Everyone from Wall Street to Main Street has an opinion about the recent extraordinary new developments involving a sub-thread on Reddit known as ‘WallStreetBets’ and the meteoric rise of several stocks, most notably Gamestop.
It all started when a number of hedge funds and professional traders shorted Gamestop, believing the fundamentals did not support the then market price. Young traders and activists on Reddit took notice, and hundreds of thousands joined together to buy the stock with the goal of hurting the short-sellers.
While talking heads and even regulators are weighing in, the network thought it would be interesting to hear from some of the world’s most successful trading educators. One who agreed to talk was Laurens Bensdorp, founder of the Trading Mastery School.
The network connected via Skype and Laurens dialed in from his villa in the south of Spain. I asked what he thought about the entire situation.
“It’s somewhat amusing to me. The hedge fund traders don’t really know what they’re doing, and the kids from Reddit don’t really know what they’re doing, and yet the market is working, for the most part. I can say this confidently because the hedge funds have shown over the years that they rarely outperform the markets, and in this specific case, they should never have been so exposed to the ‘short squeeze’ trap they’re now in.”
He continued, “The kids clearly don’t know what they’re doing, using apps such as RobinHood to invest and driving up the price without an exit strategy. I heard one of the investors has a seven-figure gain but won’t take any profits because he wants to maximize the pain of the hedge funds. It’s all crazy… and it’s certainly not ‘investing’.”
The network asked Laurens to explain more of what he meant when he said that the whole Gamestop fiasco was not ‘investing’.
“Well, an investor has a plan. He has an objective, a philosophy and a risk tolerance established. None of the high profile players in this scenario are acting like investors. As we teach at the Trading Mastery School, you can successfully trade anything, yes, even Gamestop, so long as you have developed a strategy. For example, if you’re going long, you already have determined an exit strategy based on historical price action.”
Speaking about what his students do differently, he said, “All of our students also have a comprehensive risk-management strategy, so before entering the position we would know exactly how much we’re buying, and what we would do in the event of a loss. For example, we might exit if there is a 10 or 20% drop. Students who are willing to take on more risk might buy additional stock at that point. There is no ‘one size fits all’, but there are certain principles that every successful trader will rely upon.”
Laurens Bensdorp also explained that at the Trading Mastery School, students embrace a stoic-like approach to trading
“Everything you’re seeing right now with this hysteria is the opposite of what we teach and practice in our trading. Each student investor completes a comprehensive self-analysis, to understand their relationship with money and with trading. We want to avoid emotionally-influenced decision-making. We want to develop an indifference to the price action so that we can analyze and act without fear, hesitation or greed.”
The results seem to speak for themselves; graduates of the Trading Mastery School have studied the methods that have enabled Laurens Bensdorp to more than double the S&P 500 return in recent years, often with as little as 30 minutes a day invested in managing his portfolio.
Readers can learn more about Laurens Bensdorp and the Trading Mastery school at TradingMasterySchool.com
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