Windfall Profits: How to Catch Big Trends and Take Huge Profits

By Jeremy Whaley, TradeSmartU.com

March 24, 2016

Stop for a moment and think…

When you hear the words “Wall Street” what kind of images does it bring to mind?  

Maybe you think of young hotshot traders speeding around in their expensive Lamborghinis?  Or perhaps you get images of Gordon Gekko in the movie Wall Street.  Or maybe you think of the stories you have heard about the occasional fund manager who was on the brink of extinction and is now worth over $1 billion.

Whatever your image, one thing that most people can agree on– they tend to think that if someone works on Wall Street, “they have more money than me”.

Can you agree with that?

In many cases you would be right.  There is a lot of money on Wall Street and the typical professional trader is likely making at least 4 to 5x the average median income.

 But what a lot of people don’t understand about Wall Street is this: It’s not the lavish lifestyle, or the fancy cars, or the fancy parties or any of that stuff that really makes up Wall Street.  Those nice things are all a result of the profits that can flow through the market. 

So why is it that according to some statistics, as many as 64% of traders never make any money trading? If you have ever traded you may be one of those 64%. But don’t worry, all of that can change if you simply learn the secret that Lamborghini-driving, 20-something traders have figured out…

Windfall Profits.

It’s not that these traders are inherently greedy, or that they came from privilege that allows them to act and think that way.  In general, the lavish wealth of Wall Street is very often traced back to a few great trades where the traders made a handsome windfall profit.  And like most people who suddenly find themselves winning big, these traders go out to show off their newfound wealth.

So, is it possible to anticipate a trade that could yield a windfall profit for you?

YES! 

That’s the good news. 

The bad news is most people have never been taught how to effectively trade in a way that would allow them to have a high probability windfall profit.  Consequently, most individual traders find themselves sitting at home, watching CNBC or some other news outlet, trying to compare the stock picks on TV to the stock picks of some internet newsletter and mostly just staring at their computer screen frustrated, trying to pick the right stock to trade. 

Does this ever describe you?

I have great news!  In the next few pages I’m going to teach you a method that anyone can use to find great trades that are a high probability to yield a windfall profit.

But before I can share with you the “windfall secret”, I need to first set the stage a little bit.

Types of Trends

Everyone knows you make money when you buy a stock at one price, and sell it at a higher price.  But most individual traders fail to realize a secret all professional traders understand.  And here it is:

There are three directions that any stock can trend. 

Society has programmed people to believe that stocks always go up but this is fallacy that has cost individual traders collectively hundreds of millions of dollars.  It leads people to buy a stock and hold it and never sell it with the false belief that it will eventually go back up - but this is a lie. 

Have you ever fallen victim to this lie?

Don’t worry, it’s not your fault.  This belief is so broadly held it has infiltrated every corner of society from the news room to the class room, but it is not truth.  It all started when the government began requiring mutual funds to only place long trades in their accounts.  After that, fund managers had to find a way to convince their investors to leave their money under management when the market goes down, so they created fancy techniques such as “Dollar Cost Averaging” and sayings like “the market always comes back, you don’t want to sell at the bottom”. 

These marketing messages have ruined millions of Americans who knew better, but trusted the system. 

The truth is, markets trend in any one of three directions at any given time.  Everybody on Wall Street knows this, the government knows this, your fund managers even know it - they just don’t tell you!

But now you know, so you can position yourself to profit as well. 

The three trends are as follows:

  • Up (Bullish)
  • Down (Bearish)
  • Sideways (Neutral)

At any time every stock is trending in one of these three directions.  So how do you know which way the stock is trending? It’s simple:  LOOK AT IT!

Up Trends (Bullish Trends)

When a stock is trending up, it will be characterized by a series of higher highs and higher lows.  You do not need to read an earnings report, try to calculate fundamental valuations, or listen to the latest guru to figure this out.  All you need to do is look at your stock chart and take a note of where the most recent highs and lows are.  If the high swings are consistently higher, and the low swings are consistently higher, then the stock is trending higher.  If they are not, then something else is going on (see Image 1).


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As long as the trade continues to trend higher, there is absolutely no reason to take a trade counter (against) the trend.  And in a similar way, if the highs and lows do not continue to trend higher, then there is absolutely no reason to be buying the stock.  You should only buy a stock when it is trending higher.

Down Trends (Bearish Trends)

When a stock is trending down, it will be characterized by a series of lower highs and lower lows.  Again, you do not need to read an earnings report, try to calculate fundamental valuations, or listen to the latest guru to figure this out. All you need to do is look at your stock chart and take a note of where the most recent highs and lows are.  If the high swings are consistently lower, and the low swings are consistently lower, then the stock is trending lower. At that point you have no reason to buy the stock, even if your favorite guru tells you it has finally hit the bottom (many advisors led their investors to buy Enron only weeks before it went bankrupt on this fallacy) (see Image 2).

Here’s one of the great secrets: If you only place bearish trades when the trends are bearish, and only place bullish trades when the trends are bullish, you will set yourself up for windfall profits!

Sideways Trends (Neutral Trends)

Sideways trends are a totally different beast.  They are sometimes more difficult to identify early, and they are always more difficult to trade, which is why you must learn additional strategies for how to make money during sideways markets.  But even with the right strategy, you must know how to identify the sideways trend. 

You may have already guessed, you will simply need to look at the swing high points and the swing low points.  But now instead of having higher highs and lows, or lower highs and lows, you will be looking for similar highs and similar lows. (Image 3)

For people who have never been taught to look at trends this way, the simplistic identification of the trend seems painfully obvious.  And yet millions of people have been taught wrong for so long, that many even look at this chart above and still mistake it for a bullish trend, even though the stock is clearly moving sideways and has done so for many months. 

How to capture Windfall Profits

By now you are probably wondering how you can apply this information in a way which you can actually make a profit.  And that’s the next step. But before we could talk about trading these trends for a profit, we had to first learn the basic techniques of trend identification.

Now that you know how to identify a trend, the next step is to identify it early, and hold the trade as long as the trend is valid.  Here’s the basic rules:

  • When the stock is trending bullish - ONLY BUY THE STOCK
  • When the stock is trending bearish - ONLY SELL THE STOCK
  • When the stock is trending sideways - AVOID THE TRADE or apply different trading strategies


The most successful traders on Wall Street learn to identify the trends early and they stay with the trend until it is no longer valid.  Sometimes that trend may last 4-6 weeks, other times it may be 4-6 months, and sometimes it may be a year or more. 

The KEY is to always trade in the direction of the main trend.  If you do this, you will find yourself consistently taking many more profits and avoiding the painful rollercoaster of holding a stock only to watch it continue going down in price, while you hope and pray it will reverse and go up. 

How to speed up the process

If you really want to make windfall profits, the ideal technique is to get into the trend as soon as it has reversed and stay with it for the majority of the trade.  This is where the biggest money can be made.

That may seem like an impossible task but with modern charting tools and techniques, traders today can position themselves early to take advantage of the most lucrative trades.  Many of these techniques are relatively new, some even in the last 10 years or so.

That’s why today is the best time in history for individual traders to learn to really trade the market.  Unlike in previous decades, the playing field for individual traders like yourself has been leveled greatly because of these modern computer-based tools. 

If you will learn to:

  • Identify the trend direction early
  • Only trade in the direction of the primary trend

You can consistently be on the right side of the trade and capture some of those windfall profits for yourself. Who knows, you might even buy a fancy new Lamborghini!

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ABOUT THE AUTHOR

Jeremy Whaley

Author: Jeremy Whaley, Co-Founder
Company: Trade Smart University
Website: TradeSmartU.com
Services Offered: Trading Education, Training
Markets Covered: Stocks, Options, Futures, Forex

Jeremy is the creator of our flagship course Foundations of Stocks and Options, as well as courses on Options Trading, FOREX Trading, Bollinger Bands, Elliot Wave Theory and much more.

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