Robinson, J. [Follow The Money]. (2017). The Complete Position Trading Course [Video File]. Retrieved from https://followthemoney.com/180-strategy-mastermind-group/
Learn Our Most Powerful Position Trading Strategy To-Date
[4:50] Fundamental analysis is to know what to buy. Technical analysis is to know when to buy.
[7:35] Got into 'options' as a way to recover from his bad trading habits
[10:50] Favorite income streams (out of his 19): Trading, Real Estate, Affiliate Marketing - in no particular order
[11:35] You don't have to trade just stocks. Can trade stocks, options, commodities, currencies, credit spreads, derivatives, etc. - doesn't matter what you trade because the charts and the trading strategies are the same across all of them
[13:20] William J. O'Neil - mentor and founder of Investment Daily started with $500. But need to temper expectations, you need a lot of money to make a livable income.
[15:00] Today, I focus on position trading stocks (in companies) and commodities (like gold or uranium)
[16:15] three ingredients of long-term trading success:
[1]: Zettelkasten method of note taking [2]: [[Patience and Long Suffering Study]]
[20:40] If you don't have discipline in the rest of your life, you'll have a hard time applying it to trading.
[24:20] The definition of patience: "The capacity to accept or tolerate delay, trouble or suffering without getting angry or upset." - Websters
[24:55] If you don't trust your rules, you change them until they become "time-tested"
[27:00] I'm not watching CNBC, or listening to market hype and opinion. I'm looking at charts. Watching Price. Watching Volume. Watching the overall trends.
[30:25] Three favorite online brokerages
[34:30] If you're starting on the low end of money, focus on options.
[36:00] The difference between swing and position trading:
[38:10] The amount of money you should put into each stock depends on how much money you have to trade:
Splitting smaller amounts across different stocks means more commissions, etc.
[42:15] When it comes to your trading account (not your finances as a whole), you don't need a ton of diversification. Your goal isn't to diversify, it's to make money. Catch the breakout with as much money as possible.
[43:15] Limit your total risk on any single trade to 1-2% of your overall trading account balance.
[45:00] That means you should make your stop loss order equal to 1-2%. Put all of your money into the trade (to catch that upside), but immediately put a stop loss order that will make sure you only lose that 1%.
So if you had $25,000 to trade, your stop loss order would be to only lose $250 to $500.
[47:20] I use stop limit orders to enter a stock. And stop loss orders to exit.
[53:40] Stop loss orders are typically about 8% lower than the buy price. This is calculated so that losing 8% of your shares only results in 1% loss of your total account. There's a calculator on the website.
[56:00] Which charting software should you use?
[59:55] Stop loss orders don't work well with options. This is true, we just place the amount we were going to lose as the premium.
[1:01:40] Once I've set a stop loss order, I'm never allowed to lower it (called averaging down). I'm only allowed to raise it.
[1:05:15] There are four stages in the market cycle:
[1:07:00] The four stages unfold in all time frames simultaneously.
[1:07:50] Stocks don't rise and fall by accident. Bears push it down, bulls push it up. When the chart isn't going up or down, then the bulls and bears are locked in an epic struggle.
[1:09:00] The stocks don't move based on news. The bulls/bears that heard that news made a decision to buy/sell. Be cognizant of the fact that these are people - other human beings - in this exchange.
[1:10:00] Stage 1 Characteristics
[1:12:00] Don't believe the old misnomer "buy low and sell high". This can work in commodities because the commodity doesn't ever go away. However, with a company, the stock is low for a reason and could mean the company will disappear and you'll lose it all.
[1:13:30] 99% of all super-star stocks being their uptrend above the 200-day moving average. Confirmed (high volume) uptrends always begin above the 200 DMA.
[1:14:30] Volume will begin to surge just as it transitions from Sate 1 to Stage 2. This is the best time to buy. We don't care about Stage 1 because you don't trade there. Just don't ever buy these, mmmmkay?
[1:19:00] "Buy strength, don't buy weakness."
[1:20:40] Stage 2 characteristics:
[1:21:10] The name of the "180 Trading Strategy" comes from the power of the 180 DMA
[1:21:58] You'll see the volume high when the stock goes up, but when it pulls back the volume will be lower. This is an indicator that the bulls are throwing more money than the bears.
[1:22:50] It's imperative that you don't enter a stock that hasn't yet broken above both the 180 and 200 DMAs. So, no Stage 1 and no Stage 2 before breaking above both 180 and 200.
[1:23:15] We also won't buy a stock unless it's 30% higher than its 52 week low.
[1:25:35] Be consistent with this trading strategy. "Buy right or don't buy at all."
[1:27:30] Stage 3 begins when the big money begins to sell, so there's another surge in volume. Mainstream press starts to talk about it because it's so high. So Big money is selling at the same time "dumb" money starts to buy - even though they've missed the uptrend.
[1:29:20] A good rule - sell anything that has higher than average volume that's below the 200 DMA. This means the sell-offs are great. It's at the end of its run and is going down now.
[1:31:10] Stage 4 Characteristics:
[1:32:10] Rich investors buy in stage 2, sell in stage 3. Rinse and repeat. Nothing to do with stage 1 or 4. Don't get married to the stocks, simply ride them.
[1:36:55] I don't like to cut my losses too early. Rather than selling it before it's hit the top, I'll put in a new stop loss order that's just below where I'm currently at and let it ride. I've choked my losses.
[1:38:10] I'm not a fan of trailing stop losses. Even though they're more automated, it's good to go in and adjust them manually. Especially when you're new.
[1:40:10] Favorite setups
Cup and Handle Setup - poularized by William J. O'Neil
[1:41:00] Inverse Head and Shoulders
[1:41:45] Triple Bottom
[1:42:15] Bullish ascending triangle
[1:45:00] What you need is a method to scan for stocks that meet the criteria you're looking for. Specifically, stocks that are piercing through the 180 EMA (exponential moving average) on 1.5x-4x normal volume.
[1:45:45] Here is an example chart to see what we're looking for.
[1:47:57] You'll apply three lines to your chart:
[1:51:00] We recommend using Profit Trakker and stockcharts.com in tandem.
Step 1 - Check the current long-term market trend of the broad market indices. "What stage are the broader markets in?" You mostly want to be trading in overall market uptrends.
Step 2 - Target and monitor the 180 EMA line with daily scans. "Watch for price to cross above the 180 EMA on 1.5x-4x normal volume." This tip comes from 20 years of back-testing that shows that 180 EMA is where the changes happen. Don't know, but suspect that big investment houses use the 180 EMA internally. All I can say for certainty is that when the chart goes through it on higher than normal volume, something always happens. Very high probability.
Step 3 Focus your trading on those stocks with the best fundamentals. "Look for strong (and surging) sales, earnings, and profit margins.
Step 4 Place a buy stop order for no more than half of your total desired shares just above the nearest resistance area once your stock pierces through 180 EMA on surging volume.
[1:57:40] So, to summarize:
You want to buy stocks that are the ones that are fundamentally doing well - profits, earnings, etc. This answers the "what" to buy question.
And "when" to buy? Right at the beginning of Stage 2.
[1:58:00] Step 5 Buy the rest of your desired shares ONLY if another volume surge sends share prices higher. If volume fails to confirm, sell immediately. "The smart money enters stocks in stages to mistaken trades. You should too!"
[1:58:20] Pyramiding When you enter a stock with 50% of your intended shares up front. Then when it rises 3% higher, put the rest in. This allows you to spread across a few other stocks until a fast riser proves it's going higher.
[2:07:00] 70-80% of volume is driven by big money. That's a very small part of the number of traders. // [[Pareto Principle]]
[2:09:00] The ADX Line (Average Directional Movement Index line) reveals the *strength on the trend, regardless of direction. When ADX line is above 20-25, it means the market is trending.
[2:10:15] The On-Balance Volume (OBV) indicator provides instant price/volume analysis. Trending up means bulls in controls. Trending down means bears in control.
[2:13:47] Here's the scan logic to look for 180 EMAs.
[type = stock]
and [today's close > today's ema(180,close)] and [today's close > today's ema(200,close)] and [yersterday's close <= yesterday's ema(180,close)]
and [today's volume >= yesterday's sma(90,volume)*1.5]
and [country is US]
and [exchange is not OTCMKT] and [exchange is not OTCBB]
and [Close >= 1] and [sma(90,volume) > 300,000]
[2:19:00] Fundamentals 101 - Add these as filters on finviz.com
[2:28:30] Some tips around fundamental analysis
[2:23:50] Filtering for these reduces your list of stocks to something very manageable.
[2:34:50] Good resources for fundamental analysis
[2:36:00] Don't get too caught up in the weeds of fundamentals. A basic understanding is good. Fundamentals are an analysis of the past - but stocks don't trade in the past, they trade on future expectations.
[2:36:50] Investor's Business Daily has the IBD 50 - a list of stocks with good fundamentals published weekly. A good place to start looking for good stocks. C-A-N-S-L-I-M method.
[2:40:40] Also, check followthemoney.com/highcaliber. It's the FTM equivalent of the IBD 50.
Criteria is: Price/Book ratio rank less than or equal to 20% excluding ADRs and OTC stocks
[2:51:40] Trade execution checklist
[2:53:30] Post-trade Checklist
[3:08:00] Recommended Books:
A company's **Book Value** is used in fundamental analysis of a stock. It's a standardized number that represents the total amount of assets the share...