Trend Trading For Giant Profits?
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Transcript For The Trend Is Your Friend Video
00:00 Steven Brooks: Hey, guys. This is Steven. I'm so excited to have you on this training video here, talking about how we're gonna give you guys confidence, whether you already have an account and you're feeling a little loss of confidence in your investing abilities, or you don't have an account and you're a little bit timid to jump the gun, open up your own account and start investing. This little photo of me right here is funny. I like this one a lot. You'd be smiling too, if you knew how easy it was. And a lot of people, before they understand how easy it really is to invest in the stock market, they feel so overwhelmed by it all. But you will, at the end of this video, be smiling too because you will understand how easy it actually is to make money in the stock market. And we're gonna give you some confidence to help get you there.
00:40 SB: So, there are a lot of people on this video. Most people on this video who are watching are gonna know who I am, but for the people who don't know who I am, my name is Steven Brooks. I'm an investing coach. I've been an investing coach for the last 10 years. I've been seen on publications such as Forbes, and Money Magazine, and Barron's, and I've been featured on CNBC. I don't really like to brag about where I've been or the publications I've been on, but just wanna let you know, I've been on all the top ones. So I think I know what I'm doing.
01:06 SB: I mentioned that I teach people how to invest, and all the people that come to me, different skill levels, they all come to me with one big fear. They all have a lot of different fears in investing, but their largest one collectively is this one big fear, and this big fear is they're afraid to lose money. Let me repeat that again. The number one fear that my students have before they come to me in terms of investing, is that they're afraid to lose money. And I usually have about three types of students that come to me. The first is one who already has an account, who wants to make more money, and they're afraid to lose money because they feel like they're gonna need to risk more money to make more. Again, that's someone who's already been in the market, who's already made money, and they still have that fear of losing money.
01:57 SB: Then there's those who have an account and aren't really doing as well as they'd like to, and they're thinking about throwing in the towel and giving up. And they're afraid that, in order to get where they wanna be, in terms of making money, that they're gonna have to lose more money to figure it out. So they're afraid to lose money as well. And the third kind is those who don't have an account at all. They really like the idea of investing and growing an account over time. They see all these studies like, "Hey, if you start with $10,000 and you have 7% return every year, you're gonna end up with $500,000. Right? That's what we all want, right? That's great, right?" Except a lot of people are afraid because they're afraid to lose that money, they're afraid that it won't turn into $500,000, and they're afraid that they won't return 7% a year.
02:40 SB: Some of these people, especially those who come to me without accounts, they work one or two jobs, and that's hard money to... That's hard to earn. They're working 10, 15 hours a day and they don't wanna lose a lot of money, but they wanna grow it. So, they're very much in between. Again, the number one fear my students have, and I'm sure many people are nodding their head... Yeah, people are commenting in the chat box, but I'm sure most of you are nodding your head right now up and down because at some point in your investing careers, even if you don't have one, you've been afraid to lose money.
03:10 SB: That's why I created this video. My goal for this video is to take the people, and it's most of the people who are watching this video right now, 'cause I can... Hey, Jeremy. I can see you guys commenting in the comment box right now. Stephanie... [chuckle] No, you're gonna be fine. Don't worry. They're saying, "I can't do this. I can't invest. I can't make money. And the number one reason is I'm afraid to lose money." We're gonna scissor that tee, so it's gonna be, "I can do it." And the way we're gonna do that is we're gonna give you a ton of confidence. We're gonna jack up your confidence levels. It's gonna be great.
03:40 SB: How awesome is that, right? We're gonna give you a ton of confidence. We're gonna give you reasonable expectations on a certain strategy, and the goal of this strategy is to give you all the confidence you need to move forward. If you don't have an account and you're afraid of losing money, after seeing this strategy and seeing how easy it is, it will give you the confidence to open up an account. And if you already have an account and you're not making the kind of returns you wanna make and you're thinking about throwing in the towel, I'm telling you, this strategy it's so great. I'm telling you, this strategy, it's worked for hundreds of my students. This strategy is gonna put you over the hump. It's gonna give you the confidence to get back in there, and it's gonna give you a great strategy to make a lot of money without losing a lot of money.
04:20 SB: And this works for a lot of my students. This worked for one of my students really, really well. Her name is Elizabeth. So, for years, Elizabeth was seeing all these studies, right? Again, talking about these compounding returns. What she wanted to do was she wanted to start planning for retirement at a young age. She's under 30 years old, and she had a goal of retiring when she was around 50 years old. And one of the ways to do that obviously is to invest and to be the beneficiary of compounding returns. And what was going on with her was she had her money in a savings account, and savings account right now don't even make probably a 10th of 1% with interest rates being this low.
04:54 SB: It's very difficult to really grow a lot of money over time when you're making close to nothing on your money. And she was so scared of losing money 'cause she felt like the stock market was a big casino. She watches the news. Anytime the DOW is down a little bit, they're freaking out on CNBC, they're freaking out on CNN saying, "Oh, there's blood in the street and there's fear on Wall Street." She remembers the financial crisis of 2008-2009, which we'll actually get here in a couple of minutes. She remembers the dot-com bubble. She remembers all these stocks going absolutely crazy, so she feels like the stock market is this big casino and she's gonna lose a lot.
05:28 SB: But this trade, this strategy that I'm gonna show you guys, in about two minutes, it's really gonna blow you away. I showed this to her, and the coolest thing about this was... And I was on the phone with her. I was on a phone consultation with her. We hooked on to Skype, I showed her the strategy. The next morning, she opened up an account, an IRA, again 'cause she was trying to plan for her retirement. She opened up an account, an IRA with TD Ameritrade, and the next Monday... Because this strategy is just a once a week, maybe take you anywhere between two and five minutes a week to do. The next Monday, she did this trade, this strategy, and it's worked really, really well for her. So if it can work for Elizabeth, someone who was thinking about investing in stock market for so, so long but just could never really do it, all this trade and this strategy did was just give her the confidence. That's all this is about, give you the confidence to move forward, feeling like you can go out there and you can actually make money in the stock market as opposed to getting ripped off or losing money.
06:24 SB: I wanna talk about a concept really quick, it's 'the trend is your friend.' So, if you have watched CNBC or Bloomberg or anything, CNN Money, or any books, you've undoubtedly heard the phrase, 'The trend is your friend.' This image is a cool one. Think about if this image was the price of Apple stock. So many of us know Apple stock, and we'll actually get to that one here in a minute, but assuming Apple stock is going up, so the price of Apple stock is going up and it has been for a while. A lot of people would consider that a trend. And saying 'the trend is your friend' is like saying... There are two ways to think about it. Number one is if you're already a shareholder of Apple, you stay the trend. You don't sell your shares because the trend is your friend, right? You wanna stick with the trend. Or if you don't have any shares of Apple, if you're not a shareholder, if you haven't bought any shares and the trend is still up, well, you can safely get in there and buy some stock because, again, the trend is your friend.
07:19 SB: And it's not just financial media talking about it. Some of the most world-renowned investors are talking about it. Peter Lynch is the CIO of Fidelity Funds. Fidelity Funds has a trillion dollars under management. How cool would that be to manage a trillion dollars one day? This guy, Peter Lynch, obviously knows a lot about what he's talking about. And he says, "More and more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves." So what he's saying there is, people have lost more money trying to time the end of a trend as opposed to just staying in trend. That makes sense. That definitely gives credence to the concepts of 'the trend is your friend.' And even Warren Buffett, who is the world's most famous, most popular, most storied investor says something very similar. "If I could give anyone starting out advice, I would tell them the trend is your friend." Warren Buffett is very well known for sticking with stocks for a very long time. The trend is up, stick with them.
08:16 SB: And even his mentor, his mentor was a guy by the name of Benjamin Graham, said, "If the market is going in one direction, follow it." So obviously we have financial news, financial media saying, "The trend is your friend." We have some of the most world-renowned investors who have trillions of dollars under management. How crazy is that, right? Trillions of dollars under management saying, "The trend is your friend." Now remember, this entire video is to give you the confidence, give you the confidence that you can say, "I can do this. I can make money in the stock market." And in just about two minutes or so, I'm gonna show you exactly how easy it is and it's gonna give you, guys the confidence to get in there, open up your own account or stay in it and actually make some money in the market.
08:58 SB: So Stony Brook Securities and my philosophies are a little bit different than pretty much everyone else you're gonna see online. We look at hard data that we back test for years and thousands of data points, and then we make decisions based off of that data. Now, one of the things that does is that gives us a lot of confidence because we have reasonable expectations about how certain strategies have worked. The study that I'm gonna show you here in a minute was done over 27 years. That's a pretty big sample size. So we look at that study and we say, "Okay, that's 27 years." Here are the expectations, here's how that has performed. That performance, while it's not gonna dictate future performance, past performance, it does give you a ton of confidence. Remember, it's a big confidence game. People that are concerned about getting into the market, it's all about giving them the confidence they need to step in there.
09:49 SB: So this study that I'm gonna show you, it was from 1990 to 2017. So that's 27 years of data. That's a long time. Now, let's talk about what's gone on in that 27 years. We had a huge upswing into the 2000s and the dot-com bubble. We had a 50% sell-off when that bubble burst, then we had a little rise into 2007, and then 2008 and 2009 which again, will actually get into how this study did during that time, and then 2008, 2009 the market crashed a little bit over 50% again. And then since March of 2009, March 6th to be exact, the market has pretty much gone straight up and we're currently sitting around all-time high. So this study was done from 1990 to 2017 in the S&P 500. Why did we do the S&P 500? We did the S&P 500 for two reasons. Number one is because it's really easy for us to get all the data we need because it's the biggest index in the world. And the second reason we did is because the S&P 500 tracks 500 large cap stocks in many different categories. So it tracks technology, it tracks commodities, it tracks energy, it tracks real estate. It tracks a little bit of everything, so it really gives you a good gauge of the overall market.
11:03 SB: So, we did the study for 27 years in the S&P 500. We did three things. The first thing we did... Now remember, we did three things all to see if the trend is your friend. So the first thing we did was we bought... The first trading day in 1990, we bought the S&P 500 and we held it till the end of 2016, so right at the beginning of 2017 when the study ended. Buy and hold strategy, really easy. And now, getting a little bit more into the concept of the trend is your friend, what we did was, if the S&P 500 finished the week up, the following Monday, on the open, which is at 9:30 AM Eastern Time, we bought the S&P 500 and held it for the rest of the week and sold it before the market closed for the weekend or at the end of the day on a Friday. So this is trying to see if the trend is truly your friend.
11:56 SB: Remember, we're buying the S&P if the market was up or if the S&P was up the week before. So, if the S&P is up the week before, we wanna buy it because that's clearly the trend, right? That's clearly the trend and we wanna stay with it. Remember, people have lost more money... According to Peter Lynch, people have lost more money trying to predict counter-trend movements than they have sticking with trend movements. So, we're gonna buy the S&P if it was previously up the week before. This is exactly what it is as far as the trend is your friend.
12:29 SB: And then we did the opposite. We wanted to see the opposite. We wanted to see what happens if the market was down and we bought. Now, remember, the trend is your friend is what everyone talks about. And this study, the only purpose of this study, is to show if that's true. And if that's true, it's gonna give you a lot of confidence because we're gonna be able to show you exactly how we did this study, and you can go ahead and just model it. So the first chart we're gonna look at is holding the S&P 500 as the buy and hold strategy against our fourth bullet point here which is, buy the S&P 500 if it was up the week before. That's all we're gonna do. Ready for the results? Give me a one in the chat box if you wanna see it. Okay. Oh, okay. That's a lot of people. There are a lot more people on this than I thought. There's 80 ones right now, that's great. [chuckle] Yes, I will show you. Stephanie goes, "Show me the damn numbers." I'll show you, okay? Here we go. Ready?
13:27 SB: This graph right here is comparing buying and holding the S&P 500 to just buying it after it was already up for the week. So the gray line, really quick, buy and hold the S&P. We see we started with about $10,000, which is a reasonable starting size for a portfolio in 1990, and we've held it all the way to the end of the year in 2017 and we made about six times our money. So we ended with, I don't know, what's that, $63, $64,000? Now during that time, obviously, we made a lot of money. Then we lost about 50% of our money when the dot-com bubble burst. Then we made some money into 2007, and then we lost a little bit over 50% of our money during the financial crisis. And then we've pretty much gone straight up from there.
14:12 SB: But if you see where we're comparing it to, we're comparing it to our example of the trend being your friend. Remember, we are buying and holding the S&P 500 for one week if it was positive the week before. We're just trying to follow the trend here. And if you look, we made absolutely no money at all, no money at all following the concept of the trend being your friend. How crazy is that? How eye-opening is that? I see a lot of people commenting in the chat box now, they're saying "wow" and they're giving me all these emojis like shaking my head and everything. This is crazy. The data shows that 'the trend is your friend' is not really a profitable strategy. In fact, over the last 27 years, it's made you zero money.
14:56 SB: If we go back to my friend, Stephanie, who I showed the study for, you would have made more money just keeping all the money in your savings account making 0.1% a year, following the trend is your friend. That's crazy. Now, let's look at the other half of this. So, here in the gray line, we see buying and hold the S&P. So, it's the same thing, up, down, up, down, and then ultimately up. But this orange line right here is we're buying the S&P 500 if the previous week was down between 0.5% and negative 3%. Now, buying and holding the S&P definitely outperforms the orange line, which is, again, buying when the S&P is down 0.5% to negative 3%. However, this orange line is incredibly consistent. It's very much... It's not like a hockey stick curve, it's not hyperbolic. It's incredibly consistent from 10,000 to 59,000 and change. It's really consistent. And when you look at some of these big drawdowns in the dot-com bubble bursting and the financial credit crisis, you don't have those nearly the same size drawdowns during that time with this orange line strategy. How awesome is that? You can get almost the same returns as the market, which, by the way, very few people get with significantly less losses.
16:26 SB: And when you look at the numbers specifically, let's take a look here. So we have our trend is your friend strategy right here in this column, which is buying after the S&P 500 is up. Remember, if the S&P 500 is up for the week, we're gonna buy it on Monday morning and sell it before the close on Friday, right? That is to mimic the trend is your friend. Remember, if it's up the week before, that is clearly a trend. So we wanna follow that trend, right? Or maybe not so much, right? I see everyone in the chatroom saying, "We don't want... The trend is not our friend anymore." [chuckle]
That's hilarious. Carrie is freaking out right now. So, this column right here, buy after S&P is up, is the trend is your friend. You made no money over 27 years doing that.
17:15 SB: However, if you did counter-trend buying, which is buying after the S&P is down negative 5% to negative 3%, you made almost 500% on your money. And here's really the crazy part. Here's the crazy part, everyone. You averaged almost 1% profit every time you did this trade, and your largest one-week loss is only 1.37%. Now, this is really the kicker, this is really the data point that turns people from non-believers to believers, that really jacks up their confidence. Stephanie, my student that I mentioned before, this is the data point, this data point right here in red, that jacked up her confidence, that made her open up that account, that made her follow the strategy the next Monday. It's the fact that over 27 years, let me repeat that, over 27 years following this strategy... I'm getting goosebumps just thinking about it, guys, this is so great. I'm leaning forward in my chair, I'm freaking out, this is so exciting. In 27 years of this strategy, your largest one-week loss was 1.37%. Yeah. You made almost five times your money, and the most pain you ever had to endure in a five-day period was 1.37%.
18:36 SB: Let's put that into numbers. On a $10,000 account, the worst you would have ever done, by far the worst, is $137 you would have lost in a week. Could you imagine that? If I was to tell you, "Hey, I'm gonna give you five times your money and the worst you're ever gonna lose is 1%." Would you do it? Of course, you'd do it, right? And on a $1,000 account, a 1.37% loss in a week is only $13 bucks. That's the confidence right there. I can see everyone in the chatroom is going crazy again, "Oh, my God, oh, my God, oh, my God. Yay. I can't believe I never saw this before." Well, now you did, so this is really awesome. This is the confidence booster. Now remember, it's all about confidence getting you in the market, it's all about confidence. Remember, the number one fear my students have before diving into the market, getting their feet wet, throwing themselves in the fire, is that they're afraid to lose money.
19:31 SB: But let's put that into context really quick. If you were just to buy and hold the S&P 500, like the first study, which was just buy and hold from 1990, you would have made a little bit more money than the strategy that we developed. However, your largest one-week loss was the week of October 15, 2008, when the S&P was down 9.03% which, on a $10,000 account, was $903 bucks. That's pretty steep. And remember, we talked about Apple before. Apple is the most widely held stock in the world. It's worth almost three-quarters of a trillion dollars right now, That's mind-blowing, isn't it? That's crazy, right? The worst week Apple had was December 7, 2012, when Apple went down 7.81%. That would have been a $781 loss on a $10,000 account, pretty steep. Now, however, our strategy, which again is buying the S&P if the previous week was down between negative 0.5% and negative 3%, our worst loss was the week of January 8th, 2003, where the strategy lost 1.37% which, again on a $10,000 account, guys, on a $10,000 account, that's only $137 of losses. That is crazy. That's like a meal out with the family. That's the worst case scenario.
20:48 SB: Look at this, buying and hold the S&P 500, you almost lost 10% in a week. Buying and holding Apple, you almost lost 7.8% or almost 8%. But this strategy, in which you made five times your money, you only lost $137 bucks or 1.37%. Now, I see a lot of you in the chatroom... Lesley right now in the chatroom is saying, "But what about in 2008 and 2009?" Very interesting that you said that. If you notice, the biggest loss for our strategy, which is this line right here, was not in the financial crisis. So if you look at how this strategy does in the financial crisis, it's actually mind-blowing. So, again, the gray line is buying and holding the S&P 500. At about the bottom, which was March 6, 2009, you would have lost a little bit over 50% of the value of your account. That's pretty ugly. It's really tough to come back from that and, in fact, it's even tougher for people to stay with their account and not throw in the towel.
21:42 SB: At that time, this strategy which, again, is buying when the S&P weekly closes down between 0.5% and negative 3%, this strategy was up 10%. You completely avoided getting annihilated in the financial crisis. In fact, you profited big time by this. How amazing is that? How amazing is that? I see everyone going crazy in the chatroom again. This is so cool. I gotta tell you guys, I love teaching people how to invest. I really don't like how there's so much information out there that's not actionable. This is actionable. Remember, I wanna give you the confidence to jump in there. What could possibly give you more confidence than you making 10% during a nasty, ugly, disgusting financial crisis, one that we might not even see ever again? That's the confidence that I'm talking about.
22:35 SB: So, we've talked about this a bunch, but we're gonna go over it really quick, about how to do it. So get out your pen and paper, this is really, really important. This study was done in the S&P 500. However, for non-professional traders, it's difficult to invest directly in the S&P 500. So what you're gonna do is you're gonna go over to SPY. SPY, type in and Google if you don't know what it is, or in Yahoo, type it in, SPY is the S&P 500 index ETF. So it tracks tick for tick, penny for penny, price movement for price movement, with the S&P 500, except that it's just that a tenth of the price. So if the S&P 500 is at $2,000, SPY is at $200 a share. So, this is the one you wanna look at.
23:17 SB: So, every single Monday morning at 9:00 AM... Remember, the market opens at 9:30 AM Eastern Time. So every single Monday morning at 9:00 AM, we're gonna log on to our account or we're gonna log on to Google or we're gonna log on to Yahoo or Bloomberg or whatever it is. We're gonna log on and we're gonna look, and we're gonna see was SPY down between negative 0.5% and negative 3%? If it was, at 9:30 AM when the market opens, we're gonna buy SPY. Now, remember, this entire time, we have an understanding that the absolute worst case scenario for that week or that trade, the worst, worst, worst case scenario guys, is only, only, only, only, down 1.37%. So the whole while we're gonna have all this confidence because we can't really even lose that much money. Our downside is tiny, it's puny.
24:09 SB: So what happens is if we buy, we're gonna sell those shares that we bought between 3:30 and 3:59 PM Eastern Time that next Friday. So remember, this trade is just that week. And then you're gonna rinse and repeat. That's it. There's nothing else. This is gonna take you no more than three minutes a week. There's nothing else to it. Now remember, here is... By the way, here's what S&P 500 looks like. This is SPY, nice and easy. So, you need $242.11 right now to participate in this, and I think everyone has that. And again, if your worst loss out of that is gonna be 1.37%, which is $3 if you buy one share, $3 is the most you can lose in a week. It's crazy. I know everyone is feeling a lot more confident about things, as I'm seeing in the chat box, but for those who don't, this is it. This is it. Remember, here is the expectation. So again, buy and hold, yes, you make a little bit more money. However, you have to endure 50% losses. That's big. That's really tough to do. But with this strategy, your worst loss in a week is 1.37%, and you make five times on your money. That's crazy.
25:15 SB: So, what are you waiting for? If you don't have an account, open up an account. Go to TD Ameritrade or Schwab or E-Trade or whatever it is, I don't even care, go open up your account, follow the strategy. It's really simple. You can watch this video 10 times, you could take notes, you could share it, you could do whatever you want, you could download it. This is it, guys. This is it. I said at the beginning, you'd be smiling too if you know how easy it was. I know there's a lot of people freaking out in the chat right now about how excited they are about this. I'm sure they're smiling too. That's just human nature. But this is it, guys, this is great.
25:46 SB: Now remember, let's recap this real quick, guys. On the left, how are we gonna do it? So, in SPY, every single Monday morning at 9:00 AM, we are going to look and see what SPY did the previous week. If it was down between negative 0.5% and negative 3%, we're going to buy it at 9:30 on the open. Nice and easy, right? And all the while, all the while, we know that the absolute worst case scenario, or at least it's been over the last 27 years, the worst case scenario is down 1.37%. Again, on a $10,000 account, that's 137 bucks. On a $1,000 account, that's $13. And if you only buy one share of SPY, that's three bucks. When we buy it, we're going to sell those shares back before the market closes on Friday, we're gonna rinse and repeat.
26:48 SB: Now remember, the people who come to me that wanna learn how to make money in the stock market, their biggest fear is losing money. I don't think anyone in the world has a fear of losing 1.37% in a five-day period when their upside is 500%. I'm really happy everyone was on here. I really hope it gave you a lot of confidence. Again, I can see in the chat box everyone has been freaking out. I'm so glad about that. I'm super excited. If you have any questions about this, any questions at all, email me at firstname.lastname@example.org, you'll get an email back within 24 hours. Remember guys, this is it. The trend is your friend doesn't really work. We've proven that. It makes you no money. However, but if you buy the S&P after it's down between 0.5% and negative 3%, in the last 27 years, you would have made 500% of your money, and the absolute worst case scenario, the worst case scenario, is down 1.37%. Go get them, guys.