Do you know why 90% of retail traders lose money?

It is because they constantly trade based on the LATEST NEWS!

What they see on the news headlines:

There are wars in Palestine, so they immediately buy gold.

Michael Burry is shorting the S&P500, and they follow suit.

Charlie Munger buys Alibaba (BABA), they jump on the bandwagon too.

Retail traders are so sensitive to negative news that they always feel like they have insider information and need to take action.

But more often than not, this leads to losing money.

But why does this happen? Let me explain in this blog, which will forever change the way you trade.

Warren Buffett sold off all his General Motor (GM) Stocks

Fresh and existing, just five days ago on the news.

Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, made headlines when it was revealed that his company had sold off its entire $850 million worth of General Motors (GM) stock in the last quarter.

The reason behind this decision was clear (Of course it’s an assumption. We can’t 100% explain the market). The decision to sell off GM stock may have been influenced by the automaker’s recent forecast that a strike by autoworkers would significantly impact its earnings this year.

Berkshire Hathaway ended the quarter with a record $145 billion in cash on hand. This increase in cash is mainly due to rising interest rates and a lack of dealmaking opportunities on Wall Street, which has limited Buffett’s ability to acquire new companies.

Perfect analysis right?

How would retail traders react to this?

Most retail traders rely on news sources for their trading information.

When they see that Warren Buffett has sold all his GM stocks, they think they should do the same.

“Warren Buffett sold all his General Motors according to the news yesterday, so I should do the same.”

But what they fail to realize is that they are selling at a significant disadvantage, with a 10–20% discount compared to Warren Buffett. In the end, retail traders lose money to large institutions that buy from them.

News is always exaggerated and delayed

What went wrong in this case? Why are retail traders still losing 20% in stock value even though they are trading in real-time after the news comes out?

The devil is in the news itself.

Most news on television is exaggerated. The mainstream media wants to grab your attention, so they often release exaggerated news.

We are more sensitive to negative feelings, which is why they want us to feel missed out and keep looking for more news, trapping ourselves in a loop.

Moreover, news is delayed. By the time the mainstream audience sees it, it’s already too late.

Warren Buffett has to file a 13(F) filing every quarter to provide transparency on the stocks he traded, but it takes an extra 1–2 months to process and release to the public.

By the time we see it on the news, it’s already 1–5 months late. The stock’s price and company fundamentals might have already changed during this time, making it impossible for retail investors to know their next move if they only copy trades from successful investors.

How do you avoid the delay & emotionally influenced

So, how can you avoid the delay in information and emotional influence?

Through technical analysis on price actions.

The price is always a real-time representation of what’s going on in the market. Every market sentiment is reflected in the market, no matter how big or small.

By observing the change in price, you can have a more holistic view of the stock’s performance in the long term.

TradeDots is one of the most effective trading indicators that helps identify reversal tops and bottoms through real-time price action analysis.

In the case of General Motors, Warren Buffett sold his stocks at an average of $32.97. The price has since dropped to $28.03, resulting in a 15% discount for anyone who chooses to sell it now.

However, if traders had followed the signals indicated by TradeDots, they would have had the chance to sell at $38.59, which is a 17% premium compared to Warren Buffett’s selling price.

Bottom line

This showcases the power of programming and algorithms in the current trading era.

Retail traders no longer need to rely on traditional media channels to make trading decisions. With the right tools and indicators, combined with experience, trading is no longer a game that is privileged to institutional players.