Editor's Note: The energy market is often subject to Wall Street's manipulations. Kent's strategy helps investors like you beat the Street while counteracting its schemes. And with a new year just around the corner, now's the perfect time to re-familiarize yourself with his method. Here's Kent...
I have misgivings about Wall Street. Perhaps you do too.
For me, its short-term trading that distorts the energy markets almost beyond recognition. But there is a way to remedy this situation...
As a normal investor with a balanced, long-term view, you can stabilize the market. That's why I started Oil & Energy Investor - to help you prevent market meltdowns.
The way to do that is by following this simple, 15-step strategy.
And don't worry - I'll show you exactly what you need to do...
Now, for the Strategy
Our 15-step strategy is composed of five entry points, five essential ingredients, and five elements you need to know. Taken together, these 15 considerations comprise a strategic investing approach I have developed over decades.
The five entry points are where I will bring you into the market: (1) companies in the upstream (production), midstream (distribution), and downstream (wholesale and retail); (2) technology developers and providers; (3) ancillary and support entities; (4) energy trading and hedging; and (5) product spreads.
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The first three involve standard investment plays - buying or selling stocks and bonds, using puts and calls when appropriate - to maximize gains and minimize losses. Here we will be appraising companies, their performance, and their potential. In other words, this is traditional investment 101 as it applies to all kinds of energy and all participants in the sector.
The last two are newer opportunities. Here, the average investor can participate in the profits from playing paper assets (futures contracts) against "wet" assets (the actual underlying oil, gas, or energy consignments), as well as the market value of one value-added product (say gasoline) against others (for example, diesel, jet fuel, heating oil, or petrochemical feeder stock).
We will follow investment targets in one or more segments: providing energy; improving efficiency or delivery; making available the necessary field, power plant, or market services; and trading the resulting energy itself.
To succeed, an investor must have access to where the money is being made. That is not simply the market in general, but a trading position having particular characteristics. This is the next part of the strategy.
Think of these as the building blocks of a successful investment approach. You need (6) access to trading liquidity sufficient to temper volatility; (7) exposure to the right trades and executions; (8) the flexibility to move into and out of the action; (9) ease of application - knowing about a correct move is useless if it requires two pages of equations to get to it; and (10) timing.
This last consideration is without doubt the most important single element in any trading strategy. Good timing makes money. Bad timing loses money - period.
The Elements You Need to Know
The final category of the strategy considers the five main aspects of the market in which we will be trading. These components are not static; they change.
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Therefore, you need to understand (11) the environment - that is, the factors both inside and outside the market impacting the attractiveness, or even the desirability, of what may otherwise appear to be a promising trade. Seeing (12) the sequence of events - both those improving the investment and those cautioning against it - allows the investor to participate in direction or flow. Confusing a cause with a result has brought down many an investment model.
Understanding these first two elements allows you to do the next two, the most important. Just as computer trading programs analyze factors before acting, so must you. However, your approach is actually more direct. You need to be able to (13) identify triggering events (those that produce an expected result), and (14) determine when to move in and when to leave.
Finally, all of this needs to be (15) in plain language.
There it is in a nutshell: the 15 elements of my trading strategy.
And here's how to use it...
The Best Way to Use It
I'll be introducing hundreds of energy moves to make you money. As the market changes, and as its volatility increases, this strategy will allow us to move with it. And this leads to the third matter I want to address today - how we use the strategy.
Actually, this is the easy part.
You don't need to worry about crunching the numbers (I have that covered) or revising the math formulas and permutations (got that covered too). You won't be talking to decision makers worldwide (that's my job, though I will continue to bring you along) or identifying sequences, triggering events, applications, or any of the other elements in the strategy.
You will receive all of that right here. Stay tuned.
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About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.