Speaker A
It's going to do one, too. We're going to just make sure everyone's hearing me.
Mark Minervini and David Ryan share tactics for achieving triple-digit stock trading returns with low drawdowns and disciplined concentration.
Key Takeaways
- Concentrate investments in a few stocks to maintain focus and manage risk effectively.
- Discipline and adherence to a proven method are essential to remove emotion from trading decisions.
- Achieving triple-digit returns requires going beyond conventional trading wisdom.
- Avoiding large drawdowns is as important as making big gains for sustained profitability.
- Consistent profits over time build significant wealth from relatively small starting capital.
Summary
- Mark Minervini and David Ryan discuss strategies to achieve consistent triple-digit returns in stock trading.
- David Ryan, a three-time US Investing Championship winner, shares insights on maintaining low drawdowns while earning high returns.
- The importance of discipline, focus, and concentration on a limited number of stocks is emphasized.
- They highlight that conventional wisdom often limits returns and exceptional results require unconventional approaches.
- Minervini shares his personal journey from a small trading account to a multi-million dollar portfolio through concentrated investments.
- The speakers introduce a forthcoming book, Momentum Masters, featuring top momentum traders including themselves.
- Key rules include managing risk by avoiding large drawdowns and focusing on big returns when the market conditions are favorable.
- They stress that consistent profits and avoiding big losses are critical to long-term trading success.
- The discussion includes the need to be attentive to a few large positions rather than diversifying too broadly.
- The video serves as both an educational session and a promotional platform for upcoming books and interviews.
Full Transcript — Download SRT & Markdown
Speaker A
Okay. Uh, let's see if anybody's not hearing me. Uh, type a two if you're not hearing me. It's a joke, of course. Type a one if you're hearing me.
Speaker A
Yeah. Hold on one second. And what's that? Hold on one second. Let's—I'm just getting—Hey Dave, can we see if your microphone's working too?
Speaker A
Uh, I am here. Okay, great. Okay. And if you can hear David, type a two.
Speaker A
Okay. Oh, lots of twos. Okay, great. Looks like everyone's hearing us pretty good here.
Speaker A
Very good. Okay, just one second. We're going to get started here. I'm just setting up my screen and my microphone.
Speaker A
What do you—Okay, great. I first want to welcome everyone because we have attendees here from all around the world at different time zones and want to welcome all of you. I see we have people from India and from Australia and all
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over the— all over the world as you can see Bob just brought up a map and so where everyone's coming from, so it's pretty spread out around the globe. So, welcome everyone and also want to
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point out that I know we had people asking if you can ask questions.
Speaker A
You certainly can type in questions and we'll try to get to as many as we can at the end of this presentation, but we're probably not going to be able to get to them all because there's many hundreds
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of people here today. However, David and myself are being interviewed right now for a book. It's sort of like a Market Wizards book, but it's for momentum trading only. It's called Momentum Masters. Probably be out
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sometime at the end of the year. And in that book, if you enter questions, we'll take those and submit them to be maybe included in the book and then we'll answer those in a
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roundtable discussion. Also in that book is Mark Richie. I also Dan Zanger, who you might know. Dan has had some phenomenal performance also. So, it's going to be myself, David Ryan, Dan Zanger, and Mark Richie who's going to
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be answering in a roundtable sort of interview format in a new book that's coming out at the end of the year. I'm also working on a second book that's not scheduled for the follow
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until the following year. So, there will be a sequel to my Trade Like a Stock Market Wizard also. Okay. So, we're going to start here and today's topic is about getting big returns and getting returns consistently as well. And
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the reason why I have David Ryan here with me today is because there's not too many people better than David knowing how to get triple-digit returns and to keep drawdowns low. David, of course, won the US Investing Championship
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three times in a row and had triple-digit returns all three years. He's had many years of huge performance. So, we're going to get into this today and have a lot of fun.
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We're also going to be talking about how to keep drawdown small and that's one of the big keys for triple-digit performance. So, let's get started if Dave, if you're ready. Ready.
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See here. Yeah. So, the first thing we want to talk about is that there's some major keys that you need to know to get this type of super performance. And we're talking about big returns, not beating the market by a few percentage
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points or getting even 20 or 30% a year. We're talking about 50, 60, 100% a year or better. You know, triple-digit returns was always my benchmark for what I wanted to achieve on a yearly basis. I was
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fortunate to be able to have triple-digit returns in about 70% of the years over the last two decades. So, you can obviously do the math and figure out how many years I've had triple-digit returns during that time. Most of the
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other years I was up close to triple digits or in the mid, you know, 50, 60% and had very few years that were even single digit. I had a few years where I broke even but that
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was about it during bear markets. So the question is, you know, how do you do that?
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Is that something that you have to have some special innate talent for?
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And I don't think so. I think it's just something that you have to realize.
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There's some principles that you have to follow and we're going to talk about those. The real keys are one, you have to be able to make, when things are really working for you and the market's good, you need to be able
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to make some big returns when you're correct. And also, you need to be consistent. You don't have to make big returns all the time, but you want to have consistent profits. And probably the most important thing is that you
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want to avoid big drawdowns when you're wrong. If you have big drawdowns, even big performance is not going to really add up to much
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because you're going to be giving back a big portion and then you got to come all the way back and then it takes all this time just to get back to where you already were. So, we're going to go over some rules that I've applied and that also David uses to be able to
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get these types of returns. And the thing is that much of this is going to go against conventional wisdom. All right, remember conventional wisdom is going to get you conventional returns and you're going to have to go outside
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probably what you hear most of the time or what you think is normal or what is comfortable to you to be able to be exceptional. You're going to have to do things that are unusual or
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maybe feel like they're not the norm. Dave, you got anything to add before we start on this next rule? Well, I think the most important thing to me is that once you have got the right method, you've got
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the right rules, you got to be extremely disciplined and that discipline will take out the emotion that so many times leads to losses among traders and investors. So, the right method, the right discipline or being
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disciplined and then also you got to concentrate. You can't have 20 stocks and think you're going to have very, very big returns. You have to concentrate and bring it down to at
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least, you know, 10 stocks or even less than that. And now David doesn't even know what the first slide is, just to let you know.
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And it's concentrate. Okay, way to go Dave. So, that's a nice segue into the first slide. And I swear to you, he doesn't even know what the first slide is. So, rule number one is,
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to, like David said, concentrate. Don't diversify. That doesn't mean that you don't want to have any diversification. You're going to have some diversification. But I know in my own trading even to this day I'm not
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widely diversified and I'm much more conservative than I was when I didn't have a whole lot of money and my portfolio wasn't that large.
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And but even David, he's pretty concentrated even to this day. Although again, we're going to talk about more the kind of trading that we did when we were really going for those huge returns to start with a smaller amount
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of money and turn it into a large amount of money. I started off with a very small amount of money, just a few thousand, and then I eventually added some money to it. It got up to about $10,000. Finally, over a few years, I got
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it up to about 30,000. Now, that's not a whole lot of money to start with. But I turned that into 150 and then I turned it into a half a million and then I turned it into a million change and it
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just kept going. All because I was able to get really big returns year after year. Now, what I would normally do is I would put most of my money in just four names, four or five
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names. So, we're going to talk about that in just a minute. The reason why you want to concentrate is a few things.
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First of all, you want to be able to manage things. And if you're spread out all over the place, you're not going to be a
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going to really be focused on those holdings. And I can assure you that if you have big positions, you're going to be much more likely to be very attentive to those positions because you know that if one of them move against you, uh, you
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know, you can take much bigger losses because you have such concentration. So, it's going to automatically keep you focused. And here's the other thing.
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It's going to allow you what I call the luxury of integrity or or to the um the luxury of being patient. And the reason why you're able to be patient is because if you concentrate when things work, you're going to be able to make money
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very rapidly. Now, of course, on the flip side, if things go against you, you would lose very rapidly, and we're going to talk about that also. That's why you have to be able to manage the risk. But you are going to be able to play
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catchup. Let's say, let's say you're out of the market for four or five months, and the market's even moving higher. It doesn't ever bother me. I don't care if I'm out of the market for long stretches of the of time because I know that once
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I go into that market, once I go into the stock market and I start buying uh positions, if I'm pretty concentrated, then I'm going to be able to uh move my my equity up very rapidly. But I want to
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make sure that I'm in at the right time. So, um I do that very carefully and I focus on the very very best names.
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That's another thing. So, if you are only going in, let's say, you know, four, five, or as many as 8 to 10 names, well, when the stock market has eight or 10,000 choices, and you're trying to boil it down to only the top five or 10,
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well, you're going to really boil it down to the very very best names. And that's really important that that that you are able to really really focus on the absolute best names to make the biggest uh moves and the biggest return
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possible in the shortest period of time. uh any uh what do you say there Dave on this rule?
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Yeah, I would say you know when you are concentrating you don't have to concentrate I I'd say you have to do it in steps. I mean I usually take my portfolio I divide it into 10 sections a 10% position in in 10 different stocks
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and then that's where I start. I usually buy a 5% position and within a day or two that's up to a 10% position. If the stock starts moving moving very well, then for that stock to get up to a 20%
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position or even more, I want to see that stock make a nice move, build another base, and then I'll even add to it at on that second base. And so then the stock is maybe a 20 25% position. And
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that's that's where you really get some great gains is you play them over time and you don't do it, you know, you don't try to go for the home run where you take your whole portfolio and divide it
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into two stocks and and 50% in one, 50% in another. Start a little bit smaller and then you gradually get it in work it into a bigger position as the stock starts making profits for you.
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That's right. and and and I shoot for 20 to 25% positions. That doesn't mean that I come right out of the box and I go right to a 25% position. I might also buy a 5% position if things are really
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kind of sketchy. I might even just get what uh David calls a mental health buy where I just buy, you know, a few hundred shares or something just to have some something to watch and get myself involved. And then if things start uh
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picking up and looking uh uh like they're working, then I'll I'll move it up. But once I see that things are working, then I I move very quickly and I try to get as much as I can into a
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handful of the better positions. Um now, let's move forward here. Now the second thing and again the most of these are going to go against they're going to go against common wisdom or you know what what you'll normally be told you need to do what
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you're normally told you need to diversify right spread spread it around over a bunch of stocks so you can protect yourself. Diversification is definitely not going to protect you. All right it's just going to dilute you. The other thing that you need to to realize
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is that you're going to have to turn your portfolio over. There's a few reasons why you're going to have to turn it over. One, you're going to have to you're going to have to take profits when you have them and and you're also
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going to be trimming off the stocks that aren't working out so well. So, your portfolio turnover is going to go up.
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Portfolio turnover is not a problem. If you're taking profits and you're cutting losses and you're keeping your losses smaller than your profits, then portfolio turnover is a good thing. It certainly could be a bad thing if you're just, you know, whipping it all around
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and and you're and you're churning yourself uh into the ground with a lot of trading and not much uh to show for it. But what what we find is that a lot of people don't sell because they're they don't want to pay the taxes. So
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then they end up getting the stock moves against them and they end up having a loss and then they don't have taxes to worry about or they're, you know, they saw a previous high in the stock and they're well, if when it gets back to
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that high, I'll sell it. or they're at a loss and when it gets back to even I'll sell it and the loss keeps growing. So, you want to forget about the taxes, forget about getting the high because you're virtually never going to get the
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high. I've been doing this for 30 years and I I don't think on what maybe a few occasions I've gotten the absolute high in a stock. And you want to forget about your ego. Um, you know, the goal is to
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make money and to protect yourself. So, if you're if you're trying to be right all the time, you're going to have a problem. But if if you're if you divorce your ego and you forget about being right, you're going to find that you're
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going to turn the portfolio over a lot more. You'll find someone like uh Kenny Hebner, who is a great uh uh manager um and runs billions of dollars, has a lot of turnover, but he also has one of the
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better track records, and a lot of the guys who have the bigger track records usually have the more turnover. Now, you want to nail down profits when you have them, at least, you know, a portion of them. Um and and that's another thing
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that's going to create a lot of turnover. Uh especially now there's a lot more trading nowadays. Dave, I know you know we've had a lot of discussions about this and um you know you've you've talked about how I don't I say that
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things are really never different. However, I think being faster isn't really different. It's just the same thing just at an accelerated pace and because of you know you have access to the internet now. Back in the day, we
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had to pick up the phone, call somebody, they had to call somebody, they called them back, they called us. There was a $250 commission. So, it was a lot harder, you know, to move quickly. Now, of course, you just make a click and
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your and your positions are bought and sold. So, things move faster. But, um, you you want to talk about this a little bit and and and your view on how things uh uh have changed maybe a little bit as
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far as that's concerned and how you've uh how you've altered your uh trading. Yeah, I think you know with the fact that everybody's got a computer, everybody's connected, you can just push a button and you execute the stock
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within a second. Uh it it has to me sped things up. And you have to be you have to be knowledgeable that you have to be aware of that because sometimes you'll see a stock break out and the only
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people aboard that are moving that stock higher are just a lot of traders who have their their alarm set. And so you have to you have to see is there followon volume. Does it does the buying continue not just for today but then for
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the next day or in the following day after that. So things things have sped up. You have to be a careful um I tended to not do anything in the first 45 minutes of the market because there's just a lot of emotion a lot of news
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moving things down. I actually like to see uh intraday as stocks calm down to place place some of my orders or even wait until towards the end of the day to see because you can get whipsawed in some of the sort of the computer type of
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moves that that occur. And I just adding to your rule number two on turning over your portfolio. Yeah, I I never ever think about taxes when I'm buying and selling, you know, when I'm selling a stock. I'm thinking of is the position
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right to be sold? Should it be sold? And I I never even think about taxes. I've never thought about taxes. I, you know, I lots of times you might think, "Oh, well, I can't I can't uh take that out
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that position now because uh because I'm going to have to pay some a big uh tax uh hit on that." But lots of times I've seen people who who've said that who then a few months later they're now
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underwater and they much rather pay taxes on a profit than than no taxes on a loss. And your your third point um forget about your ego. You have to take I I've always said you have to take your
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ego. You got to throw it in a trash can when you when you walk into the trading trading day or the investment arena because you just you are going to be wrong. And if you're wrong, if you're wrong 40% of the time, even 50% of the
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time, you can still do extremely well in the market. You just have to keep those losses small. You have to be able to admit admit your your that you've made a mistake and move on to the next stock.
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learn from that mistake, but but take that first loss and then and then move on. So, forget about your ego, you know, and just and and and learn from learn from your losses, learn from your uh your uh winners.
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Yeah. Now, moving on here, the the next thing that you know, you're you probably been told many times is that you can't time the market. I just you know especially in the in nowadays we have the ETFs and uh of course you know Bogle
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is is Vanguard is uh is the big proponent of uh buying and holding and the market you know when it does well for year after year and you have a big bull market you know see if you just
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held um okay that's great but first of all we're talking number one about super performance here we're talking about tripledigit returns and you're not going to get tripledigit returns uh by holding the S&P 500 00. Uh that's number one. Um
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also it's you know if there's any one thing that maybe has changed over the years is m you know back in you know many many decades ago you could you know buy AT&T or a bellweather stock and and
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hold it for a long period of time but even then you had big bare markets that took these stocks down uh you know 50 60%. Um some you know never come back.
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So, you have to remember time is money. And, you know, I've been timing trades since I started in this business 30 years ago. David's been timing his trades for uh, you know, for 40 years.
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And we can go on and on with many successful traders who time their trades. So, can the market be timed?
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Well, I don't know about the general market. That's probably a lot more difficult, but individual stocks can be timed very effectively. The thing is, you have to learn to use charts, of course, and I know many of you do use
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charts, but you have to use them correctly. And one of the things that I would point out is to just learn how to identify what I call the volatility contraction pattern or the VCP setup.
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Um, and what what this allows you and when you're able to very uh with pinpoint accuracy go in there and buy a stock and know very quickly whether you're right or wrong. What happens is first of all, you're able to compound
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the money very rapidly because you're not wasting time. When you're right, you're right very quickly. And on the flip side, when you're wrong, you're out of it and you can move on to something else. So time becomes your friend. Uh
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I'm going to show you a uh a setup here that not too long ago that we we bought.
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I purchased myself and we uh purchased it at the uh on the platform here. And this is a a classic um there there's a few things that are happening here. One, you have what we call a primary base.
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It's a it's the first time that you set up uh a constructive price setup from a new issue. So over here you have the new issue. And like many of these new issues, sometimes they they run up real
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quick. Uh but usually uh after that run up they correct or they correct right away and then they spend some time going through a correction or some type of sideways action. Um and some even go up and and and take off and double first
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before they actually spend that time correcting. But I always wait for some type of consolidation and then from there I look to buy as the stock starts emerging from that consolidation. Now, you can apply the VCP to uh um you know
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to new issues uh or to a stock that's been around for a long period of time.
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This is the entry point that we made um and and that I I purchased the stock on.
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And if you go, we're going to take a look at a little bit wider view where it is now. Um so, you can see that this stock this came out very efficiently.
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And this allows you to be able to now um first of all, you know, take if you want, if you're a shorter term trader, take a very quick profit and be able to compound that money more rapidly, but
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also if you get yourself at a profit right away like this, then you can sit through some of this pullback uh because you've gotten yourself uh uh in a position where you have some cushion.
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And so there there's multiple uh benefits that you're getting from timing the trade correctly. Now on the flip side, let's just say this stock tries to break out and then comes comes off here and starts uh uh falling back. Well, now
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I know that it's acting abnormal. This is not what should be happening. This stock should be following through and moving up and and having successive days of of price increase. And now I know to get out of the stock. So, it's really
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allowing me to know that that train is coming in on schedule. Now, you can read about this in my book. I put the uh the page number here. There's a a section called a picture is worth a million
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dollars and then there's a a subsection on the VCP. Um but the whole section of course you should read. It's on page 189 and I explain this in much more depth.
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Of course when we do the master trader program we spend two days and there's hundreds of examples of this um which will be not till October though. Um uh Dave any any uh anything to add to this?
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Yeah, one one comment on on the uh indexing and how how popular that's become. Anytime I've seen something become so popular that everybody's starting to do it that you're probably getting towards the the end of that and I I think maybe example of the market
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even in the first three months of the year is is is is a great example. Well, the market is just going back and forth. I mean, we we were up a few percent coming into the day, and now we're barely up on the on
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the S&P. We're down on the uh on the Dow, and I guess the NASDAQ's up a little bit, but if you've been able to hit the right stocks, buy the right stocks, and take them out, may you might
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have been able to make a little bit more progress in the market. And so, I'm I'm thinking that it's been a long time since really stock picking has been in vogue. And it's it's been all indexing for the last six years. So, this might
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be, you know, maybe maybe we're starting to turn. May this might be the day of the stock picker. I'd love to see that because I just love picking individual stocks that can outperform the market.
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Yeah, I I I agree with David and I think that maybe after we have a decentsized correction, um, the next type of, you know, and I'm talking about some type of maybe bare market, a real good size reset. I think coming out of that we may
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go back to a stock pick pickers type environment and we and like David said we haven't been in that type of environment a long time. It's been where indexing has been working. Um but uh uh um again you know it really regardless
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of what's working with the indexes uh with individual stocks um you know there's always going you you get leverage with the individual stocks. If the general market goes up 20%. You and you're in a bull market run, you're
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going to have individual names that double, triple, and some go up 10fold, 20fold. So, you get a you get a leverage factor there. Uh um and timing the trades really become something that uh uh um you know is going to be able to uh
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give you that compounding. Now, of course, we talk about the upside on these trades and timing them properly, but you have to remember that you're not going to be right all the time. As a matter of fact, even if you're really
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good at this, you're probably only going to be right maybe half the time. I mean, when the market's going really well, um I sometimes am have a 60 65% batting average when things are really working for me. But generally speaking, it's
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about 45 to 50%. Um and when things are not going so well, it's uh 35% 40%. And if it gets below 35% I usually know that's a sign that things are really not too too uh good in the market and I and
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I scale back my activity quite a bit. Um uh uh Dave what uh um as as far as that's concerned um you know what are your feelings on that? Oh, yeah. It's you you always have to as you're going
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into a trade or into an investment, you have to set a spot where you get out because as as someone said, the mind's got an infinite capacity to rationalize.
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And a stock starts down on you. You can come up with every excuse in the book of why you shouldn't sell, but I always set at least some point. Maybe it's 8%, maybe it's 5%. It it it depends
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on the maybe even the setup of the stock and and the and and where the how the stock is coming out of a base. Uh but you have to as you go into any investment uh that you have to you have
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to set those loss those stop-loss points points because you just don't want to suffer a huge gain because it is so hard to come back from those losses. Uh huge loss you mean? Yeah. You mean a huge loss?
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Yeah, a huge huge loss. Yeah, you don't want to suffer a huge loss because it's very very hard to come back.
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You do want to suffer a huge gain, though. Uh, all right. So, so let's let's talk about and be a little more specific and and and um I know you guys want, you know, tangible things that you can you
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can use. So, let's talk about managing the riskreward relationship. This is this is the holy grail. If there's any holy grail, this is it. This is what trading is all about because um really it just comes down to doing the math and
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figuring out where you need to cut your loss relative to where your gains generally expire. So it's no different than uh uh what insurance companies do with mortality tables. Uh and that's how they charge a premium because they have
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a really good idea of where the p the people are going to going to die on average and that it'll fall right on that age pretty specifically when you take an average of it. So you can look at your own trades and say all right
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well on average I'm getting let's just say 12% gains uh over the last you know say a 100 trades in the last six months or a year. I did a 100 trades and my average gain is 12%. Well and take a
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look at how many times you've been right. I've been right, you know, 50% of the time on on half the trades. Well, does that mean that you can take bigger than 12% losses? No. There's no way you can take 12% losses and make money. So,
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you're going to have to take losses less than 12%. If unless you're trading all of a sudden it improves dramatically overnight, which it probably wouldn't.
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Um, over time it may improve somewhat, but then if you monitor your gains regularly, you'll get an idea of what you're producing. what you're producing when you're right and then you can adjust that loss and then that loss
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should be at uh one half of your gain or your expected gain. Um and then even one/ird you know using a 3 one or a 2: one is a general rule of thumb. Um and and if you could if you go and you look
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at most traders uh that are even swing traders or even longerterm traders uh investors they're cutting their losses if they're successful their losses are generally cut at 1/ half to onethird where they're getting their gains. Now the other thing that you want to realize
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I always talk about building in failure and and I'll just explain real quickly what that means. This means that instead of trying to worry about having a being right all the time and having a big batting average and being successful on
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80% of your trades, which is very difficult to do, um, what you want to do is is actually use the riskreward relationship and cutting your loss relative to your gains as your edge more than than than the actual number of
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times you're right. And what I try to do is I try to be profitable when I'm only right 35% of the time. So, so I in my mind I'm saying, okay, I want to keep my uh I want to manage my riskreward
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relationship. So, when I'm only right 30% 35% of the time, I'm still not getting into trouble. I'm I'm breaking even. So, you can do the math and back into that. But that then I've built in a lot of failure because because at that
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point uh I mean even I can be right probably 25% of the time throwing a dart. Uh but so but if I'm if if I'm needing to be right 80% of the time and my average loss is 15%, my average gain
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is only 10% and I'm upside down with the riskreward relationship, but my my edge is coming from the fact that I'm right all the time or not all the time but a good portion of the time. when you're
Speaker A
wrong and and that moves against you and you start to have a have a draw down in your in your batting average, you're going to have a huge draw down because your system is not able hasn't built in
Speaker A
any failure. It's it's it's expecting it's planning for the best and expecting the best. So, I pl I plan for the I I expect the best, but I plan for the worst. Let's move on here. Of course, we
Speaker A
don't have the time to go into every one of, you know, go into everything in great detail. We're going to try to touch upon this and answer some questions. Uh um so I I apologize that we and I could go on and David could go
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on for this, you know, with this these topics for days on end. Um excuse me. So what I do is I approach every trade from a risk first uh standpoint. I had a tickle on my throat.
Speaker A
Sorry. And I know exactly what I'm getting out before I ever get into the stock. And and I to this day I still I still have it committed to paper after doing it for 30 years. I still don't trust my memory
Speaker A
with anything. Actually, I trust my memory less now that I'm 50. But um I and I write it down. And then when that stock hits that point, there's nothing to think about. I just get out of it. I
Speaker A
and and I and I'll go and I'll re-evaluate and I might come back to it later on. Sometimes, you know, uh uh I get shaken out of a of a quick move, but at least I'm protecting myself. And that
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risk is always uh thought of as a function of my expected gain. And this is liter this is the number one single most destructive thing that every investor does is that they don't cut their losses properly. And and even if
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they do cut their losses, many investors only do it for on some trades and some trades they don't. And every now and then they fall in love with something.
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It ends up turning against them. They hold it down and just a few stocks end up destroying what could have been really good performance. Um and then you look back and you find out that uh uh um you know, you know, it's just a few uh
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bombs that hit your account that really uh messed you up quite a bit. Uh, and then you have some some traders who they just refuse to uh to look at that stuff and keep moving forward. Never really know why they went wrong. So, it's
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really important to make sure you uh you know what you know where you're going wrong. Now, I have a little sign that's on my desk that I've kept for quite some time. Um, and and there well there's a
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few things I do. First, when I wake up in the morning, the first thing I do, uh, when I go into the bathroom is I look in the mirror, and I've been saying the same sentence to myself every day,
Speaker A
and I say it internally in my head, but I've been saying the same thing to myself every day for decades now. And that is, I walk in, I look in the mirror, I say, "Mark, you have the ability to do serious damage to yourself
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today." And then I go into my office and I start working. And the reason why I say that is I always want to remind myself that, you know, there could I could get really hurt in the market very
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easily if I just fail to uh adhere to some simple rules. The next thing you know, I'm taking very uh you know uh uh very big uh uh problems in my account uh and and in my confidence as well. And I
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also have a sign on my desk that says no big losses, no force trades. And simply I don't I I'm always trying to remember I I want to keep the losses small and I don't want to force things. I don't want
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to try to make something happen uh uh that's not there. I wait for for the stocks to set up the way I need them to set up. And if they don't, then I wait and I wait patiently. If you remember,
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we go back to the first rule. If you're concentrated, if you're if you're concentrated, then you can make things up pretty quickly. Uh, and you don't have to be so worried about being in cash and sitting out of the market.
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Also, I mean, if you're in it for action and you can't sit on your hands and wait for the market to set up properly for what you need to see for for a high uh probability setup, well, then you're
Speaker A
probably better off just going to Vegas, you know, and having some fun and and you'll lose your money there and and you can start all over. But that that's what where you're going to end up being if you're going into it for action. You're
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you're basically going to be going uh to Vegas. Now, um Dave, do you have any I I don't know if you have any signs in your anything that you say on a daily basis to your Well, it you know, when usually when I
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wake up in the morning, I look in the mirror, I look at myself and I go, "Oh my gosh, you're getting so old." But say that also.
Speaker A
Yeah. But the um but the key no big loss is no force trades. That you know that that's very good to have. I I think a lot of people are going to say, "Well, do you set mental stops or do you set or do you set
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uh you know, stops in with your broker or or put them in online?" I actually do them online because if if you put a mental stop in or you write it down and then you're then you have to watch it,
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you know, every single second of the day as as it's starting to get closer to your to your stop point. I just I just put them in and I and if I get taken out and then they whipsaw me and they come
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right back up, well, I'll I'll buy them again on that next setup. But I like to put them in I like to put them in as I'm placing the trade uh on the buy side. I like to put in my stops actually with,
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you know, my online broker at that at that same time. So then I don't sit there and argue with myself or I don't start rationalizing as the stock gets closer and closer to my stop. It's immediately triggered and and I'm taken
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out. And the the reason why I say that is that you have to develop something where you are extremely disciplined. I I hate to sound like the I don't know the coach or the uh the teacher or even your
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dad or your mom where you say you got to practice discipline but it uh so much of this is removing the emotion by being disciplined, you know, setting setting your losses as you're as you're purchasing the stock and and just in just being I I've called
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it it's like being a robotic investor. you see the information, you act on it, and when it when the thing starts turning down then or you it's time to take profits or it breaks moving averages or whatever it is, you have to
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just go in and act instinctively and not use all these these emotions that that we can get caught up into and which creates creates big losses.
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Yeah. Real quick, I just want to point out something. And I know we've had maybe I don't know a handful of people.
Speaker A
It looks like maybe five or six people that are saying fix the audio. We've got I think 800 people on here right now and there. So there's like 77 780 something people that are hearing it fine. So it's
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not on our end just so you understand. You might be on a wireless or whatever for whatever reason, but we apologize for the few people that are having problem with the audio but we've we've got like 700 people that are not having
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problem with the audio. So, it's definitely not on our end and there's really nothing we can do. I really I really apologize for that. Um anyway, uh let's move on here. Now, this is something that um uh uh that I really
Speaker A
believe is is an important and these are all important rules. Uh but some are just not followed nearly as much by people uh and they break them. And u this is really important to trade directionally. And when when I say trade
Speaker A
directionally, I'm going to I I'm talking about this on a longer term basis right down to the to the very shortest term basis on an intraday basis. Um and um uh uh let's start with the longer term. On the longer term,
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you're going to want to trade with the trend in your in your direction, the longer term trend. Again, you can go to my book and and I talk about this.
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there's a trend template and that that's the the criteria, the eight criteria that must be met or I won't even look at the stock. I'm not even going to going to see the stock unless it's meeting this criteria. Um and and then from
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there uh I'm going to want to see the VCB setup, the intermediate term uh uh chart pattern also have that uptrend. Uh and then finally, when I'm buying the stock, the stock is actually moving up.
Speaker A
Now, the thing is I I buy on pullbacks and so does David. But almost every time, even on a pullback, we're waiting for the stock to actually start turning up. So maybe the stock pulls back and undercuts its 50-day or whatever the the
Speaker A
pullback buy may be. Most of the time, we're or almost all the time, very almost never am I buying when the stock is actually coming back in. I'm waiting for it to have some type of uh uh stabilization and actually turn up. So,
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I'm trying to get what I'm trying to do is align all the time frames. So, every every trend across the board is in my direction. And you never want to average down. Not the the what what's even worse
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than buying when the stock's coming down is to buy more when it's coming down. It comes down and then you buy it and then it comes down more. So, you you buy more and you average down. This is something
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that a lot of brokers try to convince uh clients to do for obvious reasons. Uh it it it's the guaranteed way to the poor house at some point. You may get away with it a bunch of times, but somewhere
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along the line, it's going to uh really hurt you. Now, again, we talk about determining if the train comes in on schedule. when you when you have all these these trends in your favor, it becomes very obvious to see that when
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things aren't working because you you're going to move against so many different uh uh uh forces that are in one direction and and and again, this is something that I I talk about sign uh uh uh quite a bit in my book about the
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determining when that train is coming in on schedule and then coming in right at the moment where that stock is starting.
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to move and you want to try to buy when momentum is the strongest when that that stock is really on the move. Dave, I know you, you know, you trade directionally, you know, virtually all the time as well. Can you can you
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elaborate a little bit on this? Yeah, I I never I never buy when a I never average down because I've already made a mistake on my first purchase.
Speaker A
Then why compound it by adding more to it? Well, you know, maybe, you know, maybe it could rally from there, but I I've already got, you know, I've already made a mistake. Um, and so I I just it's
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just a a rule because I have just seen stocks where I have where I'm down on them and I go ahead and sell them out and just cannot believe how far some of these things can fall because when when
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I the stocks that I'm in and the stocks that you're in, Mark, that are usually strong very strong growth companies and when that growth really starts slowing down the stock can fall dramatically.
Speaker A
So if you're averaging on the way down, you could have some very very big losses in a very short period of time. So as a general as a a very specific rule, I I never add to to stocks uh or losing
Speaker A
positions where I' I've already got a loss in. Yeah. And now here here's a guy, okay, here's David Ryan who's one of the best traders in the world. He's been doing this for 40 years. Is not trusting his
Speaker A
own opinion. See, he's not trusting that. He He's saying, you know, I bought this stock. It's not going in the direction that I thought it would go.
Speaker A
It's going against me, and I don't trust my own opinion. I'm going to trust the action of the market, and I'm not going to go and add good money after after bad. And and so if he's not trusting his
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opinion, why should you, you know, and and dig in? So, it's really important to understand that, you know, the your your first loss is your best loss. And if the stock's not moving in your direction, then guess what? you made a mistake in
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timing. You have to admit that you've made a mistake in timing. Maybe it's just a temporary short-term mistake and the stock will get back on track a few days, a few weeks, or even a few months down the road and you can come back to
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it or you if it hasn't hit hit your stop yet, you stick with what you already own. But the last thing you want to do is start to to add to that. I know we had a question asking uh you know, how
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do you know the intraday uh uh trend is up? Well, stock is moving up. It's that simple. If if the stock has been moving down and and it starts to turn up, uh uh that that's that's of course the
Speaker A
shortest shortest time frame, uh or it's up on the day. If the stock is certainly up on the day, then the stock's moving up on that day. But my the point is is that you're if you buy when the stock is
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falling, you it's almost never that you get the absolute low, just like you don't get the absolute high. So, you're probably going to be sitting at a loss right away. And how big that loss is going to be is is anybody's guess. And
Speaker A
if you're using stops, u it only has to go down a not much more and you'll probably get stopped out. So you're trying to avoid getting whipped around and you're trying to get on a on the stock trade when it starts to make a big
Speaker A
move and be at a profit as soon as possible. As a matter of fact, and I know you know this is one of David's main rules, is not only does he want to see and do I want to see a stock give me
Speaker A
a profit immediately right after I buy it within literally seconds and minutes, I expect to be at a profit. Now, that doesn't always work out that way, and I'm not going to sell it just because I'm not at a profit right away. However,
Speaker A
that's the optimal trade, and that's the best sign that I'm going to make money on the trade. And even a better sign is the next two or three days I have follow-through and the stock moves even higher and I'm at a profit for several
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days. Those are usually the best trades. Do do you find that that that to be true Dave?
Speaker A
Oh, always the the the best stocks are the ones that are actually hard to buy.
Speaker A
And so when you're buying it, you you've got you've got a lot of other investors, maybe some huge hedge funds or mutual funds that are on the same side of that trade. and we're all scrambling to get those shares and you buy some and it
Speaker A
goes up and then you try to buy some more and it's hard to get and those that that's that's the market telling you that uh that you've got probably your timing has been very good and you've got a good stock on your on your hands and
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and as you mentioned I don't want to see a stock that has a one-day breakout. I mean, I I can't tell you how many times stocks they come out of they kind of come out of bases and they get one day
Speaker A
of buying and then all of a sudden they turn around and they drop right back into the base or go right back to through the bottom of the base. And recently that's been happening a lot and that's not a very good sign for the
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overall market. But um but yeah, I when I'm buying I want I want that first day up. I want to be up and then I want to see just as many days in a row as possible to the upside for that stock.
Speaker A
Yeah. And now there was a question asking is there a reason why the VCP why these stocks can move so rapidly and off of the VCP? And yes, there is. There's a reason there's this is not hocus pocus
Speaker A
or uh this isn't the cause. It's the effect. It's the effect of a greater cause. We're just reading supply and demand. And the better that you are at reading supply and demand, the more accurate you're going to be with this
Speaker A
stuff. Now, what David just said is is really a golden nugget here. Now, when the difference between a breakout that the stock pops out of the base, then comes back in and then falls apart is the difference between retail buying and
Speaker A
institutional buying. This is this is really something that's very important that you want to understand. You're trying to align your purchases with big institutional orders that are buying that stock at a time at a time when there's very little supply. See, this is
Speaker A
where the VCP comes in where you where you quiet the stock down and it gets very tight on that right side after contracting and the volume comes in.
Speaker A
That's telling you that stock supply has stopped coming to market. What that means is that now it only takes a little bit of activity to move that stock. So, it creates the line of least resistance.
Speaker A
And that's why they're so explosive when they come out of these these these chart uh formations when you read them correctly. Really important to study. If you study this stuff right, you won't have to listen to anybody. You won't
Speaker A
have to get tips. You won't have to guess. You'll see it right before your eyes. you'll take action and then you'll you simply wait to admit whether you've been you're right or you're wrong and if that the stock is the train is coming in
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on schedule. So the difference between retail buying and institutional buying that's what you want to that's what you want to learn how to how to identify and that will help you not only time the tra trades correctly but get at a profit
Speaker A
very quickly. Now, here's another major rule, and I think um we're getting into now the rules that are really important for keeping your draw downs uh small.
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Now, I've had huge returns and I've made a lot of money in the stock market.
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However, that is not what I'm most proud of with my own uh um with my my own performance. What I'm really proud of is the fact is that over the years, I've I've never been caught in a big decline.
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I've never had a real big problem in my portfolio and my draw downs have been very small and and that's trading extremely concentrated and being very aggressive and being through a lot of turbulent times. What is the reason for
Speaker A
that? Well, it you know after trading hundreds of thousands of trades, it's certainly not I couldn't get lucky 100 or 200,000 times. So there there's a there's a method behind this madness and and one of the really important rules
Speaker A
that you can you can start learning how to apply is to build on success. And it's very simple. You're you're you know, first of all, trading is not an on or off business. David alluded to this right in the beginning.
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He said, I'm not going to just go in there and start trading large. I'm going to take a 5% position and things start working, you know, I'm going to I'm going to step up my exposure. I'm the exact same way. As a matter of fact, I
Speaker A
play poker that way. You know, I'm not really getting aggressive and getting creative until, you know, I've made some money and I've built my stack up a little bit. I apply the exact same thing to the stock market. I let my smaller
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wins finance my larger risk. So, for instance, I first entered the market maybe from a cash position. Market's been in a correction and I'm knocked out of all my trades. and I'm in cash now. I come in and I might buy one or two
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stocks and take some smaller positions. Maybe a 5% trade, maybe even a 10% uh position. And if those work and things start and things start moving in my direction, I might take another trade. I will almost certainly take one or two
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more trades. And as I start getting getting some traction, I'll start increasing my size because now those profits are financing my my forward risk. So now on the opposite side, if the market is starts moving against me or the stocks start moving against me
Speaker A
and and I start getting stopped out of names, I trade progressively smaller. So, what this does, and it's really important that you do it on both sides, okay? This I've seen people do it on the on the loss side where they scale back,
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but then they don't scale up and they get afraid that they're, you know, they've gotten some profits and they don't want to give them back and they're afraid to get aggressive. But if you get aggressive when you're when things are
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working and you get conservative when things are not, what'll eventually happen is you'll be trading your largest when you're trading your best and you'll be trading your smallest when you're trading your worst. So when like the market really takes off and everything
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starts really working, you'll make a lot of money and when things roll over and you go into a bare market, you'll be forced to cash or very very uh uh negligible positions. it it's an automatic way to keep yourself uh uh
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pressing the gas when things are working and and riding the brake uh when things are not. Now, the thing is is I'll go in there and I'll get in maybe 25% invested when I first put my first toe in the
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water. If things work, I'll move it up to 50 and then from there, maybe 75 and then I'll go to 100%. And for some of you that, you know, use margin, you can then maybe move on to margin. But if
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you're not profitable at 25% or 50% and you're and you're losing money on your trades, well then what rational reason would would you possibly have for stepping it up even more? Things are not working. It's not the trades aren't
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working properly and and what you expect it to happen isn't happening. So you're going to guess and and now you're going to revenge trade and try to get it back quicker and double up and start moving heavier in the market. And that's
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precisely what gets you into a lot of trouble and creates big draw downs. With with this way, um, you're you're going to have very few times where you're getting in real trouble because you're never really putting on any size until
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you've already got some profits. Any thoughts on that, Dave? Yeah, it's there's no reason to add when when you're not making any money. It's another trader, an old old gentleman who I I've I've seen trade for years would
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always say, he say, "I'm not getting paid to take this to take this risk. I'm not getting rewarded." And so, there's no reason to keep on adding and adding and adding uh and and filling out more positions when you're not even making
Speaker A
money on the first one. So, it's it's always you should be bending with the market. If if the market is going up, your stocks are doing well, then you should add to those, you know, add to those positions or add on new positions.
Speaker A
If the market starts coming up and starts rolling over, well, your stops are probably getting hit and you're you're coming you're you're coming out of the market as as those stops are hit.
Speaker A
So, it's you're constantly kind of moving back and forth with the direction of the market. I mean, it's almost like driving a car. you see a you see a red light up ahead because you have stocks that are starting to to get hit. Well,
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you start hitting the brake and and slowing down and and if you see a green light ahead, your stocks are doing well, well, you hit the gas and you add more positions or you add add more money to
Speaker A
the your existing positions. Yeah, absolutely. Uh um now um I see we have some questions. We have uh uh someone from Dubai uh asking uh if the uh how do you scan and pick your stocks?
Speaker A
Now, I want to explain something. Of course, we're not going to be able to get into this, you know, these specifics of the of the whole strategy and exactly what we do. That's something that we do for several several days of training at
Speaker A
the Master Trader Program. If you're real serious about learning this from A to Z, that's that's where to come. Or you can come on onto the platform, our premium platform on a daily basis. And then we we do it right there live and we
Speaker A
answer questions every week. This is something that's going to take time, okay? And I and you don't have to use my strategy. You could be using some other strategy. These rules are really applicable to any strategy. It's not
Speaker A
strategy specific. Um and so you have to realize the main thing is is that you're applying good sound rules and making quality choices with whatever strategy.
Speaker A
But if you want to learn you what what we do and my strategy, you know, you can you can of course the book is the cheapest way to do it. And I'm explaining probably 90% of it in there.
Speaker A
Um I have another question here. Is the VCP in the book? Yes, it is. There's a big section on it. Uh it starts on page uh 189. Um and um also um I see here just backing up here. I'm trying to go
Speaker A
through some of these questions because I know it's going to be tough at the end. Uh, do you think VCP would work in S&P 500 stocks? Absolutely. It doesn't matter whe they're large cap, small cap.
Speaker A
I mean, I favor the small and midcap names because they're a little uh uh uh less efficient. Um, but but it certainly will work in S&P 500 uh companies.
Speaker A
Absolutely. Um, all right, let's move on here. Now, the next rule and is talking about break protecting your break even point. And this again, this is really to help your equity curve and to uh keep your draw downs to a minimum. And and
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the way I do that is that I try to protect my break even point as soon as I can without choking off the trade. Okay, the ASAP. And I and I know uh uh um I I think Vicki I think you asked me a
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question in the trading room uh last on Monday and I didn't get to answer it and it was specifically on this if my memory serves me correctly and and you were having you were saying what's the ASAP you know how do we determine ASAP? Well
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I'll tell you how I'm going to tell you how I determine it. When I get where I've risk let's just say I'm going to give you a hypothetical situation. I've risked say 5%, I have a stop at 5%. And
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my average gain, let's just say is two times that at 10%. So now I buy a stock and that stock shoots up over a number of days and let's say I'm up 15%. So now I'm up three times my risk and I'm up uh
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one and a half times my average gain. That's a that's a time where I'm going to protect my break even almost every time. When I get a multiple of my risk two to three times above my risk and
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that is above my average gain, I generally at that point will at least move my stop up. I usually cut my stop in half or uh most often I will move the stop to the break even or just slightly
Speaker A
below the break even point. And on top of that, I may even I might even take a little bit off the trade and and try to free roll it. If I if I move it to break even, I may free roll it. Um, we're
Speaker A
going to talk about that in just a minute. So, the the real rule is though, here's the rule. The rule is never let a decentsized gain turn into a loss. Once once that stock, you know, when you first take a trade, it's all risk.
Speaker A
There's nothing but risk. And and and of course, there's upside. There's potential upside, but you're at risk at that point. Now, the stock moves up.
Speaker A
You've you've given the stock, let's call it, the shot at you. you know, you put your chin out there and you give it at the shot at you. Now, you're at a profit and you're at a pretty decent
Speaker A
gain that probably, you know, if you're at a 10 or 15% gain, that could absorb most news factors if if they come out with some, you know, some surprise news, uh, notwithstanding something, you know, uh, catastrophic. You know, the stock
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may gap down 5 10%, even 15%. But with a 10% gain or a 15% gain, you're not likely to take a very big loss. So you're you're now, you know, if you want to call it, you know, working with house
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money, although I don't like to, you know, once the money's mine, once the the stock's at a profit, I think of it as my money. So I try to protect it, but I do have my I I am at a gain at that
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point. So I'll do one of a few things. One, I'm going to move my stop up and then I also may backs stop my profit.
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So, what that means, I simply decide, all right, well, I'm at 15% gain and my average gain is 10%. I'll just move my stop up to 10% profit. So, now at the very worst, at least I maintain my
Speaker A
average gain. All right, so these are just a few. You could be creative with this stuff. You can come up with some of your own ways that you approach risk management and and and protecting your break even point. But here's the general
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rules. The general rules are you start off. This is an order of priority. When you first go into the stock, the very first thing you have to be be you have to think in your mind is where you're
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going to where you going to cut your loss. If this if this stock turns against me and it's a problem, where are you going to cut the loss? My uncle point is absolute 10%. And I re rarely ever want a a stock to go down more than
Speaker A
8%. But my average is going to be something like four or 5%. As a matter of fact, I know uh Bob and I were just reviewing our numbers over the last five or six years, and in the last five or
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six years, my average loss about 3.4%. So, that's pretty tight. I mean, and and that's getting blasted every now and then. and having a stock that's down 12 or 15% on a on an earnings miss or or uh
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or or a lot of times I'll set a stop at 7 or 8%. But but I'm cutting my my stocks out a lot of times at break even or at half stops once they move in my favor. So my average is much less once
Speaker A
once the stock moves up. Now your next priority is to protect your line. Your line is your break even point. You want to try to conserve as much of that original uh uh uh starting point as you can. So now I move my stop up. Now once
Speaker A
the stock now makes a decent profit, now I want to go into protecting my profit and I have to start thinking about nailing down that profit and not giving that back. So now my priority changes a third time. And at that point now I'm
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going to uh uh you know I'm going to protect that gain and I'm probably going to either back stop it or use some other type of uh uh technique. Um I want to show you something that's very very
Speaker A
simple and I'm just going to let before I get into this Dave if you have any thoughts on that let you uh talk about that. What on your your last comments one thing I would I would keep in mind
Speaker A
now this is an old this is an O'Neal rule and since I spent so many years there it's kind of ingrained. If you've got a stock that you've bought, you bought it just right, coming out of a nice long base, the earnings are there,
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and the stock just takes off and goes, and you get a 25% gain in a matter of I, you know, in in a matter of three or four weeks, uh, then you should probably try to play that stock out for a much
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longer term. uh because that is those are usually signs of a of super performance stock when it can make a a big gain like that in a matter of a short period of time.
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Yeah. And and I'm going to talk right now, let's talk about that a little bit on how to stay with a stock and hold it for a larger move. Now, I'm going to I want to give you a few uh uh I'm going
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to enlighten you on a few things that I do and I also want to just bring in a question here. How do you get stocks before they hit the IBD screens, top 50, uh top 200 composite, it seems that all
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these stocks peak when they hit the the IBD list? Okay. Well, first of all, in defense of the IBD list, which I don't use, however, um a lot of names that are on the IBD list, you know, will be
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trading because they're they have big earnings and and high momentum. We're in the very late stages of a bull market right now. And and yes, you're right. At this point, a lot of stocks are probably peaking or near peaks and you're going
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to see a lot of stocks once they get that momentum. They they that may be uh you know the beginning of the end.
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However, in the beginning of a new bull market, you come off of a correction and that's the best time to really start thinking about holding a stock. Like like David just said, if a stock makes a big move in a really short period of
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time, coming out of now, of course, that's taking into consideration that's coming out of a consolidation. That's not after the stock's extended and it and it's run way up and now it's extended itself even further. This is coming out of a consolidation like like
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Jack in the Box did here. This is a stock that I tweeted if if some of you might have saw this a while back. Um, and we bought some uh uh in my own account in uh in the uh in the service.
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Um, now let me let me show you how you use what we call the 50-day rule. It's very very simple. You're buying coming out of a out of a consolidation or VCP.
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You can see we've tightened up here. For those of you who know a little bit about this, um, you'll see there's the the consolidation where we tighten up on that right side and then here's the buy point. Now, when we come out of that
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base, I have a stop set. All right. At that point, I have a stop loss that I've usually it's anywhere between a few percent and as much as uh it could be as much as 8%.
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Hold on one second. I'm being told something here that I What can't they see?
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Yeah. Okay. Uh I'm going to put Let me just put I'm being told that I should put a little red dot here. Okay. Okay.
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See that? Now, now I got a little pointer has my initials on it. Um, okay.
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So, here, right here is where I was buying the stock. Okay. And you can see it comes out here and then holds up for maybe a week or two and then moves up a little bit more. Has a little pullback
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here. And once this, this is the 50-day moving average. You see how the 50-day moving average comes here and catches up to my break even point. Right here is the breakout and that's where I'm buying it. And that's my break even point. Now,
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here's here's the general rule. Once the 50-day catches up to your break even point, what you can do is switch over to the 50-day to a to a close below the 50-day. Um, you can use or uh um there's
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there's v various, you know, permutations of it you can use, but very simply, a close below the 50-day would be the easiest. And you can see that we haven't even come anywhere near the 50-day all this time. It holds you in
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the stock. Now, very often what I'll do is I'll if the stock goes up big enough and I get a really nice profit in a short period of time, I'll take a little bit off and then I'll play a portion of
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it, usually half of it to one quarter of it for a larger move and I might uh I might uh institute the 50-day rule. Now, when does this work the best? This works fantastic in the beginning of a of a new
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bull market. If you've been in a correction or a bare market and the first wave of stocks that are market leaders start breaking out of bases and like David said, they run up and we can use the O'Neal rule where they, you
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know, they're up uh, you know, 20% uh, in in in less than eight weeks, you should hold it. you should at least give it uh you know until the next quarter or two and institute the 50-day rule because some of these stocks especially
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in the beatable bull market will go up four 500% some go up a,000% and never close below the 50-day. The 50-day contains the entire move. It happens time and time again. It generally happens with market leaders, stocks that
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are under significant accumulation and every time the stock pulls back just a little bit, it's met with buying because the institutions are looking at a much bigger picture and that stock has a very bright future. So, this is a very simple
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rule. Of course, again, we there's lots of we go over a lot of these things in more depth and we have more time. Uh but uh uh today we've only got an hour and a half, so we can only do so much. Um,
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okay. So, let's move on uh to the next uh the next rule here. Um, and and again, like I said, the first five rules were were more on the the side of return. And the next five rules, five,
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six, uh, 6, 7, 8, 9, 10 are more geared for keeping the drawdowns uh, protecting the draw downs uh, um, or keeping you in a stock a little longer. In this particular rule, number eight, we're talking about selling uh into strength a
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as as a way of minimizing your your um your equity uh um your your your equity volatility. Now, why is this important?
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There's a few reasons. One, if you wait until a stock breaks, it's you usually you'll give up so much that you'd be better off selling even lower, selling at the strength. I mean, an example of that, I don't have a chart of it right
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now, but I know uh was it SWKS, I believe it was. Uh um had a pretty good decline today. Um you know, I owned that stock and I had sold it uh at a fair a fairly small uh uh medium gain. I think
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we're up 12 or 15%, whatever it was. Uh sold it as it moved up and then it went even higher. And now in just one day, it's come all the way back down. And you'd be surprised sometimes in just a
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few days it'll it not only will come back to where you could have got out very easily earlier but it'll it'll come in even much more. Now the reason why the selling at the strength is important to manage your equity uh volatility is
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because as a stock gets extended and really starts to run up and and and uh maybe it goes parabolic and you start getting those larger days the the the air pockets just get deeper and deeper and the volatility gets gets bigger.
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Remember we're buying from a VCP. All right? That's a volatility contraction pattern which means that we're buying at a time where volatility is very very minimal and then buying in the direction you know as that stock starts to turn up
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and move in the direction of our trade. Now once the volatility once the stock really starts to to move up and get extended and and and get wider trading ranges the volatility starts to increase. What does that mean? Well it
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means that it's going to whip back and forth. you want to be selling it on the whip up, not waiting till it whips back down because now you're going to be getting a lot of wide action in your
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underlying equity curve. So it's it it's it's I think selling it to strength is really something that becomes uh uh a learned method because the problem is is that when the stock is up and it's moving up sharply uh you start really
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falling in love, you know, a lot of people fall in love with the name because it's getting better and better and that's when you start to think, wow, this thing's going to the moon and very often you'll sell these stocks into
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strength and they go even higher. Uh, but you have to realize the key is to just make money. You want to make money in the stock. It's not remember not getting the high. Now, here's another general rule of thumb that you can you
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can apply. And that is if a stock is moved up and you're at a profit, you're pretty happy and you're thinking about selling it, but you you you think you're on to a, you know, a monster and you
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don't want to give it give the whole thing up. You can sell half. Now, the reason why you sell half and not any other po uh percentage, selling 30% isn't going to work. Selling 70% isn't going to work for a win-win uh solution.
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And I I'll tell you why. If you sell half, you're in a win-win psychological position. If the stock moves higher, you can say, "Thank God I held half." If it moves lower, you can say, "Thank God I sold half." Either way, you're equally
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right. You're you're either way you you you are right for in what you did. Um now now if you sell if you if you kept 70% of it and sold 30% you're going to be more wrong than right on one on on
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one direction, right? It goes down. Well, then you know obviously you you understand that. So selling half puts you in a win-win solution. And I'll do I do that all the time. I'll be at a profit on a stock. It runs up and um I
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say, you know, I really want to get out, nail this profit down here, and I just sell half. I move my my uh my stop up to break even. If it really starts to run up, I move my stop up to my average
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gain, and then I just start trailing it, and I ride the other half. And then um if it moves up even higher, I sell half again because it puts me in the exact same position. You see, I'm in the the
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win-win solution all over again. And I could just keep doing that all the way up. sell half, sell half, sell half, and every time, regardless of what direction the stock goes in from that point, from that point forward, I'm in a win-win
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psychological position. Remember, trading is as much about protecting your your psychology as it is about protecting your portfolio. You you want you have to protect your confidence at all times and and get yourself into a mindset to make money, not pamper your
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ego and and and not to be a gambler and to have action. Okay. Um, I I went on a little bit of a tangent there, Dave. Why don't Why don't you uh let's hear your feelings on that.
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Well, I I the one thing on on selling half I think it's a good idea when you when you get a stock that's very very extended when you've had a really nice move on it and and it looks like it's
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going to start forming a base that it's a good time to sell half. The one thing you you want to be careful of though is is selling selling the whole position of a really strong stock because sometimes it's very hard to come back into that
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stock. So that's why if you can sell half of it and then you know ideally if the stock if you your timing was right you saw some distribution and the stock starts forming a new base well after that base is finished you can come back
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to your full position and and even buy more as the stock breaks out and makes another move but it just it keeps you just a little bit yet it makes it to me it actually relax me relaxes me in that
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position when I know I've taken a little bit of a profit and I and I can watch a base starting to form instead of having the an entire position and and and thinking it's going to return all the
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way back down to the buy point. If you take some then you're still in that stock for for what you could be an a much bigger move.
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Yeah. And and and of course stocks move and the market moves in in in group moves. you know, when probably if things are working in your portfolio, you're going to have multiple names that are working at that time. So, when you get a
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lot of stocks up, this is why you can have pretty big volatility in your portfolio right after you've been doing your best. You'll be up, things are going great, next thing you know, you go, "Holy cow, I can't believe am I
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really at this level? I was up so much just a few weeks ago." Yeah, that's because you had, you know, five or eight stocks or 10 stocks that were all extended and now they all come come crashing in all at one time and and
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suddenly your your equity is all over the place. And and the key is to protect to move up in stair steps to make money and then go flat or or to pull back your exposure and to get ready for the to the
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next move up and to stair step and to never really lose much. that that's more important for big performance uh than than winning big. Now, I want to point another thing out and this is because a lot of people think because um I've had
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these giant returns and also because um I talk about the big biggest winning stocks looking at these these stocks that make these big moves that I must have these giant winning stocks. Not true at all. I actually do a lot of
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swing and intermediate term trading through my entire career. Even when you go back to all the returns you read about and the stuff in market wizards, um, when I had those big runs, I was doing lots of trading and I would keep
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small positions and play for bigger moves. But these these stocks that go up, you know, a,000%, Qualcomms and, you know, back in the day where many of these names uh, went up, a lot of people thought that those that's why I made
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those big returns. Well, I was in many of those names, but I I would trade them like Yahoo for instance. I was in Yahoo.
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Uh I was in it. It made a 100% move. I was in the whole time. Uh well, let's put it this first. The stock made an 8,000% move. During that 8,000% move, I was in it four or five times. And I made
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money, I think, every time or or four out of five times. At one time it was 50%, another time it was 30, one time it was 100. So when you when you compound it, you know, I might have made two or
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300% in that stock that went up 8,000%. So, I got a nice little chunk that was big for me. Um, but I didn't hold the stock for the whole big, you know, the whole big move. You don't have to uh be
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in the stock for its entire move, but you can trade it sometimes many times as it resets. And sometimes you sell into strength, you sell half, it resets, it comes out of another base, and then you add the the half back. Of course, I'm
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getting into money management techniques and these are things again that we have to go into for long periods of time with many examples. So again, if you're more interested in that, you need to come to the master trader program. Let's move on
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here. Um, this is without a doubt the rule that has kept me um or or has turned me from a mediocre trader to getting stellar results. And that is to not only conduct post analysis of my trades, but to do it
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on a on a very regular basis. Um, you need to really, you have to know the truth about your trading. You know, you can't stick your head in the sand and when you're not doing well, just not look at it and try to forget about it
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and move on. Doing the same thing over and over, you know, and and getting bad results and then doing it again is is just never going to lead to any type of of real success. You have to get to the
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bottom of what's going on. Everybody has weaknesses. Everybody has strengths. All right? David's strengths may be different than my strengths. We may have different weaknesses, but in individually, we need to know where our weaknesses are and where our strengths
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are. And also, you're going to find that there's commonalities in when when you everybody who trades has certain things they do over and over that is their Achilles heel. And the reason why is because this is a very emotional game.
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This business is is pure emotional exposure. It's like an an exposed nerve all day long. And everybody has different emotional thresholds. Some individuals are very nervous and jumpy.
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Some are very calm. Some have no problem with uh uh you know with with uh with the stock market and the risk. Some are scared to death. This is going to cause you to do certain types of things and
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have certain foibless and they are going to show up over and over, but you're not going to be able to mentally comprehend those in in a in a quantitative way. The only way is to go back and to and to look at what you're
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doing. Pull the charts out, write down where you're buying and selling, and then flip through that chart book, and you're going to go, "Wow, look at this.
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I do the same thing every time. I constantly sell early. I constantly hold too long. I constantly do this. I constantly buy late. You're going to find that there's going to be one or two major commonalities that you do over and
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over and over, and it's going to be one of the biggest reasons why you're not where you need to be. Now, you know, I know Dave, you know, I know you've done this because I I learned this from you
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and O'Neal 30 years ago. um you know on once I heard you know O'Neal talk about this and I I happened to uh go to a seminar and I and and heard David speak um you know many many
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years ago uh three decades ago and I the fir I went right home and I broke out the charts and started writing down a with a green pen and a red pen and I realized right away I was terrible at
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selling. I I I was taking profits at the absolute wrong time. I was selling too early. Uh, I I I I left so much money on the table. Um, I just had all kinds of problems with selling. I was buying
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really well. I was I was placing the buy orders pretty good and I was managing my risk pretty good, but I had no idea on how to sell. And I find that a lot of traders, they spend so much time on
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trying to find when to buy that when the when they finally get into a situation where the stock makes a nice quick move, they're scratching their head. they don't know what to do and and they don't know how to handle it. Um so uh Dave
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Yeah would have a lot to say on this. Yeah, this regardless of what method you use in the markets, maybe maybe you're a value buyer and this is you're listening to this and you can't you can't really relate to buying super growth stocks and
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things like that. But no matter what type of investing you're doing, you have to study yourself and you have to see where you're going right, where you're going wrong. Because you'll learn more about yourself by doing that than
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anything that we'll that we can say. I' I've had people call me up and say, "Hey, look, if I could just sit next to you for five days and just watch everything you do and and and how you're
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buying and what you're doing, uh, you know, then I could be a great great trader." But but to to me, I I could actually sit there and tell you what to do, but but I I don't know what's going
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on in your mind and and when you're making your decisions. And that's really it's kind of selfanalysiz, you know, analyzing yourself. And that's what's so important about looking at your trades and putting them into two piles. the stocks that you made money on, the
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stocks you lost money on, and analyze each one of those sides because that's where I turned around my performance. I mean, this is back in the 80s, but I had taken an account and I had doubled it and then I lost it all back and even
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more. And I was so disgusted with myself, I took an entire weekend, went through every stock I had bought and sold for the prior year and found that my big mistake was buying extended stocks. So when I cut that out and I got
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extremely focused on just one setup, that's when I started doing extremely well in the market. And that's that's something that each one of you can do and each one you can really profited from by just analyzing yourself in your
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own trades. Mark, are you are you there? Oh no, my microphone wasn't on. Let's try that again. Uh um yeah, so anyway, I was saying that you have to have your what I call your own personal epiphanies or your own own personal
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breakthroughs. Mental breakthroughs lead to uh manifesting themselves in in physical breakthroughs. You you have to you have to know the truth about your trading. I can't stress this anymore.
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We've I believe in this so much that we've come up with tools that we have for our premium members. their their calculators and and and tools that you can put your numbers in and then they will spit them all out and show your
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average gain, average loss and we have we have a I have a proprietary uh distribution curve and you can analyze everything down to the most micro level and know everything about what's going on in your trading from a quantitative
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basis and then from this other side you have to like I said write down on the charts and try to get an idea by grading you know what's going on give yourself a report card you'll find about what
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you're doing wrong and where you're going wrong. Now, you know, this sounds like a lot of work, but here's what you have to remember. And um you I put I wasn't profitable for seven years. It took me and and because I didn't have
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the benefit of the type of, you know, uh education that they have nowadays. The learning curve was much longer, but I stuck with it because I knew once I got it, it would pay for itself, you know, hands down. And then in just one year, I
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made more money than I dreamed of making in in a lifetime. and and and and from that point on I never turned back. Once you get this and you and you make these breakthroughs, then it's going to be a
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lot easier. But it's just like anything, you can't expect to go into the market and and you know, and know what you're doing and getting great results overnight. People will go to college and spend, you know, eight years in college,
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but they think they can go in the market and they're supposed to be good at it overnight. It it doesn't make any sense.
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I mean, if I went into McDonald's right now and they said, "Here, go make fries." I wouldn't even know how to turn the fryer later on, you know, it's not that I'm a dummy. It's just that I don't
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have that knowledge. I'm ignorant to that. I I would have to be taught how to make fries at McDonald's. It's a job that many people do and it's probably not that complicated, but I just don't know it. So you you really have to spend
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some time and you have to get to the bottom of what you're personally doing within the confines of whatever strategy you're employing. So I'm going to give you a bunch of rules. You know, maybe you're going to read my book or come on
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to our service and and learn this strategy, but now you've got to get your own personal actions to align with what needs to be done for that strategy. Now that's going to move to this to the next rule. And
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again, these these rules that we we've come up with come from decades of our own personal experience and and performance and seeing thousands of traders and what they do wrong and and what the majority of traders what their
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problems are and and how to fix them. And again, this is, you know, I see so many traders start off with a style and they whether it's value strategy, they're trying O'Neal's Can Slim, Mark Mervini, SEPA, whatever the strategy is,
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and then the minute it's not working, they go, "Well, this doesn't work." And they go on to something else and they try another style. And they're trying to find the style dour or or the holy grail. when the fact is the only holy
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grail there is is what I told you before and that is managing the riskreward relationship. That is the only holy grail and that's applicable to any strategy. The main thing is that you become a specialist in that strategy.
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Whatever strategy it is, you've got to master it and you've got to be willing to sacrifice other strategies. You're not going to be good as a day trader, a value trader, a growth guy, uh um you know uh uh technical fundamentals.
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you're not going to be a specialist in all those things. So, you have to figure out what works best for you, what makes sense to you, what you're passionate about, and then sacrifice everything else and become really good at that one
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thing. Now, we do have uh we do have some questions here also, and uh I I I want to I want to get to those and I also want to just point out a few things. If you're if you're not getting
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the returns that you desire, I'm a big believer of taking full responsibility for what happens in my life and in everything. Uh at least at least I try to figure out how I could affect that and how I can have the ability to
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respond. That's all responsibility is the ability to respond. It's not blame. If you're not getting the returns you desire, you know, don't think that there's some special uh talent that's needed for this cuz there's not. because I was terrible at this for many years
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and was a was what I would call an unnatural. If there's a natural, I was an unnatural and but the one thing I I was good at was taking responsibility and realizing that I had to get good and
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I had to learn these things myself. So I I just I took action. I learned from that and then I made adjustments and just kept doing that over and over. The most important thing and this is what I
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you know I didn't write I didn't write books and I don't do seminars to make money. I do it because I want people to understand that they could do way more than they can imagine and they could do
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way more than I can do and to help people believe in themselves and to do great things. And that's the most important thing is that you realize that you could do way better than I've done or David's done because you have the
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benefit of our knowledge and but you have to believe in your own abilities. People fail at trading. People fail at basketball, baseball, and going becoming an astronaut, whatever it is. The only reason why they're not achieving the results that they really know that they
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that they want and they dreamed of is just simply because they don't believe in their own ability. Has nothing to do with the strategy. The strategy works.
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I've used it. And we have we have many people that have uh become multi-millionaires from nothing with with this strategy and other strategies, too. This isn't the the only strategy.
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The main thing is is that you have to believe in yourself. And also, if you come up with these rules, I find there's three types of people in trading.
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There's one, the first type, they don't have any rules. So, it doesn't really matter. They're doomed from from day one. The next group, they come up with rules, but then they fail to follow them. Either they fail to follow them
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all the time or they break them every now and then. Either way, it's equally as destructive. It's just one just the destruction happens faster. That's the only difference. If you're breaking your rules every now and then, you're going
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to eventually destroy yourself in the market. And then the third group is the ones that become successful. They not only have rules, but they actually follow them and then they work at improving them and coming up with better
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rules and and and and understanding them and and fine-tuning those rules as best as they can. And understand that there's nothing perfect, but this is about probabilities. Okay. So, with that, let's talk about some questions here. I know we're there's no way we're going to
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be able to get to the hundreds of questions, but we certainly can can touch on a few that hopefully also cross-pollinate some of the other questions. And also we're going to try to take some of these questions and and
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submit them to um uh to be included in the questions for this new book um uh momentum masters where we we're going to answer uh I believe it's like a hundred questions on all different you know uh uh topics of momentum trading and that
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will be with myself David Ryan Dan Zanger and I've I've personally picked Mark Richie II who was somebody who uh came to a seminar years ago and has turned out to be a tremendous trader and has great results and he's a new
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upcoming guy that I feel deserves uh to uh to share his views. So, um us four are going to be answering questions.
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We'll try to include some of these questions if they're not already in the question list. We've already answered, I think, uh 50 or 60 questions and we're we're looking to answer some more as they as they're submitted to us. Um
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let's see here. So, um is there a way to screen for VCP stocks? Well, you can certainly screen for a lot of parameters, but then you're going to have to do some some actual physical looking at the charts to really uh
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there's really no kind of no way around that. You have to you're going to have to look at the charts. Um I know a lot of people try to come up with computer programs um that have chart recognition
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and that could give you kind of a you know a broad look at it, but that real spec we have that specific entry point.
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It uh you still need to do some uh some eyeing it. There's no no computer better than your human eye. that that's what I found. Um th this is a good question for you Dave because you are uh the the the
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volume the volume expert as far as I'm concerned. Uh how does volume influence your buy decisions? You want to talk about that a little bit?
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Yes. It's uh to me it's very very important. It's it's a way it's really almost the purest form to me of of supply and demand. And so you want to I study the volume very specifically day by day and I look to see is it above
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average daily volume, is it below average daily volume and what is the stock doing on those days. And so I watch the tracks of of the volume uh and and really key on successful stocks.
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They move up on very big volume as they as they go through in consolidation. the volume lightens up, then they start moving higher again on bigger volume.
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And and then the reason why I watch that is because the major moves in a stock are created by institutional buying, big money, hedge funds, mutual funds, banks, those those people cannot hide. And when they buy, they're not buying a 100
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shares or a thousand shares. They're buying a 100,000 shares, half a million shares, 4 million shares. So that is volume that you can that you can actually see in the marketplace if you analyze day by day how that what the
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volume is and what is it in relation to the the price move. Yeah. And uh Angelo is asking do you use any indicators or just price and volume?
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I really don't use any indicators. Um there's a few things that uh um I look at for the general market to give me kind of an idea. you know, overbought, oversold, but they're very dangerous uh to to try to, you know, uh uh not get in
Speaker A
a market because it's too overbought or buy a market that's oversold. Um so I really look at price when it comes to individual stocks. I'm looking at price, volume, earnings, uh margins, and sales.
Speaker A
That's really what it comes down to. That's about all I need to know um to give me an idea of whether I'm going to be buying the the stock or not. How about you, Dave? You using any kind of
Speaker A
indicator? Not not on the not on the the volume. I'm I'm just looking straight strictly at the the volume as it trades every day in relation to its 50-day move moving average. So, because I just want to see
Speaker A
it is it bigger than than average or less. But um other than that, I don't look at any other indicators on volume.
Speaker A
Yeah, we have someone asking also about uh let's see how you did uh where is it?
Speaker A
Do you consider the trend of the overall market and your individual stock purchases? And this goes, this is Chris, um, I believe from Germany. Um, this also goes handinhand with another question. Uh, where is it? Uh, sorry, I got to try to find this here.
Speaker A
Um, oh boy, I lost it. It was a good question that would have went good with this. Anyway, I'll paraphrase it. H, how do you know the how do you have that longer term uptrend if the general market's coming out of a correction?
Speaker A
Isn't the Isn't that part of the trend? uh uh down. So for instance, the the question is if the market has been in a bare market and then turning up out of a bare market, then the long-term trend
Speaker A
would be down. So how are you trading with the trend? That's that's if I'm par I'm paraphrasing, but hopefully that's that's uh uh uh near correct. Well, first of all, when I talk about the myself, I'm saying the trends all in
Speaker A
your direction. I'm talking about the individual stock. What what will usually happen and again this is a bigger discussion but will usually happen is what will always happen as far as the stocks that I trade is that the market
Speaker A
will be in the downtrend and coming off a bare market low but the stocks will be in an uptrend above 200 day and breaking out of a base and usually making new highs or close to a new high. So the
Speaker A
individual stocks are in their own earning cycle and they're moving. That's how that's why during a bare market it the the leaders are so obvious because the market is in a downtrend and it's coming off of its lows and these stocks
Speaker A
that are breaking out to new highs and David and I often talk about Amgen and some US surgical and some of these names from the '9s because the market was in a in a bare market in uh that that in 1990
Speaker A
that went until October of 1990. And during that time, you had all these names in the health care field and in technology and computers that were they were barely undercutting their 50-day if and when they did, they come bouncing
Speaker A
right back and then they were breaking into new high ground, all-time highs and 52- week highs as the market was coming off its lows. That was a blaring indication that these were stocks that were about to become uh uh big market
Speaker A
leaders. Um let's see. I know we have a few a bunch of questions and again I got to apologize that we're not be able to get to anywhere near uh how many are here. Um is the VCP the same as a flat
Speaker A
base? No. The VCP has contractions where it goes through um usually the the the first uh correction might be uh 20% 25 33% uh and then it'll contract usually usually the contractions are about half of the previous correction. So maybe it
Speaker A
contracts to 10 or 15 and then contracts to 3, four or five or 8%. With a flat base, it just goes in a real tight sideways uh move. And that would be um there wouldn't be any contraction, but
Speaker A
that's okay. You don't need contraction if the if the sideways action is really really tight and the volume starts to dry up on the right side. So again, a little bit bigger topic that we'd have to flush out. Um, we'll try to maybe
Speaker A
we'll do another webinar in the future on technicals and we'll just look at technicals and maybe even one on on fundamentals. Um, let's see. Uh, h how long do you wait to see if a trade is working before you increase the
Speaker A
exposure? So, we we're talking about how, you know, I'm not going to get aggressive until I see uh some traction.
Speaker A
And a lot of people say, okay, well, what how do you how do you define traction? For me, I generally put on a few trades. if they start to work and maybe they're up three, four, five percent or seven or eight percent, I
Speaker A
might put on another one or two trades. And if those also uh start to move up, at that point, I'll get more aggressive.
Speaker A
So, I usually try, you know, four or five, you know, three, four names, um if things are really really starting to rip and and there's a lot of setups, I might move a little quicker. How about you, Dave? What uh how do you kind of scale
Speaker A
in? Well, I scale in. I I I I when you read that question, I thought the the individuals talking about an a specific stock and so I in in answering the question that way, if I have a stock,
Speaker A
let's say the base has been formed under 30 and the stock breaks out through 30 and I get it at I start buying it at 30 and a quarter and on that first day I I accumulate a 5% position uh and the
Speaker A
stock closes at 31. Well, if it follows through the next day and you get more you get and you got good volume on that first day, you get some good volume on the second day, I'll maybe get that
Speaker A
stock up to a 7 and 12% position by another u 2.5% position and then on the third day maybe f round off the position to a 10% position if the stock continues to follow through, shows good volume. So, I
Speaker A
want to see continued upward movement. Uh, I want to see followthrough. I want to see volume. I want to see that consistent day after day of buying.
Speaker A
That's how I kind of I start 5% and then go two and a half, two and a half, something something like that. Um, and that that's where I build a nice position and and I add to something that's already working.
Speaker A
Yeah, this is probably a good question to segue into. Adam's asking, how do you adjust your strategy in a directionless market like we're currently in? So, you know, when we're in a in a market where you move up a little bit, then you move
Speaker A
down, you're much more likely to be in a whipssaw environment. So, as you pyramid, you pyramid right into the time when it comes in and and vice versa. It it's definitely a more challenging environment and Dave and I have had a
Speaker A
lot of conversations about this. We're getting later and later stage and it looks like the market is under uh you know, some distribution here. Uh uh maybe a corrections upon us. uh you just simply have to um adjust your risk
Speaker A
accordingly and and if like again if things are working then you're going to stick with it but if they're not you're going to scale back and you may have to wait you may have to wait I think it was
Speaker A
19 uh I got I got in for the bull market of uh of of 91 in late 1990 going to 91 got very aggressive traded really aggressive all the way till 93 and then I got out in 93 and I didn't get back in
Speaker A
the market I went from late 93 until April of 94. I don't think I made a single trade. So, I waited over a year in cash and during that time, market went up a little bit more. Uh it wasn't
Speaker A
horrible, but then we had uh we had a correction uh going 94. Um so, there's been times where I've waited out of the market for extended uh periods of time.
Speaker A
Uh Dave, what do you think, you know, with this particular environment and you know, h how do you handle that when you know when you're just sort of moving back and forth? Well, this this is where I I add I actually look for more stocks
Speaker A
and and buy on pullbacks and not as much on breakouts because you're what you're dealing with and even what's happened today is you've get stocks that have had these, you know, doubles and triples and quadruples over the last couple of years
Speaker A
and then they're forming these small bases. They're breaking out into new highs off of small bases and then they reverse. Sometimes they can reverse and reverse very badly and very very hard reversals like we had today. So the way
Speaker A
I treat a market like this is more look for stocks that are the primary trend is up, the longer term trend is up and I'm looking for pullbacks within that within that upward trend. Now I'm not buying it
Speaker A
as the stock continues to pull back. I wait for that pullback to hold, maybe get some volume and start turning and start going back uh going back higher.
Speaker A
You you might look for trend lines, stocks pulling back down to trend lines, stocks moving back down towards uh uh 50-day moving averages or 20-day moving averages and and looking for those types of stocks that are in really good strong
Speaker A
uptrends. And the last thing is you have to look at the volume. Is the stock pulling back on huge volume or is it pulling back on lighter volume? If I get that combination and the stock holds move starts moving higher, that's where
Speaker A
I I'll buy on a pullback. But I I I tend to buy more stocks on pullbacks in a market that whips whips around like it like uh like we're experience because breakouts in this market, not that many actually work and continue to move
Speaker A
strongly. Yeah. Yeah, they're not following. They're not following through much. So now, of course, pull on pullbacks, like we said before, Dave's not going to buy if this on the way down as a stock's crashing in on huge volume. You know, a
Speaker A
light pullback, it's coming in, it's pulling back maybe to the breakout, pulling back to the 50-day for the first time, and then starts to turn up. That's where he's going to be going in there.
Speaker A
So, uh, let we're not just buying on just pullbacks, but this is this is another, you know, another area that we get into in extensive, uh, uh, for for hours and hours and hours um, at the at the uh, Master Trader Program, which we
Speaker A
only hold once a year. Uh, but I want to I I want to answer uh, Juan, who's asking, do you offer, and this gives me a chance to give a shameless plug of the master trader program. Do you offer an
Speaker A
online mentoring program for people live overseas? Well, we have tons of people that are around the world that are on the daily platform and that come to the to the uh to the master trader program.
Speaker A
To my surprise, we've had over 50 c 60 countries last year, India, they come from everywhere. It's really amazing.
Speaker A
Every year I see people and and I I I'm amazed that and and humbled that someone would some some uh people fly 44 hours the total uh trip uh 26 hours from uh Beijing and these big trips to come and
Speaker A
see David and I and and uh talk about these things but and we make sure that they that you leave knowing a toz uh everything that we're talking about of like I said we have an hour and a half
Speaker A
here there's not we can't get into it too detail but uh at the master trader program we spent in two days it's uh I don't know 16 or 20 hours of uh you know of going over this stuff. So that's
Speaker A
that's where if you really want to get into this Yeah. And Mark I would add you you you mentioned yeah we we lay all this stuff down. So then it's it's your responsibility. It's it's your job then to take all that material and then put
Speaker A
it to work and start doing it yourself and then studying your mistakes and studying your winners. And that's that's I mean it it it's a great head start for somebody who who's just getting into trading or even somebody who's been
Speaker A
around for a while to to go over these things again. Um but it's as you said, it's all laid out there for them to then work on it as they get back and start trading on their own.
Speaker A
Yeah. And with that, we've been going now for an hour and 45 minutes. We're about we're 15 minutes uh over our our hour and a half uh scheduled time. So, we're going to have to wrap it up.
Speaker A
However, let me just tell you this. I we have lots hundreds of questions here.
Speaker A
We're going to uh and many of them are overlapping. A lot of you are asking similar questions. We're going to submit these and you're probably going to find that the majority of your questions here are going to be answered uh in in this
Speaker A
book that's coming up uh Momentum Masters. And they're not, it's not even going to be answered just by David and I, but they'll also be answered by Dan Zanger, who is an extremely capable trader. He turned, I guess it was
Speaker A
$11,000 into 40 million in just a few years. That's pretty that's a pretty hefty return. Um, and then and Mark Richie uh I who is the uh who is Mark Richie Senior, his father, who was a in market wizards also. uh his son is Mark
Speaker A
Richie II who's turned out to be a really great trader and a and a wonderful person uh that I'm very fond of and is also going to be answering those questions. So you'll have the four of us answering all these questions in a
Speaker A
roundt type format which I very rarely have seen in the book um where you'll and you'll be able to contrast and compare and see how we all answer the questions. Um so I think it's pretty I think it's a pretty neat uh format and
Speaker A
it'll it'll be very educational. Um, and so look for that. Um, and we'll try to do, you know, we'll do another webinar uh down the road here. Uh, we try to do them when when my time uh permits. Uh,
Speaker A
and we'll maybe get into uh more specific like some technicals or something or we can uh key in on some of these questions in in uh with more uh uh specifics. But we I want to thank you guys for coming today. It was uh it was
Speaker A
fun. It's always fun for me. I'm always learning even when I'm teaching and I know David feels the same way. And uh we'll we'll we'll see you soon. And uh I know a lot of you follow me on Twitter,
Speaker A
so uh see you there, too. Okay, take care, everyone. Bye-bye.
Topics:Mark MinerviniDavid Ryanstock tradingtriple-digit returnsmomentum tradinginvestment disciplinedrawdown managementconcentrated portfolioUS Investing ChampionshipMomentum Masters
