When I speak to people about my trading (I prefer to call it active investing) the response I get is often “its ok for you, you are a trader, I am a long term investor, I don’t sell”
I would suggest many investors don’t sell because they don’t know when to, so they ride losses down in the hope a recovery will happen. In my opinion this is the way to make sure your portfolio, be it an investment or a trading methodology, drastically underperform.
In 2011 I posted this trading methodology for free on the website. I called it “I know what you want”
In short the rules were: buy a stocks one year high, employ 10% of your money in each stock, focus on low priced stocks, have a stop loss of 25 %. If you want more detailed information about that system and long term stats you can click on the link at the bottom of this page.
What those simple rules make sure you do is this:
1/ Buy up trending stocks. Stocks making a one year high are going up.
2/ Diversify evenly. 10% allocation is not perfect but it’s a start to correct dollar sizing per stock.
3/ Be in stocks that have a greater percent per annum gain. Low priced stocks (under $20) outperform high priced stocks.
4/ Stops you riding losses. 25% stop loss from the previous high is not perfect either, but it saves your portfolio from destructive share performances.
The above is not a perfect method, but it’s simple. Is it easy? Perhaps I should have called my business simple trading systems, because trading methodology can be simple but psychologically very challenging.
Those that know a little about computer trading/investment simulations will challenge with statements like: the stock market index now is not what it was 10 years ago ( I agree) past performance does not indicate future return (I agree) . However probability as an investor/ trader is what we are after, as no absolutes exist all we have is probability to work with. The above rules as a foundation to a method have been shown to work consistently over the long term. (click on link below)
The same system described above over the last 2 years, including dividends, has returned around 20% p.a. In that time period the XAO 500 (the all ords) has gone sideways.
The same system over the last 4 years would have more than doubled your money, by doing just 31 trades.
If you are trading or investing in the market have you more than doubled your portfolio (not even including dividends) in the last 4 years? By doing just 31 trades? Thats 8 trades a year, less than one a month.
The same system has also saved investors from big losses in stocks like the ones below.
Actually this method would never have bought BHP in the first place, (rule 3) but its a great example of how having an exit method can save a lot of pain.
The idea of trading or investing, no matter what your preferred time frame, is to have less stocks of the above and more of the ones below. Not the other way around as many buy and hold investors do. Notice how the stock Telstra was already rising when it was bought, too many investors make the mistake of buying something in a down trend hoping for the turnaround.....that never comes, or if it does it takes many years and the money would have been better off employed elsewhere.
The above examples are food for thought, they are not the holy grail. However more shine can be added to that simple system by considering facts like the fundamentals of a stock, momentum (speed of price appreciation), volumes and better exits.
If your objective is simple or more complex, results always come down to the simple fact of holding rising stocks and selling losing stocks, the frequency of trades and time frame is up to you, investor or trader the methodology is the same.
Courses and coaching.
I have no plans for a course in the near future, however I am available for one on one coaching. If you are interested reply to this email or ring me on 0403821523.