Monster Beverage (chart above) got hit to the tune of 14.7% one day last month on news that the FDA is investigating a possible link to five deaths. Time will tell whether the allegations are true or not, but with the stock now trading about 50% off it’s high, wouldn’t it be nice to be able to find out about the FDA allegations ahead of time?

With the two tools below, any speculator dedicated to his daily “home-work” could have been well ahead of the news.

Tool #1: A bar chart with price and volume, no MACD, RSI or other indicators required.

Tool #2: Education, knowledge about the importance of supply and demand dynamics.

Looking at the chart above, the blue markings identify large distribution days going back to late June, it is clear that smart money has been bailing out of the name, selling on massive downside volume and increased downside volatility is a classic sign that institutions are bailing out.

Selling short, or simply getting out of a name when the “smart money” is aggressively selling is one way to be ahead of the news, one way to “hack” the system if you will.

Do you remember the Euro Crisis? The Fiscal Cliff? Yes… those media reports about Germany throwing money away by financing Greece? Spain going under? Greece austerity? How about those violent street demonstrations? China slowdown?

You see, the media’s job is to sell advertising — nothing more and nothing less, and in order to do so, the media is attempting to pull your emotional cords, such as anger and fear and keep you tuned in.

As a trader you have two choices: let the media play with your emotions, or shut down the noise and pay attention to the markets, after all the SP500 is up 12% this year, Euro Stock index up 8.55%, Germany up 23.43% and the Hong Kong index is up 16.5%.

Did you catch any of these returns, or did you let the Fiscal Cliff, Euro Crisis, or the China slowdown media-fest keep you out of these markets?

“The people who were right a lot of the time were people who often changed their minds.” – Jeff Bezos

Now what does Jeff Bezos has to do with trading? A lot! He might not trade futures, or day trade Google options, but he is a business man and a speculator, like all of us full time traders, and as you can see from the quote above, he understands and incorporates “stop losses” into his business philosophy.

Jeff Bezos goes on, “Consistency of thought is NOT a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today, the smartest people are constantly revising their understanding, reconsidering a problem they thought they’d already solved. They’re open to new points of view, new information, new ideas, contradictions, and challenges to their own way of thinking.”

Too many of traders, fall “in-love” with their trades. In communicating with like-minded people (like other gold bugs), they build a circle of “confidence” around themselves. This helps them feel emotionally secure, but they should be looking for holes in their trading ideas instead.

The ability to be open to different points of view  know that it is OK to change your mind, i.e. take that  stop loss, is CRUCIAL for any business man, as well as any trader. Take Jeff Bezos advice and run your trading business accordingly.

Is fire dangerous?

Fire can burn your house to the ground, save your life, protect you from predators, and help you sanitize water.

So is fire dangerous? It depends how, where, and when you use it.

Options are like fire, even though they have a reputation of a product used by reckless speculators. They also can either burn or save your portfolio…it all depends how you use them.

Constantly apply long spreads and other long gamma strategies to your portfolio, and options just might save your year when the unexpected happens. See Google chart above as an example of the potential benefit of some leverage and absolute risk control. Own the stock in the 750 range or own 720 calls or maybe a bull call spread.

Which is potentially more risky?

Can you think of worst credit trash than Greek Bonds? Most professional bond traders can not, so how is it that Dan Loeb of Third Point LLC managed to make 35% return on capital in six months BUYING Greek bonds?

Education is obviously the foundation, Dan Loeb is a master of the ins and outs of credit markets, but obviously, so are many other educated, very smart credit analysts, so what makes him special?

Probably his ability to handicap odds: This is a vital skill for those wishing to become successful speculators and goes way beyond an intellectual knowledge base. Handicapping is thinking of outcomes in terms of expected values, it means that your emotional system will be put to the test as sometimes high expected value trades will be contrarian in nature (Greek Bonds as example.)

His ability to pull the trigger when others are stuck in the emotional roller coaster of European Crisis is a vital key as well, losing money being long Greek bonds for a high profile manager carries professional, and emotional baggage, the ability to execute controversial high expected value trade despite that fact, is not as easy skill to master, but it is a vital one, requires emotional balance and “egoless” personality.

Dan Loeb attributes a lot of his emotional balance to surfing third point in Malibu, sitting on the ocean, having the time to think and clear his head in peaceful surroundings.