6 stocks traded in portfolio. This is not another Mutual Fund. There’s a sweet spot in balance between being pretty aggressive in investing but keeping losses under control.
Long, US, momentum stocks
set % target.
40% stops. So a full losing trade will have a big impact. On the other side, a full winning trade will also have a huge positive effect. Works both ways. The average loss is about 20%. A full 40% loss on a trade,whilst does happen, is rare.
Must be willing to accept 20% draw-downs
One set-up, 1 entry, purely technical in entry and exit. It’s being very selective on the stocks I invest it that limits the number of stocks in the portfolio. I do not “broaden” the selection criteria so I can trade more stocks. It’s strict, there aren’t that many stocks that pass but the ones that do are usually the best gainers in each cycle. No “funny-mentals”, no stories, opinions, advice. No indicators, waves, non-sense like that. Pure price and volume. Everything on the “trading side” is actually managed once a week. No micro managing. I find less is best. Less watching, less tweaking, less out-side noise, less information..works best.
No management fee. 20% of profits after 3 years. What-ever those profits are. Every 3 year cycle is different.
Follow the signals for a few months before committing:
Do not trade stocks for excitement or to keep busy.
Great investing should be like watching paint dry on a wall. Go for the big moves that can take upto 2 years. Ignore all the day to day/week-week gyrations..they are designed to shake you out.
- Scan,place trades once a week on these stocks only. Why once a week? Stops you making stupid decisions if you watch the price too closely. + allows you to do other things with your time. Watching prices…..is a waste of time and effort.
- Only this price range
- Use this stop so you keep in these trades without getting whip-sawed out of position.
- The stock must show this, this and have this….that’s it. Tick,tick,tick. No tick….forget about it.
- The optimal price target. Exiting a trade is harder than entering, yet no time allowance is given to this. In all my years of investing this is the optimal exit % to get out on. It’s a balance between staying in long enough to make huge% gains…but not overstaying and losing a huge % of profits.
- You can’t win all the time. Markets/stocks sell off when huge money flows out. That cannot be predicted. BUT I expect 3 out of 4 stocks that follow this system to make a profit.
- Time. Time to reach the target is another factor we have no control over. Some stocks hit the target within 5 months. Other may take over 18 months. Everyone is different. Some go almost straight up with very small corrections. Others drop soon after buying then build bases, other trend up, then go into huge bases before proceeding. You can’t predict the path it will take as it is based on the present. World war 3 breaks out..things go out of whack for a while…
Forget short term trading, indicators, newsletters, opinions, brokers advice, forums, blogs. Follow the system, place your trades, moves your stop. Let the price hit it one way or another. That’s it.
Recent stocks (past 3 years is recent for me) : MOMO,AAOI,WB,CC,FB
M.S.T.S. hard copy $2,000
I looked into setting up my own small money management business in stock trading. Most of the “hedge” I have is keeping small (:-) ). We all know there is no magic wand..right? The ability to get in and out quick and follow the big money. That’s the “edge.” No magic indicator that can predict the future like I see all over the Net. 🙁
So basically, the small money manager has all but been wiped out. Here’s a break-down.
Legal fees: $100,000 p.a.
Audits: $100,000 p.a.
Running small office/staff: $150,000+ p.a (and that would be small)
Total cost before any unforeseen expenses $350,000
Say the goal is to manage $6 million.
Even if you charged a 2% management fee that would be a whopping $120,000 in fees to help cover the huge fees.
The idea in stocks is to keep the money compounding at least 7 years. No point in annual gains being pulled out. So you want your investors to keep the money in 7 years before pulling all/some profits out. If you are charging the 2/20 fees..you won’t get paid on the 20% for 7 years. IF they do not bail on the first sign of a draw-down.
As you can see the business even if you manage to obtain $6 million to manage is running at a $230,000 per year LOSS. THAT’S GREAT FOR GOVERNMENT RUN BUSINESSES AND MANY LISTED COMPANIES but not for me.
So the ONLY solution is to try and go higher in money managed. Unless you hit at least $30m+ ($600,000 fees in management) you can’t run it this way. I read something like 300 money management funds go bust every year. Too many funds for too little money.
But at $30m you won’t get the returns of a $6m fund. AND what if my plan was to never charge the 2% management fee but only 20% of the profits? Then you can’t have offices/staff and you need enough reserve to live off for 5 years. Sometimes you have to look at what you are trying to achieve and say **** it! It’s simply not worth it. Give it up. Determination is good and needed but being blind to facts is not.
As you can see. Funds now have one goal in mind. Manage as much money as possible. The fees have soared in the past 7 years making small money managers obsolete. Good for them not so good for you the investor.
The only way i’d do it now.
Put 90% of your money in a low fees index fund/bonds. Safety with very low fees. The other 10% trade a 2 stock portfolio for 7+ years. AND be busy running some other business as this really is “part-time” at the very most. (It takes about 20 minutes a week to manage and no amount of watching will change anything). That’s it. Never try and make a wage from trading. It doesn’t work. Best to have a figure, an exit plan XX years down the road and let it roll.
Some very basic stock trading/investing tips:
Make sure your system wins more than it loses.
Make sure the stocks profit target is at least 2X the risk
Do not gamble. Wait for almost sure things. That means keeping out of pennies, options, short-term trading, stories.
Do not day trade. Waste of time, waste of life.
Do not waste your time on blogs, forums,youtube. False information.
Be robotic. See the trade take it. Move stops, repeat. The biggest hurdle you will face is breaking your rules.
Be patient. You can’t force it. It’s either there or it is not. If you have traded for 8 months it’s because the conditions are not good. Wait. And when in a trade your stop takes you out. Nothing else.
Never seek opinions on the stocks you are in. Why do you need it? “If you have to ask..you shouldn’t be trading”
Have a long term plan. Forget monthly/yearly profits. Invest a lump sum with the pan of keeping it in for 10+ years, compounding the returns.
Do not waste your time trying to think you can create some system that can predict the future. Technical analysis, chart patterns, etc…marketers B*S* Study past stocks instead. Follow the institutional money into good stocks. They create the trends/moves.
Past performance is no guarantee of future performance. There is a risk of loss.