Many of my Ham radio friends struggle with success in the stock market. Probably because their mind works in a logical and rational fashion, as opposed to the whims of the market. However, I believe Hams can drastically improve their investment success rate once they gain insight into market dynamics. Below are 8 tips to applying your radio operator knowledge for wins in the stock market.
- The market moves in cycles
Radio wave propagation varies, and occurs in cycles and patterns. Weather, solar activity, season, and terrain all effect how far and where a radio signal will travel. Stock market movement also occurs in trends and cycles. Over 70% of stocks will follow the general market trend (either up or down). By definition it has to work that way, otherwise a “trend” wouldn’t be occurring if the majority of stocks weren’t moving in the same direction. During a downtrend, even the best rated stocks lose value. The point is, use your situational awareness, watch for trends and cycles. A good radio operator disconnects the coax when he hears thunder. Likewise, get out of a bad market and make sure you’re participating in good ones.
- Learn to read stock charts
A Ham knows how to measure amps, SWR and can operate an oscilloscope. Use that same keen intellect to learning how to read a stock chart. It’s not complicated. The higher a company’s earnings (or perceived future earnings) the more people will want to own the stock…the price will go up. The patterns of supply and demand will play out on the stock chart. Learn to identify the sequence.
- Follow the leader
Looking for DX or a special event station? Hams use DX spotting websites, waterfall displays, or just scan up and down the band looking for a pile up. The pile up is where the action is. The stock market operates in a similar manner. The market is driven by large institutional investors (retirement & pension funds, etc). That’s where the money is, they create the demand. If institutional investors favor a stock, the price goes up as they accumulate it. Follow the leader, if the “smart money” is buying into a stock, maybe you should too.
- Let your money work for you
All things being equal the guy with the biggest amplifier will break through the pile up. Power matters. Money is power, let it work for you. Let’s say you have $1,000 and spend 20 hours researching how to invest it to make a 10% return. Your $100 profit will equate to $5/hour of effort. (You could have earned twice as much working at McDonalds and not risked your savings.) Now do the same thing, but this time invest $1 million…your hourly rate is now $5,000/hour. The point is that you need money to profit from money. If you have meager resources, your time will be better spent learning to earn and save more. Don’t invest unless the effort has a reasonable pay off.
- Myth- the little guy can’t win
Forget about all the whining that the “little guy” can’t make money in the stock market. Don’t be afraid of high frequency traders, hedge funds, or the supposed 1%. As a Ham you know that contests are dominated by “the big guys”. They operate beams and legal limit amplifiers. BUT you’ve also heard plenty of QRP operators break through pile ups. No it’s not easy. It takes good operating skills, discipline, persistence and getting lucky with propagation. Every day QRPers and guys running barefoot make enjoyable, quality global QSOs. Winning in the stock market is no different. The “little guy” individual investor can make money by being a disciplined saver, shrewd trader, and patiently waiting for the right opportunity.
- Myth- Buy & Hold
As a radio operator, imagine it’s almost sunset on a hot day in July. You’re calling CQ on 160 meters and only hearing static. Applying the Buy & Hold strategy, you’d just stick with it and “ride out the bad market” or lack of propagation in this example. As a Ham, you know that’s nonsense. You’re going to move up the bands, looking for the lowest usable frequency. Chances are 40, 20, and 10 meters are wide open…why operate on 160 meters? The stock market is the same way. Sometimes tech stocks are hot, other times it’s large cap blue chips stocks, maybe it’s dividend paying Utilities, or real estate funds. One thing is for sure, it’s never ALWAYS the same thing. Maybe equities are performing poorly and it’s time to be in bonds, or just plain old cash for safety. Don’t Buy & Hold, trade strategically, moving between favored asset classes. Just like you would move up and down the bands looking for a pile up.
- Ignore the Experts
Listen to any rag chew conversation and chances are you’ll eventually hear “experts” arguing over some fine point of Ham radio. The airwaves are full of “experts” that often don’t have a clue. The world of investing is the same way. Ignore the talking heads on TV or in the financial media. What do you call someone that professes to know what’s about to happen in the market? A liar. NO ONE can know with certainty what will take place in the future. And if they could, they wouldn’t share it with you.
- Get the help of an Elmer
A Ham by nature isn’t a “lone wolf”. Let’s face it, it takes at least two for a QSOs or to form a Net. We’re not in this hobby for solitude. Chances are you didn’t learn everything about radio by yourself. You probably had an Elmer, most likely you’ve been an Elmer. That’s the nature of the hobby. Becoming a successful investor is similar. It helps if someone is there to mentor you, especially in the early years. Find someone that’s been a successful investor, pick their brain. Mimic their actions. Join a local investors’ club or study group. Hire a professional. Don’t go it alone.