Again thanks Gareth. One of the key learning points for me is that this guy is prepared to allocate 35% of his portfolio to his high confidence trades - admittedly this is only 18% in reality as he's leveraged at 1.9%. Even so, it looks a bit risky for the average punter. But clearly it works for him. I'd guess he's using stop losses of 5-6%.

Thanks Gareth, another great summary.
Any ideas yet as to what's up next?

Thanks Gareth. As always the message is about good risk management and tailoring our personal strategies to our own areas of skill and risk tolerance.

I did see, thanks as always William.

100,000 courses wow! Yes it could be an interesting study/presentation.
Who is the traders name....

I must say, these videos are excellent - very well put together and a valuable resource for anybody navigating the markets - compliments!

Thanks gpacker - fascinating. I take it this approach would work with any stock, not just faangs? Do you review all your stocks weekly using their weekly MACD charts?

Hi William,

He quotes daily and weekly throughout so it is difficult to determine, my feeling is he has a bias to shorter term trading on the daily chart.
I think we are both aligned in that the weekly chart is better suited to our fundamental/technical approach.

Very useful. Thank you. Just the right amount of explanation for a near-beginner to understand the message. 

Thanks Gareth. Another useful offering. Great encouragement for ordinary retail equity investors. We don't have to be Minervini to make a living.

Hi dmjram,

Thanks.

For Gold and Bitcoin i do not use a formal volatility metric, as you suggest I look at prior price movements and backtesting to determine.

For all my stock selections which make up the bulk of my holdings at any one point, I predominatly use the weekly chart for entry/exit and the monthly for the longer term horizon. I find anything less than the weekly and It loses alignment to the fundamentals.


Thanks
Gareth

Hi Epitychia, i'm open to suggestion...

Thanks Gareth. Another masterpiece of simplicity. Perhaps one day a video that compares the main TA indicators? And possibly one on the use of leverage - or leveraged ETFs.

Hi Gareth

Again I enjoyed your Gold Strategy vid. I really appreciate the way you explain the 'smart' way you utilise the MACD, RSI, share price and the interpretations within the different temporal charts. I've really begun to benefit from practicing with the insights you have offered.

Many thanks, as always I look forward to the next offering.

Regards

Howard

Thanks Gareth. A useful reminder about the value of self-discipline and staying rational. Back testing is important. I shall spend the weekend working out a consistent strategy. As always, the challenge is knowing when to sell a winner, and when to buy back a loser.

Hi Gareth

Trend following vid, very good (as usual).

Your vids are always so stimulating and so often arrive at a point whereby I am pondering how to improve some aspect of my investing practices. 

For example, over past months I seem to have got better in my risk controls (long term average hovers below -7%, used to fluctuate -10 to -15%). But I am still weak on the reward side (failing to get a sustained +12%, let alone +20%), and my win/loss ratio is not yet being sustained at greater than 50%, thus I am impairing compounding.

More to learn obviously, but you vids really do help. Thank you.

Regards

Howard

Thanks Gareth. Fascinating.  Dual MACD is a pretty logical approach if one's using TA. I sometimes look at the monthly MACD as well, but I don't think that adds anything you can't see on the 200 DMA.

Hi Graham

Very interesting video and rule-based application of MACD, I like it.

Oh, and congratulations on your excellent results.

Regards

Howard

This backtesting was really useful. Thanks Gareth. It give us some objective data on which to choose our strategies. Simpler is usually better.

Thanks also for 37  high quality presentations over the last 12 months. Collectively they've totally transformed my trading strategy from pretty random to disciplined and methodical. One thing I'm currently exploring is the use of leverage (you mentioned that a lot of Dan Zanger's success was down to leverage). Are there any good books on the subject? Perhaps it's something you could explore in one of your future presentations?

Hi Clarea,

If you change the settings of your chart to show a weekly time frame you can use the moving averages the same way you would as normal.

Thanks
Gareth

In the book on which the above viseo is based, Stan Weinstein uses a weighted 30Wk MA based on the Mansfield calculation which weights the more recent weeks similar to a EMA although the formula is different. In the 2009  book 'The Heretics Of Finance', in which Stan Weinstein contributes, he refers to 50 and 150 day MA as near enough to 10 & 30 wk MA when using day charts. He also mentions that the 150 day MA is preferable to the more ubiquitous 200 Day MA as it gives an earlier signal but without a significant incidence of breakout failure.

Thanks William - I forgot to upload here, i'll do it now....

Another great video, thanks

Hi Clarea,

Treasury bonds from the US

I use weekly charts and look at a 20 week Moving Average, although the weekly MACD is my preferred inicator.

No the theory did not escape the drop in March it captured all the drop. But as I alluded to, my preference is not to use the concept in Isolation but as a foundation, as such, using the MACD cross down I was in cash position at the early stage of the plummet. Of course the flip side is you miss a portion of the recovery, but I prefer a safety first approach.

Thanks

Gareth

Thanks Gareth. The presentation was of high quality, as expected, but I'm less convinced by the book. Whilst I can see the benefit of a system that switches readily from under performing assets to better performing assets, I don't see the attraction of bonds at the low current yields. I suspect many of us will just go to cash when equities go bearish rather than bother with bonds. 

Hi Gareth

Another very good vid (Timing the market).

Many thanks.

Howard

Some useful tips in this one Gareth. Thanks. I like the idea of dollar averaging during the swing lows. It takes patience and discipline but it's doable. And it's good to be reminded of the PEG which I'd forgotten about for a while. I think it was Peter Lynch's favourite metric.

Thanks LaughingBuddha,

Glad you enjoyed it!

Thanks Gareth. Fascinating study. Dan Zanger is probably not someone I'd try to imitate. Far too stressful. He must have been using crazy amounts of leverage to get those results. Perhaps the key takeaway for the ordinary retail investor is the study of technical indicators. Zanger spent thousands of hours learning about them. Perhaps you could do a presentation on a book that covers technical indicators (something like Bulkowski's book on Candlesticks that you covered earlier in the series)?

Incidentally, you must have gathered enough material, by now, to write your own book on the traders you've covered. Glen Arnold wrote a superb book on the subject, Great Investors, but it's far from comprehensive and I think the publishing world could be ready for an update that focuses on trading rather than investing, something succinct and accessible like your Youtube presentations.

Many thanks Gareth. High quality presentation as one has come to expect. This one demonstrates the 'keep it simple' method. Buy when it rises above the 200 day MA and sell when it dips below. I think this applies particularly well to indices and large caps. His philosophy reminds me of Warren Buffett's: Rule one - don't lose money. Rule two - see rule one.'

Thanks Dmjram,

In the process of Common Stocks and Uncommon Profits.

Should be live by Thursday.

Thanks for your feedback Andy.

Agree, its the layman perspective he's good at. I'll add the other to my list. Thanks

Hi William... Forgot the stars!!! yes 5 for the UK audience.

Thanks for your feedback as always..

Hi Andy, yes, I have been away for a week but likely to complete the Pitbull book this week followed by spread betting thereafter. Thanks.

Hi wilkonz

Which animated book covers the Kelly criteron?

I have just read 'Excellent Investing' by Mark Simpson and he suggests a grid - high, medium and low risk (downside) on one access against high, medium and low return (upside) on the other and then fills the grid with starting % size of investment (10%,5%,2%).

I have been playing with this idea and also scoring my picks out of 10 on each of 8 risk areas

financial, management, commodity, product, regulatory, country, liquidity, correlation within portfolio

this gives a range of totals for risk which can be split into low, medium and high.

I'm finding it a useful exercise in making me think about the risks and avoid being over confident or too optimistic when assessing buys (behavioural biases I think many of us suffer from).

Its still work in progress and only time will tell if this improves my investing returns.

gpacker - fantastic work, much appreciated. I am working my way through your back catalogue. Many thanks  :-)

Regards

Iron

Hi Ed

Thanks so much for your feedback, your professional opinion really means a lot.... I'm flattered that you would consider showing one of the videos to your audience too !!

Regards
Gareth

That's great Gareth. Thanks. Looking forward to Kelly & Pitbull. I agree with Ed Croft - these reviews are great refreshers and I often revisit them. (And I've bought some of the books that I didn't already have so the authors (the living ones!) and publishers are also benefiting from your series.

Thanks Gareth. An interesting and highly professional review of a fairly ordinary book. I think we learned more about Sykes than about Penny Stocks - which are, for the most part, unrewarding investments but can on occasion produce spectacular profits. At some stage it would be good to see a review of a book on Spread Betting if you have time. Perhaps the one by Robbie Burns?

Very much appreciated Gareth. A succinct summary of a long and complex book, but you've captured the key points nicely. This is the book I recommend to all first time investors. Like you, I'd describe myself a hybrid investor but most of my 'serious' money is in tracker funds and large shares I plan to hold long term. I do a little trading and have learnt a lot from your reviews of Livermore, Minervini et al, but currently my tracker funds are outperforming may trades although I expect that to change over the next couple of years. Many thanks for yet another excellent review.

Hi Gareth. Another excellent summary and video. This was one of the first books about investing I ever read. I picked it out at random as I had no idea what investing really was. Many years later I still have so many of Malkiel's messages ringing in my head and recall with clarity how reading it all those years ago sent so many light bulbs off that I begun, slowly, to learn to invest. Some things in life are bifurcation points, switching your path onto another. Reading A random walk down wall street was one such for me. Thanks again for your vids, they are excellent. Regards Howard

Thanks Gareth. Another enjoyable presentation.

two others:

Brett N. Steenbarger writes extremely well.

His 'Psychology of Trading' will only make you improve if you accept your psycho/social limitations.

'Elliot Wave Principle'  Frost & Prechter is the standard primer on the method. Interesting but difficult. Deals with Golden Section & Fibonacci plus Ralph Nelson Elliott.

Battle investment survival

(Chapter 6)

The individual who does his own thinking must learn to question most mass movements of majority point of view, for they are usually wrong.

I am so convinced of the inevitability of loss when attempting to secure a safe income of small return, that I constantly suggest speculation rather than investment as the policy less apt to show a loss and more apt to show a profit.

An intelligent program aimed at doubling one’s money might at least succeed in retaining one’s capital.

(Chapter 12).What to buy – and when

...t popular sentiment should be bearish and the securities market well liquidated. Business conditions should be poor, or the general expectation should be that they will become poor.

The company selected should be thought by the investing public at large to be so weak that it sells at low prices and is given low ratings. It should be operating at a deficit, its earnings should be abnormally low, or if earnings are currently satisfactory, the popular expectation must be that they are headed downwards. The stock should be paying no dividends, or the dividend should be lower than normal, or the general opinion must lack faith in the continuance of a reasonable dividend. The price of the stock must reflect a majority view that conditions affecting the company are bad, or soon will be bad, or will continue bad. At the same time the buyer must hold an opinion contrary to these surface indications and his opinion must be back by sound judgement and access to reliable sources of information.

The importance of full consideration of popular sentiment, expectations and opinion – and their effect on the price of the security – cannot be overstressed. Major buying points often occur without a full scale actual business depression. At such times the fear of a depression exists.

It is important to stick to issues which in past times of bullish enthusiasm have had active markets and which can be expected to have active markets again. However at the time of purchase they must be low-rated and unpopular, with their prices down and discouragement about their prospects in general.

At long intervals even the highest grade shares become depressed, and then the opportunities are especially great. That happens only one or twice in a business lifetime. The objective is always to buy that which the majority thinks is speculative and sell it when the majority thinks the quality has reached investment grade. It is in this policy that both safety and profits exist. As price is the all important consideration, the type of corporation and its characteristics are of relatively minor consequence.

Except in cases of panic or near panic prices, the fact that a stock is widely held by investment trusts is not a good reason for buying, as such stocks are generally of the high-grade kind, difficult to buy cheap. Since the aim is rather to buy an issue which is unpopular, the hope is, on the contrary, that investment companies do not hold any and will buy it later at a higher price. The distinction of being a stock listed frequently in published institutional holdings simply means not only that the price is high rather than low, but also that there are a large number of sellers should the situation take a turn for the worse.

Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival. Market values change in a few months by amounts equivalent to many years of dividends or interest coupons. Therefore such changes in value are much more worthwhile seeking than is straight investment return.

The simple equation of weighting what you think are the possibilities for profit versus the risks for loss is really the soundest way to go about it.

(Chapter 13).Importance of correct timing

As soon as a security is purchased, the buyer loses the power to avoid a decision. It becomes necessary for him to decide whether to hold or to sell. As an inexorable consequence, the percentage of correct conclusions must be lowered. Therefore, intelligent investors expect to make a great many more errors in closing transactions than in opening them. When nothing but cash is held, no decision need be made at all unless conditions are completely satisfactory. Either a suitable opportunity may be present, so that a purchase can be sensibly made, or the pros and cons may be so balanced that nothing is done.

The worst that can happen if the latter decision is reached is that an opportunity will be missed through caution, which is an inconsequential misadventure. Other opportunities always come in due time, and nothing will be lost in final profits or peace of mind.

Another reason why selling at the right time is more difficult than buying is that the development of a frame of mind in which only real bargains are sought carries with it a tendency to lose confidence too early.(see chapter for further development).

(Chapter 13).When to sell

Perhaps the best way to describe when to sell is to review handling of a commitment from its beginning. Belief that a stock is in a buying range justifies a small initial purchase. If the stock declines, it should be sold at a small and quick loss. If it advances and the indications which supported the original purchase continue favorable, additional purchases can be made at prices which the buyer still considers abnormally low. Once the price has risen into estimated normal or overvaluation area, the amount held should be reduced steadily as quotations advance.

The best reason for selling a stock is because it stops going up, or worse, starts going down. Of course it is vastly more complicated than that. (p.81)

(Chapter 14)

The primary factor in securing market profits lies in sensing the general trend. Are we in a deflation or inflation period? If the former, I would hardly bother to analyze most equities.

It is more feasible to try to follow profitably a trend upwards or downwards than to attempt to determine the price level. No one knows when a share is « cheap » or « dear » in the sense of market bottoms and tops. Shares have a habit of sometimes seeming dear in the early stages of an advance, and later at far higher levels, new and unexpected developments often make them seem cheap again. There is no rule about it.

The most important single factor in shaping security markets is public psychology. (p.60)

Personal knowledge of what is ahead in the way of developments in the next six months to a year and due regard to market factors always count a great deal more than complicated analyses. The psychology which leads people to pay 40 times earnings under one set of circumstances and refuse to pay 10 times under another is such a powerful and vital price changing factor that it can overshadow actual earnings trends as an influence on stock prices.

The same considerations rule as between different stocks at the same time. Thus we may have a fashion in vending machines of photographic shares which will carry them much higher at a given time in relation to assets, earnings, dividends and future prospects than other groups. Later, when they are out of fashion, these yardsticks may actually figure out to greater advantage, but the public mind is on something else. Sometimes for years certain popular shares will be persistently overvalued by the public, which continues to pay an unreasonable sum in proportion to the theoretical valuation. Likewise, frequently, theoretic undervaluation will persist for years. It does not help one’s account to feel sure one is short theoretically overvalued stocks that are currently rising or long those theoretically undervalued but actually sinking in price.

One should bend every effort to determine what the tendencies of the public are, right or wrong, and profit from them.

99.99% of those who try to trade think they are right and the stock price is wrong.

Always write it down

Write down your reasons for making an investment-what you expect to make, what you expect to risk.

Writing things down before you do them can keep you out of trouble. It can bring you peace of mind after you have made your decision. It also gives you tangible material to evaluate your profits and losses.

Quantity does not make quality. There is invariably one reason why a particular transaction can be expected to show a profit.

Writing it down will help you find it. It will help you judge whether it is really as important as your first inclination suggests.

Of course, you will want to decide how much you can afford to lose. It ought to be substantially less than your hopes for profit.

All this will help you in the much more difficult decision: when to sell.

One of the greatest causes of loss is to open a commitment for a reason and then fail to close it when the reason proves invalid.

Capital is like a rabbit, it darts away at the first sign of danger.

It always will be the power to understand and the ability to act that turns information into profits. (p.49)

Cutting losses is the one rule that can be taught with the assurance that it is always the correct thing to do. As a matter of arithmetic it is a formula but as a matter of application it requires detachment from human frailties. People like to take profits and do not like to take losses. (p.57)

Buy Low, Sell High is wonderful idea for but can be expensive if applies as a generalization.

.

At some point stocks are genuinely ‘low’ or ‘high’. Remember they over-shoot their logical goals or levels and invariably become ‘undervalued’ or ‘overvalued’. (p.204)

There is no rule against buying stock back after selling it. It is much safer to buy and sell a stock a dozen times starting at 40 and ending at a 100 than just to buy and pay 40. If the stock starts to go down, you will not worry if you paid 40, but if you bought your last lot at 100, you will jump pretty quick. If you pyramid instead of averaging, you won’t get back in, or you won’t stay in for long if it happens to go into a real decline. The owner at 40 might very well average at 60 after seeing the stock at 100. (p.82)

In the consideration of market indications, the most important point is the time element. Outstanding strength or weakness can have precisely opposite meanings at different times in the market cycle. For example, consistent strength and volume in a particular issue, occuring after a long general decline, will usually turn out to be an extremely bullish indication on the individual stock in question. In addition, if later its leadership is gradually followed by other important shares, the signal for a turn in the whole market probably has been given.

On the other hand, after an extensive advance which finally spreads to issues neglected all through the bull market, belated individual strength and activity not only are likely to be short-lived but may actually suggest the end of the general recovery, especially if the early leaders begin to show no further response.

(Chapter 15)

If the market is getting stronger when the general expectation suggests it will get weaker gives an A1 buying suggestion to those not afraid to follow it.

(Chapter 16)

One is endeavoring to buy stocks that are hard to buy and easy to sell. (p.69)

Think more of the time something occurs rather than just of the occurrence itself; of comparing the action of one issue with others rather than just following an isolated move; of watching the effect of news on prices rather than the news; of looking into both supply and demand as against the usual practice of thinking about only one side of the market at a time. (p.70)

The most consistently reliable danger signal in a stock is a sharp advance and a complete retracement of the gain on great activity after a long series of advances in a market which one would ordinarily regard with suspicion anyhow.

If a stock goes back and forth in a trading range that is normal.

If it gets away for a straight gain, it should hold 50% to 99% of it.

There is rarely a second chance to get aboard once a stock is started and if it comes back and gives one a second chance, it is usually better to pass it up. That stock is no longer hard to buy. It might be easy to sell, as in early stages of breakouts a lot of public buying is done on the dips. A smart trader pyramids on new highs, the uninformed averages. There is something about new highs that makes them look unfamiliar and dangerous, but after it drops 20% looks safer. Most distribution is done on the way down. (p.73)

(Chapter 19)

Safety comes not from the selection of a slow mover or cheap issue, or worse, a group of such shares, but by concentration in the one outstanding, fast-trading leader that is jumping in the right direction. There is more safety and more profit in so timing one’s buying in the latter, that when one gets purchase advice the price is already higher than one paid.

One cannot afford to be wrong in such a fast-moving issue and much more watchful to get out quickly if the stock does not act as anticipated. Here is real safety and a chance to build a backlog of profit against future errors.

I generally favor issues selling at high prices per share. Frequently the highest per-share prices represent the lowest total valuation for a company when price is multiplied by shares outstanding and compared with total earning power and other figures. They are also more apt to be in the rapid-mover stage.

(Chapter 11) On Advisers

We get out of things what we put into them, and no more. There is a difference between the « free rider » and the sincere seeker of help who shows his desire to pay for help by faith in his adviser’s integrity, his courage to follow his judgement, and his loyalty when the inevitable mistakes occur.

It is in my opinion impossible to secure equally worthwhile opinions on pre-determined lists of individual securities. It is vital to know the superiority of volunteered opinions as compared to answers to queries. If one stops to think, it is one thing to guide someone to profit on one’s own ground. It is entirely another to have at hand worthwhile information or opinion on any and every security requested at any and every time.

IMPORTANT CHAPTERS:

6, 11, 12, 13, 16, 22, 53

"Not sure I agree with Jessie Livermore following Partridge but I have to go back to the text"

This is part of the relevant text I think:

"I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements—that is, not in reading the tape but insizing up the entire market and its trend. And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"

Livermore following Partridge was part of his transition from a shorter term bucket shop scalper to large scale operator I think. 

The size of his account no doubt played a part in this, he had to scale into positions over time to avoid moving the market and used probe trades to see how the stock/commodity responded to his buying/selling.

Many thanks Gareth. The link was very useful, and although the Turtles traded commodities, the principles can be made to work with equities - albeit with some tweaking and simplification. I liked the 4 stage entry into each winning trade. That made a lot of sense to me. Also I identified with the trap of selling too early to lock in a profit (I guess we've all been there - there's nothing worse than watching a large profit shrink into a small loss so one feels compelled to act preemptively). All the same, I shall continue to protect my 'zero position' when I'm 10% up on a trade. 

The article is worth a reread and I shall adjust my current rules accordingly. 

With regard to my question about why some Turtles did better than others, the answer is here: 

The Turtles with the best trading records consistently applied the entry rules. The Turtles with the worst records, and all those who were dropped from the program, failed to consistently enter positions when the rules indicated.

Many thanks again for all your hard work in producing this excellent series of book reviews.

Hi Gareth

Many thanks for the link and the PDF. I will digest.

Regards

Howard

Excellent as usual. Do you have any thoughts about how a commodity based system might have to be adapted, if at all, for shares?

Another great video Gareth you sure have a talent for this. Robbie Burns spread betting next would be awesome keep up the good work.

Andy

Thanks Gareth. A useful consolidation exercise. And something on spread betting soon please.

LG = Largest

Thanks Howard, much appreciated

sure its something i can look into, Thanks William.

Stan Weinstein's book Secrets of Profiting in Bull and Bear Markets has a chapter on shorting and applying his techniques to funds as well as stocks.

Thanks Gareth. Another useful addition to the library. The VCP concept is new to me so I will study further. Best wishes, William

Another useful tutorial Gareth. I've watched it a couple of times already and will revisit. Much of the territory is familiar. Although I'm wary of stocks with a low PE ratio (usually it's low for a very good reason that has little to do with value) Graham's principles are timeless. These days, I guess one would buy tracker funds rather than bonds for the 'safe' half of one's portfolio as interest rates/bond yields are so low. Your additional input from Tal Davidson regarding low beta over 3 years was particularly helpful. 

Many thanks. William

PS If there are any books that deal specifically with trading in the few months after a market crash it would be highly relevant to the current scenario. V shaped recoveries must present some great opportunities.

Thanks William. Glad you liked it.

Thanks Dmjram.

Just resources found from the internet.

Thanks Gareth. I've always been wary of reading too much into candlestick patterns but I'll pay more attention now. It seems sensible to focus on five easily memorised signs and add them to the list of entry point criteria and maybe squeeze an extra 1 or 2% out of each trade.

Thanks for letting me know dmjram - the link is here - https://youtu.be/Jh40P4t_-HU

Thanks Gareth. Nice and succinct. And relevant. Yesterday International Personal Finance (LON:IPF) gapped up >30% so I'll be following its price and volumes closely for the next few days.

Sorry wrong link - https://www.youtube.com/watch?v=m1djMTkGE3Q