The secrets of successful stock trading Part 2: combining non correlated systems.
In this article I will show you how to combine 2 systems and make 22% per year
Malaga, Spain, October 2015
I am back from my business trips in South America and it is wonderful to be back home with the family! The last country that I visited was Peru and in my previous post I wrote to you a little bit about it already about its culinary delicious kitchen.
So, I did my successful business over there, enjoyed very much the interaction with the Peruvians and in Lima, the capital, I always stay a couple of nights extra, just because the food is so exceptional. Well this time, I picked a restaurant which was recommended to me by locals as being one of the best, and indeed it was!
If you are ever in Lima and you love a very special high class dinner, go to restaurant Tragaluz in the Hotel Belmond Miraflores park. Exceptional food and exceptional service. It is just an amazingly nice experience.
Now back to the title of this blog; the secrets of successful stock trading:
As you know, my definition of the holy grail of successful stock trading contains 3 parts:
- Non correlated systems traded simultaneously
- Perfect execution
In the previous post we covered the automation and its importance to have an automated system and I would like to repeat the benefits once again:
– Not relying on instinct but on a scientifically proven concept with predefines rules te enter and exit
– It takes the emotion and stress out of your trading. Your days of anxiety of what and when to buy are gone.
– When there is money on the line, it is very hard to be objective in discretionary trading. Emotions take over and irrationality causes you to have a bad judgement.
– No necessity to follow each news message and read all newspapers opinions etc.
– No need to go through analyst reports or analyzing all kind of financial ratios.
– You can do this in less than an hour a day and you can choose your time to trade between market close and next day open as you only need to put in your orders for the next day, before the open. Nothing more!
– No need to monitor the markets the whole day. The computer does that.
– Because of this liberty you can trade this wherever you are in the world.
– You only follow price action and your software measures when to buy or sell
This is what I teach my private clients.
So, let’s start with the second part, non-correlated systems traded simultaneously:
As you know we can define markets in 2 ways,
- Directional bull markets, bear markets, side ways markets
- Volatility volatile (lot’s of movement), normal and quiet
What happens is the following:
– If you only have a long strategy
- You will likely lose money in years like 2008, and often quite a lot!
- You will win when the markets go up
– When you only have short system
- You will likely lose money when the market goes up
- But you will win in financial crisis times à this is a great protection
– By combining and trading simultaneously a long and short system you have best of both worlds! You make consistently money and are protected in years like 2008 or for example last August.
To understand how a strategy like that works in the markets, it is first important to visually have an idea how our benchmark, the SP500 looks like:
So, as you see, you’d made money with a buy and hold strategy (about 5% per year) which just contains of buying the index (and the index beats a very large part of the financial advisors) but you had to stand a VERY nasty drop of losing close to 60% of your equity.
However if you combine a long system with a short system à Trading a bull market AND a bear market strategy simultaneously, THEN you get something that gives you the peace of mind and your way to provide you financial freedom.
See the comparison of the SP500 (benchmark) and our trading system which is a combination of long and short trading. This is test over the last 10 years;
This speaks for itself! You get a 22% per year return with only a 15% maximum drawdown and this year the system is up 21%!
So, with this system you turn 100.000 dollars close to 1.000.000 dollars in 10 years.
See the chart here:
Stay tuned as in my next blog post within a couple of days I will guide you step by step on how to do this and you will have a crystal clear idea of how this conceptually works and how to do it yourself.
Trading is NOT hard, neither do you need to sit behind the screen the whole day. I can do this in 15 minutes a day and THAT is freedom, that is the JOY I like!
My private mentoring clients have access to all this material and all rules revealed and they trade things like this themselves very successfully and some other far more sophisticated things that I trade myself and teach to them. If you are interested in getting some more information click the link below;
Trading Mastery School
PS: If you missed Lauren’s last article on the Secrets to Successful Stock Market Trading, you can read it here:
PPS – Q Wealth members can enjoy the benefits of two reports written by Laurens by logging in here:
If you are not yet a member, enrol now here!