In the stock market, emotions drive price movements just as much as fundamentals and technicals. One dangerous psychological trap you can fall into is the “bandwagon effect” — the tendency to follow the crowd without solid reasoning.  

This happens when a stock's price rises rapidly because more and more traders jump in, not necessarily because the company’s fundamentals have improved but because others are buying. This creates a feedback loop where rapidly rising prices attract more buyers, further pushing the stock higher—until reality kicks in, and the price collapses just as quickly.  

A classic example of the bandwagon effect are meme stocks (think GameStop in 2021). Traders see a stock soaring and rush in, fearing they’ll miss out (FOMO), only to be left holding the bag when the hype fades.  

Here’s how you can spot the bandwagon effect:  

Parabolic Price Action – Stocks that rise too fast in a short period, especially without strong news or earnings support.  

Unusual Volum...

As Thomas Paine said, “Lead, follow, or get out of the way.”

How does this apply to trading? From a stock trading perspective “leading” implies one has performed exhaustive research and has uncovered a stock that has positive fundamental, technical, and marketplace metrics. “Following” on the other hand implies you know this analyst and they shared their findings with you. 

Or would you rather know the executives running the company?  

Who would you rather follow? 

Unfortunately, we don’t have a snowball’s chance in Hell of getting any tips from the insiders. It would be illegal anyway. 

But there is one way to legally “follow” the insiders without knowing them at all. Our team does this every day with outstanding results and I want to share this strategy with you. 

Join me today, Thursday February 6th @ 1PM for a training session on this strategy. Click here to reserve your seat. 

Here’s what we’ll cover on Thursday:

The best leading indicator of stock price explosions.

The r...

It’s easy to get lost in the price charts, technical indicators, price patterns, and economic data looking for trade setups. However, when it comes to identifying why any tradable asset may move significantly in price, few factors are as influential as a catalyst.

Today, the FOMC releases an interest rate decision and holds a press conference announcing their view on the economy and future interest rate direction. A catalyst like this is easy to manage. We can prepare our response since we know when it’s coming.

If you’re trading stocks or options your primary catalyst is earnings season (MSFT, META & TSLA report tonight). We don’t know the direction a stock will take until after the announcement, but like the FOMC release, we can prepare ourselves for a trade decision in either direction. 

The best catalysts are those that are unknown to the public: the “surprise” news announcements. The price reaction to these can be extreme because traders are caught off guard. 

Here’s the good ...

The worst situation to be in trading Futures or options is having one contract. You have little flexibility with your exiting decision. 

Fortunately, with many micro contracts in Futures to select from even smaller account holders can trade multiples. This gives you the flexibility to “scale out” of the trade one contract (or more) at a time. 

Ultimately, your size is a function of your acceptable risk. How much you’re willing to lose when you stop out will determine your size. Trading micro contracts, if you’re willing to lose $120 on a trade and the per-contract risk is $30, then your size is obviously 4 contracts. 

The challenge you have with day trading is market noise. The bigger picture trend may look smoother than the trading timeframe chart. Sometimes that "noise" will stop you out prematurely. One way to mitigate this is to set an initial high probability profit target as your first exit. Call it a “risk management profit target.” It gives you a little win, reduces your ris...

Yesterday’s results: Neither trade idea triggered.

Today’s Best S&P Futures Turning Points: Buy 6100.00 stop 6096.25 if price retraces down from above. Short 6079.50 stop 6083.75 if price retraces up from below. 

The World Index: (+100/-100) remains at +7 with sentiment mixed on low volatility. 

Catalysts: Trade Balance & Jobless Claims @ 8:30. Fed’s Barkin @ 11:30 and 12:15. 

Quick Tip: Outperformance

If you search for the “best mutual fund manager in history” you’ll find an article listing the top 5. On this list is Peter Lynch, famous for making Fidelity a household name by growing the Magellan fund to $13 Billion in assets while simultaneously doubling the S&P return. 

Clearly Lynch was a talented stock picker. Part of his research involved Insider trades. He commissioned a research firm to collect and analyze all the filings with the SEC. This was before the internet, so you can imagine how time-consuming the task was. 

To this day Insider buys of a certain type remain a ke...

Yesterday’s results: Buying 5909.50 picked the bottom of the session and ran 66 points to the suggested short at 5975.50, which only offered a 6.25-point scalp. 

Today’s Best S&P Futures Turning Points: Short 6002.25 stop 6007.75. Buy 6007.00 stop 6001.50 if price retraces down from above. 

The World Index: (+100/-100) drops from +29 to zero with sentiment mixed and volatility low. 

Catalysts: S&P MFG & Services PMI Flash @ 9:45. UofM Consumer Sentiment & Inflation Expectations @ 10:00. 

Quick Tip: Simplify 

One of our trading teams, the stock/options swing traders, uses a long-only strategy that has extreme asymmetrical results. The risks are very low. The rewards are sometimes parabolic. 

While there are dozens of options strategies you could use, why complicate your plan? Simple call option buys work fantastically with these trades because the real edge comes from inside information, not a chart pattern or indicator. We scan for big Smart Money bets that seem unlikely to succe...

Yesterday’s results: : No trades triggered. 

Today’s Best S&P Futures Turning Points: Buy 5936.25 stop 5931.25. Short 6002.75 stop 6007.75. 

The World Index: (+100/-100) drops from -7 to -21 with all major world markets neutral to Bearish on low volatility. 

Catalysts: Retail Sales, Empire State MFG Index, Import Prices @ 8:30. Fed’s Collins @ 9:00, Williams @ 13:15. Industrial Production @ 9:15. Business Inventories @ 10:00. 

Quick Tip: Tuning Your Watch List 

Stock and option traders have a challenge that futures and Forex traders don’t have. How to winnow down your trading candidates from nearly 9000 stocks. 

There are some common filters that are easy to implement like price and volume. Picking stocks that are between $10 and $50 reduces the selection to 2200. Add in average volume over 1 million daily and you’re down to 562. 

You can keep adding filters to get to a manageable number, but you still don’t have any idea about the future direction of the stock. 

And some of th...

Yesterday’s results: Buying 5996.50 stopped out. Shorting the retracement to 5993.50 offered a 6.75-point scalp.  

Today’s Best S&P Futures Turning Points: Short 6032.75 stop 6037.75. Buy 6037.50 stop 6034.75 if price retraces down from above (filtered out during CPI release). 

The World Index: (+100/-100) soars from -71 to zero with the major world markets mixed on falling volatility.  

Catalysts: CPI @ 8:30. FOMC speakers; Kashkari @ 8:30, Logan @ 9:45, Musalem @ 13:00, Schmid @ 13:30. Federal Budget Balance @ 14:00. 

Quick Tip: Trading in the 5th Dimension

You could argue that chart trading is 3-dimensional. You’re analyzing price, volume, and time on a chart.

If you add fundamental analysis to your plan that would be your 4th dimension, and it would very likely improve your performance. Knowing more about the assets, sectors, and economy can only help you. 

There is a Fifth Dimension in trading that will help you even more. Let’s call it “knowing the unknown.” 

The obvious ...

Yesterday’s results: No trades triggered.

Today’s Best S&P Futures Turning Points: Buy 5996.50 stop 5992.75. Short 5993.50 stop 5997.25 if price retraces up from below. 

The World Index: (+100/-100) soars from -50 to +36 with most major world markets Bullish. 

Catalysts: Nothing on the economic calendar.  

Quick Tip: Windfalls

Not nearly enough, but on occasion your trade becomes a windfall. Not so much in day trading but swing and position trading for sure. Maybe you bought NVDA 2 years ago and held on. Windfall!

Our swing trading team experienced a remarkable windfall trade last week. The strategy we used had to do with Unusual Options Activity. Simply put, these are huge bets on unlikely outcomes. The concept is that anyone who can bet that big must know some non-public information. 

Following the chart above you’ll see we uncovered a Smart Money bet on 10/21. $2.1M was bet on this $160 stock exceeding $200 in the next 3 weeks. You could have bought that option for $2.70 per ...

Yesterday’s results: Buying 5789.50 stopped out. The short idea didn’t trigger.

Today’s Best S&P Futures Turning Points: Buy 5705.75 stop 5699.00. Short 5696.50 stop 5702.25 if price retraces up from below.  

The World Index: (+100/-100) jumps from -43 to +21 with most major world markets Bullish on relatively low volatility. 

Catalysts: Non-Farm Payrolls @ 8:30. S&P MFG PMI Final @ 9:45. ISM MFG PMI @ 10:00. 

Quick Tip: Time Horizon

Establishing the time horizon for your trades is critical. You’re committing capital, which is limited, to get a result. Deciding on the win or loss amount is not enough. You should have a “time” stop as well to free up the capital for another opportunity. 

Here’s an example: 

Our swing trading strategy for equities and options utilizes a key catalyst for stock selection: Large Insider buying. Why? Because Insiders know best about the prospects of their company. Historical research validates this. 

Large options speculators are another great leadin...