We hope this journal reaches you in good health and spirits.
The purpose of this journal is to familiarize our readers with a trading technique implemented at The Wizard during times of aberrant market activity. This technique has been traditionally coined “The Hound of the Baskervilles” named after the famous story written by Sir Author Conan Doyle.
The upshot of the story is that the barking of a large dog was not the key to unveiling the stories culprit but rather the absence of the dog’s bark was the key to solving the mystery. We can generally call this strategy “IF WRONG REVERSE.”
This concept does not mean that when trading in volatile markets we employ the opposite side of what a signal is telling us. Although sometimes that is precisely what happens, this strategy is only successful when an exceptionally strong signal turns out to be inaccurate. With the wisdom we have in the trading and financial arena we are sometimes faced with a fundamental shift in a market, or the markets in general. The point is that an extremely strong signal should most often be accurate. Certain market movements may sometimes confirm a fundamental shift in the market which causes us to reverse the direction of our initial prediction.
In the end, profitability is what matters. We feel that it is important to point out that during the epidemic there have been a significantly higher number of these trades than is any previous period in any of our founders trading careers (including 9/11). This is a very important and effective technique at coming out ahead on a trade that moves in an undesired direction. The strength of the original signal and the price movement of the underlying market are the key components on when to identify this opportunity. “If Wrong Reverse” is also a very sophisticated strategy that requires rarefied skill to be implemented profitably.
Take care of yourself and each other!
Jack Burgundy- Senior Editor of the Weekly Wizard