Human Errors

HUMAN ERROR & PIT FALLS

The Supra Vantage® is an excellent tool for all investors, professionals and novice alike.

However, there are times where good performance is not realized by the trader/user.

We have identified some areas where the human element has a negative effect on performance.

We now discuss the pit falls that need to be avoided when using the Supra Vantage®.

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The easiest mistake to make is a  “DIRECTIONAL MISREAD”. Direction is the third signal in the Supra Vantage® protocol after Isolation and Timing.  Many of the stocks selected by the system are prone to very violent price action. If a trader/user goes against the directional indication generated by the system the pain most times will be extreme.   Moreover, if the trader/user follows the directional signal given by the system and the signal turns out to be wrong (these are rare occurrences) the pain will also be severe. In each scenario just described the trader/user would be going long right at the time they should be going short, or they would be going short right at the time they should be going long. The scenarios we just described will always be a possibility, which means pain at times may be un-avoidable.  Fortunately we are always upgrading and recalibrating the system in order to stay accurate and keep up with the changing personalities of the stock market. However, the system is not perfect. For now the Supra Vantage® is the best we can find when it comes to trading stocks.  With that said we can only remain vigilant in an effort to avoid mistakes at all cost.

We also observe some occasional signals generated by Supra Vantage® that come ahead of price action which is very violent to the up and down side. These are blessings because in these situations any trader/user with a moderate amount of skill and nerve will be able to profit from the signals no matter what side of the trade (long or short) they take. Again in these situations it will come down to skill and nerve, if the trader/user displays enough of both they will frequently capitalize off of these type of signals.

Nevertheless, the vast majority of signals generated by the Supra Vantage® come ahead of definite price action to up or down side. For this reason the “DIRECTIONAL MISREAD” is a serious pitfall that needs to be avoided at all cost. This is a very important point, because the first two Supra Vantage® signals (isolation and timing) are exceptionally accurate so when the third step (trade direction) is wrong for whatever reason it will be very painful for the trader/user.

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Another common mistake comes with “DISTANCE OVER AND UNDER SHOOTING”. Fear and greed, unfortunately, are two emotions that compromise trading performance. We have been able to observe two human errors that are manifest through these emotions. Those errors are either over or under-shooting the boundaries of the Distance Calculation Table (DCT) generated by the Supra Vantage®.

The (DCT) is a table that is used to gauge the distance of potential movement (up or down) in a stock. This is the fourth and final calculation of the Supra Vantage®. The DCT is straightforward and exceptionally accurate. When a trader/user follows the DCT, the odds of excellent results are very high. In an effort to make more money, greed can occasionally can lure a trader/user into placing orders beyond the boundaries of the DCT. This sort of action is risky, rewards and punishments can be random and extreme.

On the other hand, fear will push a user/trader into to exiting a position prior to reaching the DCT boundary. During these occasions, the trader/user will leave money on the table and realize reduced returns.

To summarize, this over and under shooting the DCT boundary due to fear and greed will have an adverse effect on performance. We encourage users to display discipline and be vigilant in obeying the Distance boundaries given by the Supra Vantage® system.

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Another mistake comes when traders/users attempt to break time tested rules of the stock market. A rule in particular we should all obey is the one of “PATIENCE”.  The time horizon for the more risky investments should be longer than the safer investments in any portfolio.  Many traders/users do not understand “RISK” can not be made to disappear, it can only be managed and or mitigated.  No matter how you look at it trading stocks involves a high degree of risk. Many traders/users employing the Supra Vantage® have very short time horizons under which they are not only looking to take profits, but really need to take quick profits. They are many times in a financial hole and they desperately need a phenomenal near perfect run in order to make the “big time come back”.  Many times the Supra Vantage® trading runs are great but not perfect enough to get them out of the hole. Yet, miraculously we have witnessed several traders/users make these financial come backs by putting together runs with the Supra Vantage® that are truly spectacular. To many observers the Supra Vantage® is an answer and solution to all sorts of financial problems. We understand in life things go bad, people sometimes are forced to take extreme action.  However, we strongly advise against this sort of desperate behavior, it is a very dangerous path to take.

We must remind trader/users the stock market is random in nature. Consequently, the Supra Vantage® system can only find profitable data points as they randomly appear. Sometimes the system isolates an abundance of profitable data points and other times the data points isolated by the system can be scarce.  Desperation can make a trader/user push too hard by attempting to trade during a period when the system is not generating solid definitive data points. We recommend trader/users have time horizons of one year or more when committing money for trading stocks using any program. We further recommend traders/users show “PATIENCE” and wait for the Supra Vantage® to isolate strong visible data points. Employing these strategies will greatly increase the probability of success. Nevertheless, we have seen many traders/users break the rules. They take immediate cash profits on a monthly and sometimes weekly basis for very long periods of time while using the Supra Vantage®. Unfortunately we also have seen some traders/users attempt this type of risky behavior for too long and the law of averages catch up to them or they start their trading run at a time when the system needs modifying or recalibrating. These traders/users are the ones we have seen usually get punished at a time they could least afford.  After this occurs their spirit and courage most times is broken. Once a trader/user loses their spirit or courage they will not be able to continue to bear the pressure of stock trading.  The System is not perfect, however it’s high degree of accuracy makes it look so close to perfect some traders/users are seduced into thinking they can break the rules indefinitely.  We must all remember sometimes losses will occur when trading stocks. This is an un-avoidable reality that a trader/user must plan and be prepared for.

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The next mistake comes when the trader/user mis-handles “VOLATILITY”. Many traders/users feel they are mentally ready for the violent moves of the stock market. Many of them say they have a plan that will help them overcome. Volatility will scare many traders/users out of the game. Volatility can break the strongest of wills and should not be underestimated.  Diversification is the best defense against volatility.  However, traders/users with smaller accounts can’t diversify as profitably as traders/users with lager accounts. The reason this is due to stocks having a bid/ask spreads and commissions being paid each time you buy or sell.  So this means the smaller player will have to concentrate positions and or have longer hold times if they want to capture percentage returns comparable to that of the larger players.  Trading under these circumstances by the smaller player drastically decrease the margin for human error and increases the possibility for account volatility.  On the other hand, the small trader/user can diversify  positions in an effort to cut down on volatility. However, they will many times have to go with very small and possibly odd lot positions if they are to adequately diversify against volatility. When this happens commissions and bid/ask spreads cut into trading profits on a higher and higher percentage basis. There are other instances a larger player will be able to make small to moderate gains on particular trades and perform well. While those same trades may not be profitable for some smaller players at all.  More importantly, in cases where it is profitable for both small and large player to execute the same trades, the bottom lines for of each player on a percentage basis can differ greatly due to bid/ask spreads and commissions.  We are simply saying smaller players must realize larger players benefit from “ECONOMIES OF SCALE” when trading.  Moreover all players must find balance between diversity and returns. All traders/users must further understand when using the Supra Vantage® percentage returns can differ depending on account size and how volatility is managed.

We have seen many traders/users use “STOP LOSS ORDERS” in an effort to reduce volatility.  Using these type of orders can drastically change return results. There are many philosophies about the use of stop loss orders. All of them have one weakness or another.  We are constantly researching, debating, and formulating the use of various stop loss/defensive techniques in an effort to find balance between aggression and prudence. Some traders/users employ stop loss orders while using the Supra Vantage® and others do not use them at all. Other trader/users use them from time to time.  Currently we do not have enough data to determine what method or combination of methods will yield the best results.   We have many doctrines with respect to stop losses and defensive maneuvers we are presently evaluating.  We are confident in the near future our research and development efforts will provide more guidance in this area.

For now we leave the decision of stop loss orders in the hands of the individual trader/user. We realize stop loss orders can reduce volatility. However, those same orders will many times trigger premature exits to very profitable positions.  Traders/users have to decide how aggressive they can afford to be, formulate a trading plan, and stick to the plan. Traders/users must also understand that whatever stop loss philosophy/plan they employ in an effort to handle volatility it will have some weaknesses and may compromise trading performance.  Most importantly, traders/users must find a way to compensate for these weaknesses if they are to be a real success using the Supra Vantage®.

Last Words on Human Error

To all those looking to beat the stock market, we want say be very careful. The Supra Vantage® is a very useful tool that will make good traders great traders, and it will make a losing trader a winning trader.  But the Supra Vantage can not make you a trader. In order to be a stock trader you must have courage, you must command a high degree of knowledge, and you must be able to process information and execute quickly.  Most of all you must have some money to burn. When you have these things under your belt you are ready to be a stock trader. At his time we want to wish you all Godspeed and happy hunting.

www.vantagetradingcompany.com

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