to make a decision with it! Imagine being a bullfighter paralyzed in the ring because you are unsure which way to turn. In seconds the bull takes action and charges, and if you wait, then it’s too late. Inaction can kill you. As an investor, it means missed opportunities that can easily lead to miss profits and large losses in a portfolio.
Often when examining a chart to decipher which way the price will move next, the pros outweigh the cons or vice versa, and an individual has a clear direction and decision to make. When analysis paralysis sets in, it could be because you never feel comfortable stopping his or her search for additional criteria to examine in hopes of a definitive buy or sell signal. It could be that the pros and cons are equally weighted. Or it could be a personality trait of indecision that needs to be identified and overcome because the individuals allow themselves to get stuck in a cycle of inactivity. It’s like writers block or any other inactive moment that causes lockup or missed opportunity. The brain processes a plethora of information at once, and the outcome is that the human attached to the brain is locked up! Analysis paralysis is the trading version of information overload.
Investors can get overwhelmed by multiple scenarios, possibilities of movement in price action, and a dozen or more indicators, and for every case, there’s an opposing view in the mind of the investor. The conflicting views create confusion and make it almost impossible to take action and execute trades with clarity and discipline.
I had my fair share of analysis paralysis before I learned to keep things simple. I used to delve into all the details, putting together speculative theories that sounded great. But when it came down to pushing the button to execute a trade, I couldn’t do it!
Example Of Too Much Information – Analysis Paralysis
As you can see from this chart loaded with indicators, it is difficult to figure out what price will do next. Price has reached and is trading under the 200-day moving average and is testing the upper Bollinger band which is should act as resistance. Other indicators are trending up and down, providing mixed signals.
The vast information available on the internet to feed your thirst for more information is literally endless. You can search, search and search some more until you’ve paralyzed your mind. The dividing line between useful and necessary analysis and over-analysis is fine. Whether you are a technical trader, a fundamental trader, or a combination of the two, we are all susceptible to analysis overload. Our lust for analysis cannot be satiated by the sheer amount of information available to us. But we do have a choice: We can say, “enough is enough.”
It took a lot of self-discipline to regain control of my emotions and actions. I am a huge believer in being around motivational people or listening to motivational content of all kinds. When driving my truck, I tell Siri to play YouTube Motivational Speech, and I just randomly listen to them. I never know who is speaking, but I am constantly uplifted and energized. It is incredible how many different ways the same points and theories can be explained.
It is also essential to understand that whatever you think about and say is how your life tends to unfold and be experienced. I dove into this a while back in a post called Investors With Positive Self-Talk, Proper Expectations, And Commitment Succeed.
You probably know as well as I do how this relentless search for more information paralyzes your decision-making processes. You miss the good moves because you weren’t quick enough to figure out your signal. You miss the good moves because you were otherwise engaged, looking for more confirming indicators, even when you “knew” that the move was imminent. This leads to frustration.
We can easily justify the need to over-analyze, particularly with our current economic climate. We are at the beginning of a major transition from one major cycle to another. Individual investors are nervous, and you are probably trying to analyze it all but are not sure exactly what to do.
In Part 2 of this article, I show what is needed to become more successful with your trades and investments with less effort, stress, and account volatility. Until then, be sure to read up and learn how you can turn losing trades into a money-making opportunity in the link mentioned above and how you must overcome negative biases and thoughts with positive self-talk.
Also, feel free to surf my website and learn how you can use my INNER-Market analysis signals to help with your trading and investing success.