It was 2008, the year of the financial crisis. I was okay, because at that time I wasn't investing yet. I had worked for a year to save enough money to move to China and study Chinese and was running through my savings.
Fast forward a year, to when I became a copywriter. My savings was piling up, and the money seemed a bit wasted just sitting in the bank. Like most naïve investors, I spent hours reading gossip about certain companies and stock, putting my money into whatever people said was good.
A few years later, I did some analysis on how much money I made. It was a little above 0%. I figured there must be a better way.
My academic background is statistics, and I used that as a basis for my research on the stock market. I don't want to bore you with the details of my research, but let's just say here are the results of my studies:
- 1.Most professional stock brokers perform as good as a coin flip in their prediction.
- 2.Most fundamental analysis is inherently flawed due to psychological factors such as confirmation bias and the over/under emphasis of certain types of data.
- 3.Most of the popular technical analysis methods are subjective and, like stock brokers, perform just as well as a coin flip.
However, my research was not fruitless. I did find a handful of findings that, when used together, can create correct predictions with a high statistical significance.
I developed The Gap Method after analyzing my past trades (I keep a history, and so should you!) and finding that my trades based on price gaps yielded a 39% ROI on average. That means for every $100 I invested, I got back $139, $39 of which would be profit.