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The number one stock market rule, the indispensable, go-to rule, the Golden Rule, the only rule to follow even if you're a rules-breaker, is...
The trend is your friend.
If the market's trending up, you play it from the "long" side, meaning you buy and hold stocks, including the whole market in the form of an index ETF.
If the market's trending down, you get out and go "short," meaning you sell the market by selling short an index ETF, or you buy an inverse market ETF that goes up in price when the market goes down.
Making money is easy. The hard part is figuring out whether the trend is turning.
But there are ways to play it safe by being in the game - long or short - and being cautious at the same time.
Now, I've been a raging bull, and I still am bullish. But, all of a sudden, I'm leaning towards heavy caution.
But I'm taking some concrete steps to make sure my readers and I cash in no matter what happens.
You can, too...
I Saw This Coming
Forgive me if I say it, because I'm not the kind of guy who says, "I told you so." But if I was, I'd sure be saying "I told you so" now.
Joking aside, I've been right about the market; I've been all over the financial cable news with bold predictions that have been dead-on right - even when no one else was willing to commit themselves to a guess.
When the Dow Jones was at 19,000 and every analyst and market pro was being asked if it was going to get to 20,000, I said, "Not only will it get there, it will blow through that and get to 21,000 right away."
Obviously, we got there. Pretty much as I said we would.
Now, here's my secret to being right. It's a not-so-secret kind of secret you can use that works every time.
I don't have a crystal ball. I figure out which way the market is going because it shows me.
It will show you, too. It shows anyone who's watching it the direction it's going.
Why It Was Easy to Call 21,000
Going into the election, of course, everyone was super cautious. In fact, most big investors were on the sidelines - if they weren't betting on a Hillary Clinton victory and the market bumping higher on that possibility.
So, there was a lot of money waiting to go to work.
And then BAM, Donald Trump wins.
When the futures tanked on his announced victory, then rallied like the dickens hours later when he made his victory speech, it was "off to the races" for stocks, at least the whole market based on indexes.
All you had to do was watch the market make a U-turn and rally with all the sidelined money waking up.
It doesn't have to make sense. The market often doesn't make sense. It's the market. It does what it does. Don't get hung up on figuring out what you think it's going to do. Watch it; it will point you in the direction it's going.
Follow along, and you'll end up with bigger profits.
There's a human-analytical side, too: group psychology.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.