Pascal
10-07-2013, 03:05 AM
I have been lately receiving many private messages and questions regarding the new Stocks Selection service.
I do respond to all of them, although sometimes with a delay due to the backlog.
Below is one of these messages, which carries general questions I am happy to respond to.
"I have followed your site since 2009 and learned quite a bit from you. Due to the family and work obligation, I was not able to track the stock market all the time. But, I am very interested in signing up the dual models subscription with the stock selection service. To utilize your service effectively, what is the minimum requirement for my involvement? I assume that I need to set up an account that can long or short the stocks in the same time. How much do I have to invest and on how many stocks every day? A better way is to ask to how much money is required to make this investment worth well. The other type questions are related to how much efforts or time I have to put in. How much time do I need to put in every day or week? I have a regular job which I have to keep to make a living for now and I don't have time during the US business hours to attend the stock trading. I could put in a predefined buy or sell order before the market open. I understand that this brings additional risks. Will your service possibly work for my situation? Also, the stock price is very high right now..."
1. Minimum requirement
You indeed need to open a trading account that allows to Buy/Short stocks. I use Interactive brokers which has excellent fees and fast execution. Their trading screen is also good. Their charting possibilities are poor, but I do not use these charts.
2. Minimum Investment
Hard to say. The service costs $280/Quarter. If you invest only $10,000, then you would need to book a return of 2.8%/Quarter just to pay for the service. Knowing that you could easily have to place 20 orders in a month, if you use a broker that offers high transaction fees costs could increase. I believe that $50,000 is a minimum base investment. By the way, do not trade from an account that is in a country which imposes transaction taxes.
If you see that you earn money, then you can increase your investments, but prudence is always a good guide.
3. Minimum time
This is a difficult question.
The weekly system rolls every five days at the open.
We know the new stocks to buy/short only a few hours before market opens.
This means that you would need to enter your orders before leaving for work (depending where you live.)
If the 20DMF issues an intraday market signal change, then an e-mail is sent and the system will execute an intraday position roll. This might be difficult to execute if you are at work, but a next day execution does not greatly alter the returns, as 20DMF signals are not that numerous.
There are a few weaknesses in following the weekly system:
A. Fixed 5% stop.
B. No exit strategy.
C. Always execute orders at the open.
D. Always fully invested even if there is only one stock.
If you follow the weekly system, then the minimum time required is maybe 10 minutes every 5 days.
If you follow the Daily stocks selection, then you would need more time every day.
With the daily selection, you can see the best price range to invest. The higher the entry price (for long trades,) the more difficult to make money on the trade, but the higher the chance that the order will be executed.
If your objective is to follow five positions, you might enter orders that are low enough so that only for example 2 orders are executed on day 1 of the signal. Then you place a few more orders the following day, until all your orders are filled. This is the way I operate. This really increases the Win/Loss ratio, but leaves you sometimes under-invested. In today's very expensive markets, I prefer to buy strong stocks on deeper than on shallow pull-backs.
You will also need to adjust your stops. The weekly system uses 5%. I often use closer stops, which are often lower than the previous day's low. Since I buy pull-backs, if a stop is hit, it often means that the trade idea was wrong or that the market is changing direction.
Using the Daily selection also allows you to raise your stops and protect some gains. The weekly system does not manage stops.
Finally, you can also "sell in strength" when you have profits or when a stock had a run that is extending the price much above the 5MA.
Advantages of the Daily Stocks Selection
A. Tighter stops are possible
B. Often better entries (but more cash needs to be set aside to wait for better prices.)
C. Possibility to raise the stops or sell in strength
D. No obligation to roll winning trades after 5 days.
The goal of the Portfolio Management articles is to help you dealing with points A-D shown above. Do not hesitate to ask questions related to these Portfolio Management posts. That is a very good way for everyone to learn (me included.)
A few additional comments:
- You might also invest 50% in Mike's trading ideas, which are often longer-term holding ideas. This means fewer trades, less work! Mike is always available if you have questions regarding his settings
- I often noticed that most of the gains are made when the 20DMF just issued a signal. The current buy signal is already old and you might want to wait until you have a new signal (either Buy or Short,) being fully invested.
Pascal
I do respond to all of them, although sometimes with a delay due to the backlog.
Below is one of these messages, which carries general questions I am happy to respond to.
"I have followed your site since 2009 and learned quite a bit from you. Due to the family and work obligation, I was not able to track the stock market all the time. But, I am very interested in signing up the dual models subscription with the stock selection service. To utilize your service effectively, what is the minimum requirement for my involvement? I assume that I need to set up an account that can long or short the stocks in the same time. How much do I have to invest and on how many stocks every day? A better way is to ask to how much money is required to make this investment worth well. The other type questions are related to how much efforts or time I have to put in. How much time do I need to put in every day or week? I have a regular job which I have to keep to make a living for now and I don't have time during the US business hours to attend the stock trading. I could put in a predefined buy or sell order before the market open. I understand that this brings additional risks. Will your service possibly work for my situation? Also, the stock price is very high right now..."
1. Minimum requirement
You indeed need to open a trading account that allows to Buy/Short stocks. I use Interactive brokers which has excellent fees and fast execution. Their trading screen is also good. Their charting possibilities are poor, but I do not use these charts.
2. Minimum Investment
Hard to say. The service costs $280/Quarter. If you invest only $10,000, then you would need to book a return of 2.8%/Quarter just to pay for the service. Knowing that you could easily have to place 20 orders in a month, if you use a broker that offers high transaction fees costs could increase. I believe that $50,000 is a minimum base investment. By the way, do not trade from an account that is in a country which imposes transaction taxes.
If you see that you earn money, then you can increase your investments, but prudence is always a good guide.
3. Minimum time
This is a difficult question.
The weekly system rolls every five days at the open.
We know the new stocks to buy/short only a few hours before market opens.
This means that you would need to enter your orders before leaving for work (depending where you live.)
If the 20DMF issues an intraday market signal change, then an e-mail is sent and the system will execute an intraday position roll. This might be difficult to execute if you are at work, but a next day execution does not greatly alter the returns, as 20DMF signals are not that numerous.
There are a few weaknesses in following the weekly system:
A. Fixed 5% stop.
B. No exit strategy.
C. Always execute orders at the open.
D. Always fully invested even if there is only one stock.
If you follow the weekly system, then the minimum time required is maybe 10 minutes every 5 days.
If you follow the Daily stocks selection, then you would need more time every day.
With the daily selection, you can see the best price range to invest. The higher the entry price (for long trades,) the more difficult to make money on the trade, but the higher the chance that the order will be executed.
If your objective is to follow five positions, you might enter orders that are low enough so that only for example 2 orders are executed on day 1 of the signal. Then you place a few more orders the following day, until all your orders are filled. This is the way I operate. This really increases the Win/Loss ratio, but leaves you sometimes under-invested. In today's very expensive markets, I prefer to buy strong stocks on deeper than on shallow pull-backs.
You will also need to adjust your stops. The weekly system uses 5%. I often use closer stops, which are often lower than the previous day's low. Since I buy pull-backs, if a stop is hit, it often means that the trade idea was wrong or that the market is changing direction.
Using the Daily selection also allows you to raise your stops and protect some gains. The weekly system does not manage stops.
Finally, you can also "sell in strength" when you have profits or when a stock had a run that is extending the price much above the 5MA.
Advantages of the Daily Stocks Selection
A. Tighter stops are possible
B. Often better entries (but more cash needs to be set aside to wait for better prices.)
C. Possibility to raise the stops or sell in strength
D. No obligation to roll winning trades after 5 days.
The goal of the Portfolio Management articles is to help you dealing with points A-D shown above. Do not hesitate to ask questions related to these Portfolio Management posts. That is a very good way for everyone to learn (me included.)
A few additional comments:
- You might also invest 50% in Mike's trading ideas, which are often longer-term holding ideas. This means fewer trades, less work! Mike is always available if you have questions regarding his settings
- I often noticed that most of the gains are made when the 20DMF just issued a signal. The current buy signal is already old and you might want to wait until you have a new signal (either Buy or Short,) being fully invested.
Pascal