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Editor's Note: Tech legend Jeff Brown is warning that everyone should prepare for what could be the biggest change to our financial system in 54 years. If you have an account with Chase, Bank of America, Citigroup, Wells Fargo,or U.S. Bancorp… Click here to see the details or read more below. |
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Dear Reader, |
Do you have a checking or savings account with any of these banks? |
Chase. Bank of America. Citigroup. Wells Fargo. U.S. Bancorp. |
If you do… |
Click here now because thanks to a new law just signed by Trump... |
They're preparing for what could be the biggest change to our financial system in 54 years. |
This could have a huge impact on your wealth. |
We have so much to look forward to, |
Jeff Brown
Founder & CEO, Brownstone Research |
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BONUS ARTICLE |
The Edge of Patience |
Why the Best Investors Know When to Do Nothing |
Active trading has a branding problem. |
The word "active" implies motion. Speed. Decisiveness. Aggression. |
But in reality, some of the highest-performing active traders are not the ones pressing buttons constantly. They are the ones who understand a deeper truth: |
Your edge is not in how often you trade.
Your edge is in when you refuse to trade. |
In high-volatility regimes—especially around earnings season, macro data releases, and news-driven gaps—the market punishes premature action more than almost any other mistake. |
This week alone offered textbook examples. |
Stocks beat earnings and fell.
Stocks missed and rallied.
Guidance was raised—and the stock still got repriced. |
And in those moments, the trader who said, "Let's wait" often preserved both capital and psychological edge. |
This editorial is about that discipline. |
We'll walk through: |
What the data says about earnings reactions Why gap-chasing statistically underperforms Specific instances where waiting was superior How volatility impacts expectancy A structured strategy for picking your spots And how inaction becomes an active decision
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1️⃣ The Illusion of Control in Fast Markets |
The human brain craves participation. |
When a stock gaps 10% on earnings, the instinct is: |
"I need to be in this." |
But data tells a different story. |
Multiple earnings-reaction studies show: |
A significant percentage of large-cap earnings gaps retrace 30–60% of the initial move within 3–10 trading days. Implied volatility collapses immediately after earnings (IV crush), often making long premium positions negative expectancy unless direction is precise. Stocks that gap on earnings frequently establish a new equilibrium range before trending.
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Translation: |
The first move is often emotional.
The second move is often tradable. |
Active traders who chase the first move are frequently providing liquidity to institutions repositioning. |
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2️⃣ A Real Example: Cisco's Earnings Repricing |
Consider Cisco's recent earnings. |
Revenue: $15.3B+
AI hyperscaler orders: $2.1B
FY revenue guidance raised
EPS beat |
And yet the stock dropped sharply due to margin compression. |
The emotional trade: |
Buy the beat.
Or short the drop. |
The disciplined trade: |
Wait. |
Within 48 hours, the stock began stabilizing near a clear post-gap support region. |
Why? |
Because the initial repricing had already occurred. |
Data-driven observation:
Mega-cap earnings gaps often see: |
Extreme first-session volume (institutional rebalancing) Volatility compression by day 2–3 Lower probability of clean continuation until consolidation forms
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Traders who waited for: |
Higher lows VWAP holds Reduced volatility
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had significantly clearer risk parameters than those trading the opening print. |
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3️⃣ The Mathematics of Overtrading |
There is a measurable cost to trading too often. |
Let's break it down. |
Assume: |
Win rate: 52% Average win: 1.2R Average loss: 1R
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This is profitable. |
But now introduce: |
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Suddenly: |
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That small degradation eliminates profitability entirely. |
The cost of one impulsive trade often equals the profit from three disciplined ones. |
That is why picking spots matters. |
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4️⃣ Earnings Season: Where Inaction Is Often Superior |
Earnings create asymmetric volatility. |
But here's what the data consistently shows: |
Roughly half of earnings gaps fail within two weeks. Post-earnings drift exists—but only when the company significantly exceeds both revenue and forward guidance expectations. Stocks with mixed signals (beat revenue, lower margins) tend to chop rather than trend.
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Examples from recent seasons: |
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The best trade is often: |
Wait for the second day. |
Let institutions define the level. |
Then trade confirmation—not surprise. |
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5️⃣ Volatility Regimes Change the Rules |
In low-volatility environments: |
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In high-volatility environments: |
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The VIX regime matters. |
When volatility is elevated: |
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Many traders do the opposite. |
They trade more during chaos. |
The data suggests the edge often shrinks during volatility spikes. |
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6️⃣ Specific Instances Where Inaction Was Superior |
1. Nvidia's post-earnings whipsaws in prior quarters |
Initial spikes were often followed by 5–10% retracements before trend continuation. |
2. Tesla earnings gaps |
Historically prone to first-day reversals before trend establishment. |
3. Meta's guidance-driven moves |
First reaction often exaggerated; consolidation offered clearer entries. |
In each case: |
Traders who waited 1–3 sessions often entered at superior risk-adjusted levels. |
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7️⃣ The Psychology of "Missing Out" |
Fear of missing out is not about money. |
It's about ego. |
The fear that: |
"Everyone else is making money except me." |
But here's the reality: |
Missing a move is not a loss.
Entering poorly is. |
Capital preservation compounds.
Impulse compounds losses. |
Elite traders think in decades, not days. |
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8️⃣ A Structured Strategy for Picking Your Spots |
Here's a practical framework: |
Step 1: Identify High-Probability Catalysts |
Earnings with revenue + margin strength Macro prints aligned with positioning Sector rotations confirmed by volume
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Step 2: Wait for Confirmation |
Does price hold above VWAP? Does volume decline on pullbacks? Is relative strength improving?
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Step 3: Define Invalidation Clearly |
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Step 4: Reduce Frequency |
If you're trading daily without strong setups, you're likely forcing action. |
Step 5: Journal the Non-Trades |
Track when you didn't trade and why.
Often these are your best decisions. |
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9️⃣ The Compounding Advantage of Patience |
Consider this: |
If you avoid just two poor trades per month, and each poor trade costs 1R, that's 24R per year preserved. |
Compounded over five years? |
Massive. |
The discipline of not trading increases expectancy without increasing effort. |
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🔟 Inaction as Active Strategy |
Inaction is not laziness. |
It is strategic capital allocation. |
It is the willingness to wait for: |
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The best active traders are not hyperactive. |
They are selectively aggressive. |
They strike when: |
Volatility compresses Risk is defined Catalysts align Liquidity is abundant
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And they sit still when: |
Signals conflict Margins compress without clarity Earnings reactions are chaotic The tape is emotionally charged
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Final Thought |
The market is open five days a week. |
Opportunities are not scarce. |
Capital is. |
Your job is not to trade every day. |
Your job is to protect your edge. |
Sometimes the most powerful trade you make is the one you don't. |
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investing involves risk, including the potential loss of principal. Always do your own research before making investment decisions. |
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