The StockTwits® Edge: 40 Actionable Trade Set-Ups from Real Market Pros

CHAPTER 20

Identifying Trend Shifts

Derek Hernquist, @derekhernquist

Derek is a serious student of the history and psychology of markets, and he is a thoughtful and responsible money manager. He is a big contributor to our StockTwits U blog and always on the stream chipping in with his knowledge. It seems like the more he shares, the deeper he gets.

The usual bull market successfully weathers a number of tests until it is considered invulnerable, at which time it is ripe for a bust.

—George Soros

LEARNING FROM THE MASTERS

I fell in love with the markets at the University of Arizona in 1989, upon entering USA Today's Collegiate Investment Challenge. After years analyzing sports statistics and match-ups, I had found my calling. My breaks were now spent reading Investor's Business Daily and logging into Prodigy for stock quotes.

Upon graduation, I jumped into the brokerage field, thinking that was the way to expand my knowledge of investing. I quickly learned that while it gave me the chance to explore new and better ways of allocating money, it was primarily a sales job, which was not my passion. Gradually, I overcame my sales shortcomings and found myself managing an office at the age of 21. Instead of spending my time reading sales and management books, however, I was drawn to learning more and more about the underlying dynamics of capital markets.

First it was Fred C. Kelly's Why You Win or Lose: The Psychology of Speculation (www.therichestmaninbabylon.org), an obscure little ...