Okay, right off the bat I have a confession to make. I like my brother-in-laws, all four of them. They may think I’m an A-hole, but I still like them.
I use the term as a catchall for that annoying person that you see at cocktail parties, holiday events, family reunions, etc., who always is talking about the trades he is making in the market. And is always 100% wrong on each one of them. These guys are like “Bad Luck Schleprock” when it comes to trading stocks.
Schleprock was a character on the “The Pebbles and Bamm-Bamm Show,” which was a spin-off from “The Flintstones.” Everything Schleprock touched turned bad. He was a loser’s loser and just an all-together downer, which was embodied by his favorite catchphrase, “Oh wowsie wowsie woo woo. Miserable day, isn’t it?”
A typical story line featuring him went like this;
Pebbles’ attempts to help Schleprock shake his bad luck omen lead to disaster after disaster, including getting the gang trapped in a mine with a crackpot professor searching for a lost city.
In typical Schleprock fashion, once the TV series was cancelled he ended up marrying some stripper whose stage name was “Rock Candy,” and she took him for all he was worth. Then he started dealing meth and took the LAPD on a two-hour high-speed pursuit at the end of which he offed himself on live TV.
So the question is, can you make money fading “Schleprock traders?” My (virtual) friend and former pit trader Jeff Watson thinks you can. From his blog….
Fade indicators are not just identifying and fading losers in the market. Fade indicators have many variations and identities, and one should look around, as they will always show up, every day. The key is to recognizing them for what they are.
I’ve found many excellent sources of fade indicators to be physicians and dentists. Since they are smart people and have disposable income, many medical professionals play the market, mostly unsuccessfully. Medical doctors have big egos in many cases, and massaging their egos will provide many nuggets of information that can put money in your pocket. I look at doctors as the best kind of fade indicators as I’ve never met one who knows how to trade, invest, or really make any money in the market save what the drift offered them.
Another very accomplished trader I know doesn’t actually fade these types of losers, but will avoid trading altogether any stocks they are in, indicating that their participation has put the “black death” on the trade.
This concept may seem funny and not keeping in line with the objectivity that is needed to trade successfully, but if you think about it, it actually makes sense and is quite logical.
Imagine for a moment that someone is a fantastic trader and then think of what attributes or characteristics were needed to make them so.
Objectivity. Discipline. Full-time market participation. Lack of ego. Ability to tune out extraneous noise. Years of real world trading experience. And the list goes on.
Now imagine someone who has the exact opposite of those traits.
Subjectivity. Sloppiness. Part time trader. Egomaniac. Takes every word that the financial “talking heads” say as gospel. Thinks that external experience translates to the markets and trading. And the list goes on.
Those types of people are going to have an uncanny ability to lose money in the markets over time, and all you have to do it identify them and then be ruthless enough to exploit them.
And fortunately most of these “Schleps” are jerks anyway who wouldn’t give you the time of day if you tried to help them trade better, so you can feel free to use them like the proletariat in a dystopian novel.
Obviously using a person as a fade indicator does not provide an exact trade entry spot, nor does it provide objective risk/reward criteria, so you will have to marry the “fadee” with technical analysis. But using them as an “idea generation machine” for potential fade trades can be profitable if done right.
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