In this article, you're going to learn why you should not spend time researching and reading about the stocks that you own.
David Jaffee with BestStockStrategy.com used to read SeekingAlpha.com. He felt that he needed to dedicate time to read and research every underlying stock in his portfolio, and he thought that as long as he did that, he would be rewarded with making more money.
We're taught from an early age that if you study in school then you'll do better. The problem is that oftentimes the information that we're consuming is garbage.
In David Jaffee’s opinion, bad information is worse than no information.
From David Jaffee’s personal options trading experience, he performed significantly worse when he read articles, did research, and watched CNBC than he does by consuming no information (and simply by watching the price action and volatility of the market, and individual stocks).
When many people consume information, they're looking for confirmation bias - this means they're going to look for information that confirms their existing belief.
The goal of many articles and videos is to elicit an emotional response. However, oftentimes, emotional responses are not rational.
You may believe that if you study more and if you invest the time, then you're entitled to make more money.
However, with the stock market, it doesn't work like that. The more you study and the more time you invest in the stock market, the more confused you’ll likely become and the more conflicting opinions you’ll likely consume – oftentimes causing you to make bad decisions that cost you money.
Sometimes, the time you spend studying, researching your stocks, and studying fundamental analysis can actually be counterproductive.
Additionally, the Efficient Market Hypothesis states that all information is already priced into the current market price, as a result, neither technical or fundamental analysis has any value.
In my opinion, I believe that over the long-term, prices are generally correct, however I also believe that short-term price fluctuations, both to the downside, and the upside, can sometimes be irrational.
How do you make money in the stock market?
To make money in the stock market you need to consistently make good decisions.
When trading options, the most important aspects are knowing when to trade, when not to trade, the sizing of the positions that you take and mitigating your risk and downside.
David Jaffee teaches his members to trade large cap stocks that are market leaders with strong brands. He also trades ETFS and indices.
As a result, almost all the information that you read is already priced into the market price of the stock .
There is nothing that you're going to read about Amazon that is going to help you make money in this stock. Instead, you're simply wasting your time by reading articles on SeekingAlpha.com about Amazon.
Protect Yourself from Bad Options Trading Information
David Jaffee has also found that more information is oftentimes a distraction.
There is a lot of bad information out there, and bad information is worse than no information. There is no guarantee that you're consuming good information.
David Jaffee knows from personal experience that traders tend to perform worse when investing time and reading articles about the underlying stocks on their watch list.
Instead, if you want to be a consistently profitable options trader, the best thing that you can do is to improve your discipline, learn how to observe price action and the recent trading ranges of the stocks on your watch list, learn when to trade and when not to trade, learn how to correctly size your positions while also learning how to reduce drawdowns and limit portfolio volatility.
Once you educate yourself on these important trading lessons, you should significantly improve your overall consistency while also reducing your portfolio volatility.
By learning how to sell option premium, you can win up to 98% of your trades.
David Jaffee understands that ignoring fundamental analysis and research is a bit of a controversial opinion and goes against everything we’ve been taught about preparation, sacrifice, studying and knowledge.
While educating yourself and researching the stocks on your watchlist may not seem counterproductive, David Jaffee performed worse when he researched and read articles about the stocks on his watch list.
Improve Your Options Trading Consistency
David Jaffee of BestStockStrategy.com offers an online options trading course that teaches traders how to sell options while limiting their risk.
Through his course, you can learn when to trade and when not to trade. You can also learn how to improve your discipline and correctly size your positions.
Visit BestStockStrategy.com for $400 of valuable free options trading information.
Frequently Asked Questions (FAQs)
Is fundamental stock analysis worthless and useless?
Fundamental stock analysis is a good way to be engaged, but it likely will not help you make money. The efficient market hypothesis says that all new information is already priced into the current stock price.
Additionally, almost all fundamental analysis is historical in nature, whereas the stock market tends to look towards the future prospects of a company.
Finally, reading many disparate and conflicting opinions can often cause traders and investors to make bad decisions.
Will fundamental stock analysis help me make money?
Fundamental analysis will likely not help you make money.
The efficient market hypothesis says that all new information is already priced into the current stock price.
Additionally, almost all fundamental analysis is historical in nature, whereas the stock market tends to look towards the future prospects of a company.
Finally, reading many disparate and conflicting opinions can often cause traders and investors to make bad decisions.
Will fundamental stock analysis help me make money?
Fundamental analysis will likely not help you make money.
The efficient market hypothesis says that all new information is already priced into the current stock price.
Additionally, almost all fundamental analysis is historical in nature, whereas the stock market tends to look towards the future prospects of a company.
Finally, reading many disparate and conflicting opinions can often cause traders and investors to make bad decisions.
Fundamental analysis vs. technical analysis: Which is better?
Neither fundamental nor technical analysis will likely help you make money.
For most large capitalization stocks and indices, the current stock price already factors in all available known information.