Chris’ note: Today, I’m sharing what I believe to be the single most important insight if you want to achieve financial freedom. To beat the crowd, you have to think differently from the crowd.
Contrarianism has been the hallmark of Legacy Research cofounders Bill Bonner and Doug Casey. They each built fortunes by going against the grain. And longtime readers know it’s the “golden thread” running through everything we publish at Legacy Research.
It’s a lesson our master trader, Jeff Clark, learned early in his career. As he explains below, the secret to finding the most profitable trades is making sure everyone else thinks you’re nuts.
Most folks believe in their bones that trading is risky.
And if you don’t know what you’re doing, it is.
Novice traders often don’t take the time to learn the ropes. They jump right in thinking, “I got this.”
They gamble, blow up their accounts, then walk away penniless and swearing off trading forever.
I know… because it almost happened to me.
I was 19 when I made my first trade.
I had a gut feeling the stock market was going to go higher. So, I bought four S&P 100 call options at $1.50 – a total investment of $600.
A few hours later, the options were trading at $4.50. I sold and took the $1,200 profit – a 200% gain. And I was hooked on options forever.
[An option is a contract to buy or sell a stock. Each contract represents 100 shares. The contract is fixed at a certain price and expires on a specific date. A call option is an agreement to buy a stock. A put option is an agreement to sell.]
My next trade was in tech giant IBM. I bought 10 $1 calls for $1,000. This time, it took a couple of days to double my money.
Next, I bought put options on a computer company called Digital Equipment Corporation.
They nearly tripled in value in just a few days.
I made 17 trades during my first six weeks as a trader. Every single one was a winner.
Going 17 for 17 was a remarkable feat for a rookie trader – especially since I wasn’t using any sort of fundamental or technical analysis. I was just going with my gut.
But I was careful not to put more than $1,000 or $2,000 into any single trade. And I still managed to turn my $5,000 brokerage account into $50,000 in just six weeks.
Then, I decided it was time to get serious. No more tiny trades. I was too good for the small stuff.
For whatever reason, I had figured out a way to beat the market. Heck, I had just rattled off 17 straight triple-digit winners!
So, I decided to take the $50,000 in my account, add to it my $25,000 in savings, and put it into a handful of options trades.
You can probably guess what happened next…
The market has a habit of humbling folks who believe they’ve figured it all out.
For me, the humbling started right away.
At first, my trades started moving just a little against me. It was nothing to worry about, I thought. One good day would put everything back in the profit column.
But then, one by one, each trade blew up on me. It was too painful to watch. I kept the TV off… I avoided reading the newspaper… for fear I’d see something bad about the stock market and my positions.
When I finally plucked up the courage to call my broker, he told me ALL the gains I had built up over the previous six weeks were gone.
“Just sell everything,” I said.
That was an expensive lesson. But it’s one every trader learns at some point. I was just lucky it happened to me early in my career.
I now use the options market to reduce, not increase, my risk.
And if you’re already a paid-up subscriber of my Delta Report trading advisory, you can read all about how that works here.
But if there’s one thing I’ve learned after 36 years of trading, it’s this… The most unpopular trades are the most likely to be the most profitable.
Don’t ask me to explain it. I can’t.
When I was young, I was attracted to high-risk trades. But these days, I look for lower-risk trades. And lower-risk trades, by nature, tend to be the out-of-favor ones.
Let me show you what I mean…
In October 2017, I started recommending trades in the retail sector. And even though we’d had success trading retail stocks, my subscribers were ticked off.
For example, I recommended a trade on big-box retailer Macy’s (M).
To me, it seemed an easy bet. At the time, Macy’s was trading for seven times earnings. And it paid a 7% dividend. Talk about out of favor.
Besides, I had recommended trades on Macy’s three times already that year. Those trades returned 15.3% in 12 days… 12.9% in 45 days… and 28.3% in 27 days.
Those are outsized returns on a stock that was out of favor and had been falling in price all year. So, I figured my subscribers would willingly jump at the chance for another trade on Macy’s when I recommended it in early October.
You wouldn’t believe the vitriolic emails I received after that recommendation. Folks were upset because the retail sector at the time was deeply out of favor.
And that’s when I knew for sure we had a winning trade.
You see… when even the folks who know I’m a contrarian trader HATE a trade I’m recommending, then I know I’m onto something.
So, after recommending the Macy’s trade – which generated better than a 13% gain in 36 days – I got more aggressive in the retail sector.
I then told subscribers to place a trade on Bed Bath & Beyond (BBBY). And that trade produced a 117% gain in just two weeks.
But you wouldn’t believe the heat I took on that recommendation.
Folks thought I was nuts. Some people canceled their subscriptions because of it. The feedback I got… well… let’s just say it was less than flattering.
But the lesson holds: If I know nobody wants to buy “this” or “that” sector, I know it’s going to be a winning trade.
Next week, I’m holding a special training event for folks who want to learn more.
You see, over the past 18 months, I’ve developed a new contrarian way of trading a small group of fast-moving stocks.
And the results have been impressive so far.
It’s spotted stocks that went on to soar as high as 60%… 90%… 236%… 308%… even 600% – all over a short timeframe.
And this new strategy doesn’t even use options – my bread and butter.
It’s a whole new way to trade without worrying about things like expiration dates, strike prices, premiums… or anything like that.
I’ll even be including the three top trade setups I’m watching right now.
To join me next week, secure your spot here.
Best regards and good trading,
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Jeff Clark
Editor, Delta Report
Chris’ note: If you’re still unconvinced about whether to sign up for Jeff’s training next week, I’ll leave you with a final word on his track record…
Since we launched his Delta Report advisory in January 2017, Jeff’s recommended 208 trades. And 161 of them have been winners. That’s a 77% win rate… or an average of one winning trade every six days.
Jeff’s average win is 29%. So if you’d followed all his trades, you’d be up 3,989% today. That’s enough to turn every $1,000 into $40,890.
So don’t miss Jeff’s broadcast next Wednesday, October 23 at 8 p.m. ET. If you’re even curious about how to make gains like these in your portfolio, sign up for free right here.