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Conventional wisdom holds that Wall Street is rigged to favor the big traders, and that you'll never win.
The implication, of course, is why even try?
I've never believed that, and you shouldn't either.
In reality, there are plenty of savvy investors who have beaten and who continue to beat Wall Street at its own game consistently, including Sir John Templeton, the legendary Jim Rogers, Stanley Druckenmiller, and Warren Buffett, just to name a few.
I want you to be one of 'em, and I'm here to tell you that you can beat the Street.
I'm not kidding.
You can do this - starting with understanding something I call the lowball order.
Do This Now to Capitalize on Market Fluctuations
I think you're going to be thrilled by how easy lowball orders are to use, especially when you realize that you don't have to sit in front of your screen all day to bank the big bucks with the best of 'em.
For lack of a better term, lowball orders are like a "profit trap" you lay in advance. They'll let you conquer market madness and profit at your leisure.
If you've never heard the term before, a lowball order is one of the simplest, yet most powerful orders available today, especially in volatile market conditions like we have right now.
They're great for at least three powerful reasons:
- You can place them in advance
- You don't have to be at your computer to actively manage your money
- You control your risk by waiting to make your move until the stock you want to buy meets your risk reward criteria.
First, you line up with one of the six Unstoppable Trends we're following: medicine, technology, demographics, scarcity/allocation, energy, and war, terrorism, and ugliness.
Second, you select a stock that's been beaten down or is otherwise out of line with long-term expectations, fundamentals, and earnings potential. Ideally, this isn't just any old stock. It's one that you'd buy if it ever went "on sale." I talk frequently about maintaining a "buy list" of companies you want to own if you get the opportunity to pick them up at a dramatic discount. To me, this is Apple at $122, Tesla at $243, or even Facebook at $144. Your list may differ; my point is that you have a list... at all times.
Third, you pick a price - to the penny - that matches your individual risk tolerance, your investment objectives, and your belief about what the company is really worth. While there is no hard-and-fast rule here, many traders find being within 10% to 15% of the most recent annual low is fertile hunting in choppy markets.
Fourth, you place your order to buy "XYZ at $50 per share or less, GTC" - meaning good till cancelled.
Depending on how sophisticated you want to be, you can tack on special instructions.
Most commonly that's things like the "GTC," which I've already mentioned. Others include "GTD," which means "good to a specific date" you pick, or "AON," which means "all or none," as in the trader has to fill all the shares requested in a single trade.
Then you sit back and wait for a price dip. Why and when really doesn't matter. The markets can react to all sorts of things - bad news, headlines from China, Putin's latest move, a misguided Fed.
What you're doing here is laying a "profit trap" in advance of conditions that you know favor your money rather than the institutional traders who would otherwise take it from you.
The Mechanics Are Simple
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Lowball orders are technically "limit" orders. That's Wall Street-speak for an order to buy or sell shares at a specific price or better. Unlike "market" orders, which go into effect the moment you place them, limit orders trigger only when prices reach the limits you've specified.
It's a Total Wealth Tactic that allows you to purchase or sell a stock at a specific price or better - rather than whatever price the market wants to give you. However, a limit order does not come with a guarantee that it will be executed, unlike an order to buy or sell at market price.
When you set a buy limit order, you set a price below the current market value that you want to buy at - because you're looking to purchase at the lowest possible price. By setting this lower price, you instruct your broker to purchase the equity only at your specified price or better.
On the other hand, use a sell limit order if you'd like to sell but only at price above the current market price - it sets a minimum price you are willing to accept in order to sell your shares. The sell limit order instructs the broker to sell shares at a designated price or higher, effectively placing a limit order above the current market price.
Since this sets an automatic price target above the current market price, it's a great tactic to use when you want to maximize profit-taking.
The point of this tactic is to pay the price you want (or sell at the price you want). Whether that happens today, tomorrow, or six months from now is moot. To paraphrase my grandfather, who played baseball in the 1920s, you miss 100% of the swings you never take.
Lowball orders help you prepare in advance for conditions that favor your money. Placing them doesn't cost you a thing, and you're not risking one red cent until the order executes...
...and then you're off to the races.
I'll be back next Friday with yet another powerful tactic you can use.
In the meantime, try setting up the list of stocks you'd buy "at a discount" and be ready for when the time comes.
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The post One Tactic to Beat the Street - and Buy Any Stock You Want "On Sale" appeared first on Total Wealth.
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.