The underlying theme of our approach to making money in the stock market is trend following, while a close second is the importance of execution of your trading system without hesitation, doubt or any subjective opinions about where the market or any one stock should be going. Systematic application of rules works only if do so without waffling (and I am not talking about making waffles). New Methodology (1) Identify the primary trend; (2) Look for the inevitable counter-trends; (3) As price breaks back into the direction of the primary trend, we place a trade in the direction of the primary trend. In the past we simply traded from one primary trend to another. We were always in the market, even if we caught a nice move in the primary trend, those annoying counter-trends ate into our profits. Since we mostly use options, the combination of losing ground in early trade price appreciation and of losing time premium, we often saw those initial primary trend profits disappear. What was worse were whipsaws, where we didn't lose profits so much as just plain lose. Although the system made money, sometimes a lot of money, the profits were not approaching what was possible. Nothing is more frustrating than seeing 100% unrealized profits turn into a break even trade. In some respects, those hurt more than taking a loss up-front. New Trading Options Rule This is integral to exploiting the new methodology, read it until you get it: We don't wait for the next counter-trend or even for the trend to end to exit the trade, we set out sights on easily achievable target levels, (50%-75%-100% seem work best) ) and exit with those gains. The Most Disciplined Way To Implement The Rule With every newly established position place a sell order to exit that position at your profit target. That's right, two orders with every new trading signal, the second being what is called a GTC (Good Until Cancelled), "Limit," order to sell at your profit target. It may take some time to get used to, but the payoff is enormous. Example Order #1: Buy option at $4.00 Order #2: Sell at $6.00 (50% gain), or, Sell at $8.00 (100% gain) Downside The downside, and you know there has to be a downside, we miss the first reversal in the primary trend. What we come to expect as merely a counter-trend is actually a change in the primary trend, afterwhich we simply do the same thing in the direction of the new trend, i.e., we stalk the new counter-trends until they exhaust themselves, and enter our new trade back in the direction of the primary trend. Conviction How confident am I that this is a much better trading system than before? I have staked my entire business model on this new system, slashing subscription fees and am about to embark upon a massive marketing campaign to promote what I believe is the best trading system I have ever traded. I am trading this system exclusively in my personal accounts, including my retirement account. This system is my trading future and after 40 years of making money in the stock market, that is one hell of a commitment. Lesson over, but know that with every backtest on new stocks and their respective primary trends I am seeing the same results. This is not random distribution, this is a solid and at least hypothetically proven trading system. In the weeks and months ahead, the qualifier "hypothetical" will disappear. I hope everyone is here for that event; the Stanley Cup is in the house. Trades The table below contains the dates and signals for each trade since we went live with the new system. Price entires and exits are going to vary with the time trades are entered and the profits targets set at the beginning of each trade. Although many of the trades have hit decent maximum gains* to date, many of these trades hit top tick and back off considerably. It is still way too early, especially in the most recent trades, to assume the best prices have been seen. I've seen trades take as long as two months to pan out, some suffering drawdowns until price trend asserts itself in earnest. *Prices had to be extracted from published market data, as our auto-tracker is not yet in place. There could be some minor variants, higher or lower.
