In early 2006, I created “Market Notes” to update fellow traders on my views of the US stock market. I found it very helpful because it gave me the opportunity to organize my thoughts and prepare myself for trading. Thanks to Philip Pearlman (twitter: @ppearlman) and Howard Lindzon (twitter: @howardlindzon), they convinced me to turn my Notes into this investment blog. My intention is to provide keen market insight, strong stock ideas, and to hopefully pass on some of the lessons I’ve learned from 15 years of trading.
My Investment Philosophy:
The first thing you HAVE to do is define yourself! Are you a trader? Or an investor? I am a trader. I hold positions anywhere from 2-3 days to 2-3 months. I screen the market every night with proprietary screens I developed over the years. These screens are both technical and fundamental. They are based on the “Greatest Winning Stock” models and studies done by William O’Neil. Essentially, I start with sound fundamental companies and try to trade them at the proper time AND when the market is healthy. I believe the market is healthy 2-3 times a year, do your homework to identify those times, and trade them aggressively. The rest of the time, build cash and protect your profits. As Jesse Livermore says: “You should not be in the market all the time.”
Find a philosophy that fits your personality and mimic someone who has been successful at it. I don’t believe in re-inventing the wheel. In other words, if you are a long-term value investor, study Warren Buffett. I like O’Neil’s philosophy because it combines both stock trading and market timing, but it might not be for you.
Be ready to work at it! Remember, there is NO substitute for experience and stock trading involves hard work and emotional control. Gerald Loeb says: “Knowledge born from actual experience is the answer to why one profits…knowledge means information and the ability to interpret it marketwise.”
Study great traders. Three common words of advice from the best traders are: CUT YOUR LOSSES! You will begin to realize the importance of this advice when you study the top traders.