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How I Stopped Trying to Predict the Future and Improved My Investment Performance

This is a guest post by Jeremy McNeil, owner and blogger behind RoboticInvesting.com (subscription service is currently available free of charge).  In this article, he will detail his method of momentum investing. 

I am going to show you the exact investment process I have used to grow my retirement investment account to six-figures.  This strategy is not a secret.  It is not a black box strategy that you need millions (or even thousands) to use.

It is a strategy that many knowledgeable investors use to trade with the market rather than against it. Simply put, it looks for stocks in a solid long term uptrend.  But more on that a bit later.

Let me tell you how I got to this point because I am sure many of you do-it-yourself investors will be able to relate to the problems I am up against.

I am 40 years old and I am trying to grow my portfolio as fast as I possibly can so I can quit my job and live off of the income from that portfolio.  Based on my calculations I am going to need $2 million in investment assets to be able to generate the $80,000 per year (assuming a 4% withdrawal rate) my wife and I will need to retire and live a rich life.

To get there I need to add $1.2 million to my portfolio by the time I am 60 years old.  I could do that by saving $5,000 per month (20 years = 240 months X $5000 = $1.2m).  But as you’ll see in a second, that ain’t gonna happen right now!

The other way I can do that is work on making sure I get the best return I possibly can on my money.  In other words, making sure I am putting my existing portfolio to work properly, protecting my capital, and maximizing gains.

But there are a number of problems in my way.  Let me describe some of them to you; see if any of these relate to where you are with your investment portfolio.

Problem #1 (Big Expenses Coming)

I have two awesome kids.  They are also super expensive, and it is getting worse as they get older.  Never mind the “normal” stuff like clothes, food (my 14 year old son spends 80% of his day when he is at home with his butt sticking out of the fridge), sports (competitive cheerleading = money pit), and just life in general.  The big cost is going to be post-secondary education.

For my son, that is only four years away.

The average cost of  post-secondary education is $24,000 where I live – and that is just tuition.  Add books and living expenses and the number skyrockets.

Given that I have two kids, double that. Granted, mom and dad aren’t going to pay for it all.  They are going to need to work and come up with some of the money on their own, but my wife and I have decided to help them get a jump start on life so we are going to fund a good part of their school.

Based on my calculations, I am going to need approximately $80,000 to $100,000 to put them both through some sort of post secondary education.  This is going to have an impact on the amount of money I have available for retirement.

Problem #2 (I Can’t Possibly Save Enough)

I am fortunate enough to earn a decent salary.  However, much of that salary goes to paying for life.  Things I talked about before; clothes, food, sports.  After everything is paid for each month, there is not a lot of discretionary income left over to invest with.

I do manage to save approximately 15% of my income and invest that, but it is not going to be enough.  In fact, based on my income there is no way I am going to be able to save $5,000 per month.

I am not going to be able to simply “save” my way out of this problem, no matter how frugal we get.

Problem #3 (Mainstream Investing Fails)

I have been able to fight off the big mainstream investment brainwashing out there about the pros of investing in mutual funds.  That was easy (from the 2014 SPIVA U.S. Scorecard):

“Based on data as of Dec. 31, 2014, 86.44% of large-cap fund managers underperformed the benchmark over a one-year period. This figure is equally unfavorable when viewed over longer-term investment horizons. Over 5- and 10-year periods, respectively, 88.65% and 82.07% of large-cap managers failed to deliver incremental returns over the benchmark.”

The trouble is getting away from the “index investing is the be-all and end-all of investing methodologies”.  It is compelling: super diversified, low fees, and most importantly you were going to get exactly what the market was going to give you.  By going with index funds I was “assured” that I was going to get good returns.

However, with index funds, what no one told me was that you only get what the market gives you – no higher, no lower.  That can mean low returns AND there long periods when index investing doesn’t recover from big drops.

Low Returns

As I explained, I am not going to be able to “save” myself out of this.  I cannot put enough money into my account every month to save the required amount of money.  I need to rely on maximizing the growth of my portfolio through returns while also preserving capital.

That has not been too hard over the past 5-years. The 5-year annualized return of the S&P 500 has been 13.69%.  A $100,000 portfolio would have grown to $189,938.

That is spectacular given that the average stock inflation adjusted annualized rate of return is “only” between 6 and 7%.

However if we take a longer view the picture is not as positive.  Over the past 10-years the S&P 500 has returned 5.26%, which means that the same $100,000 would be worth $166,968.  That is a big difference and is below the average inflation adjusted return is somewhere between six and seven percent.

Although 5.26% is better than nothing (or a loss), I need more if I am going to achieve my retirement goals.

There have been people who have achieve returns greater than the market.  For example, Tranquility Trading has seen annual returns of 18.4% in 2014 and 20.9% in 2013.  Mulvaney Capital Management saw a 67.36% return in 2014. Those are the type of returns I need if I am going to be successful.  It can be done with the right tools.

Along with the risk of low returns with an index-only strategy, there is a second risk and that is the risk of index “suckage” (ok, not a technical term but it works!).

I want to reiterate that I still believe index funds should make up a portion of my portfolio. Diversification of strategies in a portfolio is important; going all in with one style is risky.  So I still do have index funds + my systematic investment style which I will get into.

Index “Suckage”

The other sub-problem I had with mainstream investing is the risk of long periods of index “suckage”.

Have a look at this chart of the Nasdaq:

chart1

What do you see?  What I see is a very long period of time for the Nasdaq to recover from the crash in February 2000.  Index investors who held through this had to wait until November 2014 to get back to even.

I have 15-20 years until I am going to want to retire (but hell I’ll do it earlier if I can!).  If I have to wait for 14 years for a recovery from an index that stays down that will destroy my chances of a good retirement.

Want another example?  Although it is not as extreme, the S&P 500 has had long periods of getting back to even.  Check out this chart which shows you what I mean:

chart2

Index investors who bought at the peaks have had to wait for years to get back to even.  I understand that most investors like us dollar cost average into investments.  However, with that strategy the time to recover from long draw downs and buying on the way down still takes years.

So, as a 40-year old do-it-yourself investor I was really worried about not being able to meet my financial goals because I risked periods of low returns AND long periods of down markets I sought out better ways of investing.

The problem was those “better “ ways of investing also didn’t work for me.  Day trading and swing trading seemed like the holy grail, but I failed.

Problem #4 (I Can’t Predict The Future)

I am a failed day trader and swing trader.  In fact, I suck at all kinds of discretionary trading.  A discretionary investor decides to buy investments based on subjective criteria. For example, they base their investment decisions on fundamentals like dividend growth or earnings per share. They may also based it off of chart patterns.

When it comes to picking stocks based on things like fundamental analysis or reading charts, I am terrible at it.  The root of the problem is that I really suck at predicting the future.

However, I believed that I would be different than everyone else who failed at day trading and swing trading; I believed I was smart enough to make it work.

I signed up for different day trading and swing trading sites to watch the gurus in action so that I could learn.  I read as much material as I could find.  I studied chart after chart and pattern after pattern to try to identify which stocks to play.

But I could never make it work.  I would either try to follow the trade announcements that were happening in the chatrooms, but my entries would always be too late to actually see a profit.  Even if I did manage to make a profit it was never enough money to move the needle.

Then I realized that following on-line gurus was silly.  In day trading, the entry is crucial and between the time it took the announcer to announce the trade too many seconds passed by and I missed the big move.  What about trying it myself?

I tried gaps, moving average crossovers, fibonacci retracements, cup with handles, etc. to try to move in and out of my own ideas.  Some worked.  Most didn’t and I was bleeding money.

As a family man with a mortgage, two kids, and a wife I couldn’t take the risk so I threw in the towel.

Day trading and swing trading didn’t work for me because at the end of the day, day trading and swing trading is super hard and still relies on the trend of the market to get it right.  Some people, like me, are just not cut out for it and will actually never be able to last long enough in the game to get good.

Plus I was not about to drop $2,000+ on trading DVDs that were supposed to teach me the “secrets” to day trading or swing trading.  Don’t forget that those online gurus can make a lot of money selling the dream of huge profits through day trading. I bet they earn more from DVDs that actual trading.

So what is a failed and dejected day trader supposed to do?  Go quietly back to their corner and build a portfolio of index funds and be content with just being average?  I think I already covered why that doesn’t always work.

But I still didn’t want to give up on the dream of being rich based off of my investments?

Continued research led me to what people call systematic investing or mechanical investing. These tools provide a way of increasing my returns to that I can retire and be sure to have enough to get my kids through school.

Use Facts to Select Stocks That Are Trending Higher, Not Predictions!

Systematic trading does not try to predict the future. Instead, it takes irrefutable facts that are happening with the markets and individual stocks and makes decisions based on those facts.

It is very different than the discretionary investment choice you may be used to.  With discretionary trading, the investors results relies on their skill when making investment decisions.  It relies on their interpretation of things like EPS growth and what that will do in the future, gross margins, and revenue growth.  It relies and is impacted hugely by human emotion.

Systematic trading on the other hand uses computer models and statistical analysis to decide what to invest in.  It bases its investment decision on the mathematical facts and determines the best course of action.

My style of systematic trading involves trading based on trends and momentum with clear buy and sell signals.  I am going to show you how I  get “systematic” with my investing and stop guessing which stocks to buy.  Instead, I let the market and some very specific, well tested, well researched, and proven methods to pick the top stocks to buy.

This is different than fundamental investing – fundamental investing is trying to predict the future based on ambiguous data (EPS, revenue growth, etc) that may or may not continue to exist.  It is buying on the hope that those fundamentals will continue in the future and drive the share prices higher.

Instead, I now read what the trend of the market and stocks are and make decisions based on that data rather than predicting where EPS is going to go for the company and deciding to buy based on “potential” future EPS growth.

The one “hard” piece of data that has been a strong predictor is the trend of the stocks.  A stock going up tends to continue going up.  A stock heading down, tends to continue going down.  Have a look at this chart for Electronic Arts Inc. (EA) and the up trend since 2014:

chart3

The process I use is all about finding stocks like this that are going up, buying when certain rules are met, and buying in a risk-managed systematic basis.  That will give you more success than buying an index fund on the premise that the market always goes up.  Yes, it always goes up, but we never know when, for how long,

There are always stocks that still go up when the market is down – that is the power of trends.  And you can find these trends by reacting to data and using systematic investing strategies to determine when to buy them.

This is going to help you take the emotion out of investing and generate buy and sell signals based on clear facts like is the market in a bull or bear market, has the stock been trending high for the past 90 days, and is it trending better than 499 of the other stocks in the S&P 500.

This process is going to let you ride these stocks as they are rising and get out when they are heading down, or the market is in the toilet.  Unlike index funds you are not going to simply wade along taking only what the market give you.  With systematic investing you are going to ride the waves up, and not invest when it is dropping.  Those two concepts combined will increase your returns AND protect your capital.

As a 30 to 55 year old investor, those are going to have huge benefits.

How to Buy Stocks that Move Higher – React to the Data

The key to building a return-producing portfolio is using tested and proven strategies that give you an edge.  These are not intended to just meet the market returns – anyone can do that – just go buy the index funds and be content that you will get what the market gives you up and down.

These systematic trend following strategies go for additional return by buying the best moving stocks in the past 90 days and riding the trend.

If you think that buying based on trend and momentum is something you want to implement in your portfolio you have a couple of options.

The first option is to identify an experienced practitioner in this area.  I have been investing based on a trend and momentum system for some time, and have an updated and thoroughly back tested system that I personally use and offer to other investors as a service.  Using AmiBroker and a subscription to a data feed provider that ensures I get accurate data to run my screens, I can be sure I am getting the stock picks I should be getting.  In addition, it takes a fraction of the time as the software can process thousands of stocks for trends and buying opportunities.  That is what I do and share with subscribers at my site and blog RoboticInvesting.com (currently free to join!)

The backtested results have been solid.  I have been able to generate 3.5 times the market returns in backtested results and have generated average backtested returns of 19% since 2005.  There is a lot more detail on the site, but that is the highlights.

The second option is to do it yourself.  This takes a lot more work, a lot more time, and you must be sure you are using accurate data.  Crappy data in = crappy data out.  This method can work but is not truly systematic as you need to manually search for the stocks and determine which 15 – 20 are the best options.

That said, the methodology to find potential stocks is similar.  Use a tool to identify stocks in an uptrend, determine how much of those stocks to buy based on position management, and then sell based on specific rules.  Let’s discuss how to do that.

Step 1: Determine a Market Direction Filter

Trading using a trend and momentum following system, especially one that is long only and based on equities, is WAY easier if you trade in the direction of the market. An easy way to do this is to set up a market direction filter that tells you when to buy and when not to buy.

I personally use a moving average on the S&P 500 as my indicator here.  If the S&P 500 is trading above its 200 day moving average then I buy stocks from the screen.  If it is below then I don’t add any new positions.

This does not mean I sell anything; I determine that later.  It only means that I am going to sit on the sidelines while the market doesn’t behave nicely.

Step 2: Identify Stocks in an Uptrend Using Finviz

This sounds easier than it is, but you want to seek out stocks that have been in a consistent uptrend you can do this in a couple of ways.

One way to search for stocks in an uptrend is to use software packages like TC2000 or AmiBroker.  However, if you don’t have access to these packages and you want to find trending stocks then Finviz is one nice free option.

To do that, go to the screener section of Finviz and setup the screener with the following options.  This will give you a starting point for stocks to continue looking at.

finviz

Ideally you will want to have a way to rank all of the stocks that come up.  Without being able to do that with software you can look for the stocks in the longest and most pronounced uptrends.

As a good rule of thumb, I would also suggest that you avoid stocks that have had any gap ups or downs in the past 90 days.  Stocks that have gapped have a lot of volatility and since this is a longer term strategy, that is not the volatility we are looking for.

Once you have done that you might come across examples like DHI. As of this writing, DHI actually comes up on my own strategy software.  Look for 15 – 20 stocks like this.

DHI

With that list of stocks, it is now time to calculate how much of each stock you are going to buy.

Step 3: Determine Position Size for Your Chosen Stocks

This step is even more important than the stocks you identify in Step 2.  Optimal position sizes can reduce your risk substantially.  Most retail investors usually take the amount of capital they have to deploy, determine how many stocks they want to buy, and then put an equal amount into those stocks.  That is not how professional investors do it.

Position sizing is the step in your trading strategy that tells you how much money to place into a given trade.  By doing this you are limiting the downside risk one stock can have on your portfolio.

There are many ways to manage positions sizing.  The one I personally us is the one I learned about from Andreas Clenow in his book “Stocks on the Move”.  In his strategy he uses a stock’s Average True Range (ATR) to determine how much to put into a stocks.  If you have not read his book, then I highly suggest you do so as it is an amazing education in trading stocks that have good upward movement.

ATR is a metric that tell you how much a stock moves in a given day.  It his calculated over a set period of time; usually 14 days but you can use whatever you want.  For example, if a stock has an ATR(14) of $0.99 that means that on an average day in the last 14 days the stock has moved $0.99.  For this example we are going to use the ATR(20) to give us the average range over the past 20 days.

The best place I have found to get the ATR(20) is on Stockcharts.com.  I add an indicator to the chart and can instantly see the ATR(20) for any stocks.  Here is what that looks like for DHI which has a 20 day ATR of 0.943.

atr

Here is the method in a nutshell.  The formula you are going to use to determine how much to put in a stock is as follows:

# of Shares =  Account Value * 0.001/ATR(20)

The 0.001, or 1.0%, is the amount of risk you are allocating to each position. The impact of each position on the portfolio will be 0.1%.  This is how you manage the risk in your portfolio.

So to determine how much you should put into each position you will take the amount of capital you have to invest in the strategy, multiply that by 0.001, and then divide by the 20 day ATR.  This will tell you exactly how many shares of that stock to buy.

You work your way down for each stock in your list, using the formula above, until you run out of cash in your portfolio.  You will be left with a portfolio of stocks, purchased in the right amount of stock considering how much that stock moves and how much you want each position to impact your portfolio.

Most investors don’t go this extra mile and pay the price for it.  Treat your trading like a business and put proper position sizing into your process and you will be better for it.

Step 4: Rebalance Portfolio Once Per Week

Once per week you need to go through Step 2 again to see which new stocks may be added to the list of stocks Finviz identifies as trending stocks.  You also need to check the current status of the stocks you purchased already.

When to Sell

If any of the stocks you currently hold have dropped below their 200 day moving average then sell.  These stocks are no longer trending so you should reallocate your money to better momentum stocks.

If any of the stocks have had a big gap up or down in the past week (like around 15%), then sell.  Gappers have shown huge volatility which means more risk so in the interest of capital preservation the recommendation is to sell if that happens.

Check Market Direction

Remember that you are not buying any stocks if the market is not trending too.  So, go back to Step 1 and determine the market direction.  If the S&P500 is above its 200 day moving average then the market is still trending up and a safer environment to open new positions.  If it is now below its 200 day moving average the market is not trending higher and not worth taking the risk of opening new positions.

Buy New Positions

If after that you have cash to invest, then look for those new stocks on your list and buy them based on the process in Step 3.

Summary

I don’t personally think the market is going to get any easier in the next few years.  In fact I believe we are in for some huge volatility.  However, I really have no idea and I am done trying to predict where the market is going.

I have huge costs coming up including sending my kids to school and financing a retirement for my wife and I.  To get there I need to invest in a way that protects my capital while gives me returns that are better than the market.

By using a process that systematically selects trending stocks and buys them based on an easy to use market timing method and most importantly position sizing principles, I have a way to protect my capital while giving me access to high probability setups.

As a supplement to a standard index investing approach, it can expose you to high probability setups that generate the excess returns you are looking for.

Jeremy McNeil is the trader responsible for Robotic Investing.  At the site he shares his process for selecting and investing in trend following and momentum based high probability setups.  The subscription service is 100% free of charge for a limited time.

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

About the author: This is a guest post. You can read more about the author in the biography above.

{ 26 comments… add one }
  • Returns Reaper October 19, 2015, 10:53 am

    As a failed day trader, you realized you can’t predict the future. That’s a good start. So you decided you _just_ need to find stocks that are going up and buy those?

    You claim that index investing sucks because you only get the market returns minus the small fees. But to do better than the index, you have to do better than the additional fees you’ll incur and you’ll have to find someone to trade with who thinks you’re making the wrong move. Most trades out there are made by professionals who have a lot of information and a lot of time to analyze that information. So do you think your strategy will really work over the long haul?

    It sounds like you’ve made the first step to realizing that index investing is the way to go, but you’re not quite there yet. It appears as though you believe it isn’t the way to go because it won’t provide the money you need/want. You could also choose to make up the shortfall with lottery tickets and/or trips to the casino.

    Hopefully you either a) get lucky; b) realize index investing is the way to go before losing too much money on active investment strategies; or c) figure out how to make money by selling your strategy to others.

    You seem very enthusiastic about this new approach you plan to take in investing. I’m just skeptical that you will be able to find someone to sell you the stocks that are “going up” and that you will find someone to buy them after they’ve had their run.

    • Robotic Investing October 20, 2015, 6:51 pm

      Thanks for the comment – I appreciate where you are coming from. On your last comment, I think I understand what you are saying, which is why I only use the S&P500 stocks. These are not illiquid stocks so there will always be a buyer.

  • SST October 19, 2015, 11:20 am

    Whew! That was one long advert! lol

    Sorry, I won’t be buying.

    Perhaps I could submit an adver…article on churning penny stocks, it worked for me back in the ’90s, it’s bound to work for you now!

    In closing, WTH, FT? The content on MDJ has turned sub-par ever since you hit your mark; I hope the momentum does not continue.

  • Steve Blaismith October 19, 2015, 11:38 am

    I can only agree with Returns Reaper and throw my weight behind RR’s comment.

    I wish you the best of luck but I’m honestly worried for you and anyone who adopts this strategy.

    It sounds like you have $800k and 20 years. Might I suggest you consider coming back to an index approach? On March 24, 1995 – 20 years ago – the S&P500 closed over 500 for the first time. Today the S&P500 sits over 2000. That’s a quadruple. Your $800k would have turned into $3.2M. But that’s not all! It also returned over 2% in dividends EVERY YEAR.

    There is no logical reason to take a chance on your new found strategy. The only person who would recommend such a strategy is someone that had a financial incentive in people adopting it – i.e. said owner of RoboticInvesting.com

    Perhaps my previous paragraph was not clear enough so I will spell this out. THIS ARTICLE IS AN ADVERTISEMENT AND AS SUCH, THE READER SHOULD BE HIGHLY SKEPTICAL OF THE MESSAGE. IF IT WORKED AS HE SAID HE WOULD BE RUNNING A HEDGE FUND AND MAKING MILLIONS OF DOLLARS. IT MOST LIKELY DOES NOT WORK SO HE’S HOPING TO SUCKER PEOPLE INTO SUBSCRIPTIONS. DON’T RISK YOUR FINANCIAL FUTURE ON SNAKE OIL.

    • Robotic Investing October 20, 2015, 6:53 pm

      Appreciate the concerns. Just keep in mind that this is not my whole portfolio. I talk a lot on my site about diversification and that this is not the only thing I use.

  • Boris October 19, 2015, 12:33 pm

    It’s called Trend Following. Look it up people. Many smart investors use this system of investing.
    After reading tons of books I recently switched to following these systems.

  • Sebastien Benoit October 19, 2015, 12:45 pm

    “[…]and you’ll have to find someone to trade with who thinks you’re making the wrong move.” <– bingo.

  • Dwilly October 19, 2015, 3:47 pm

    There is some truth to this. “Momentum” is indeed identified and generally accepted academically as one of the “factors” that contributes to stock performance. And there exists equally as much academic data to suggest that momentum systems not dissimilar to this would have worked in the past to deliver superior returns (in the long run) and superior risk-adjusted returns.

    However there is no free lunch. If it was supremely easy, everyone would do it. Yet there is little evidence of parties that have been able to implement a strategy like this over the long run. One might be portfolio turnover leading to high trading and tax costs, but one could in theory mitigate a lot of this with lower cost trading these days. The bigger issue is underperformance of the system in sideways or up markets. Momentum systems work not by improving returns, but by “getting you out” of once-in-a-decade or once per generation crashes. They actually tend to UNDERPERFORM in up markets or especially sideways markets (where the oscillation around, say, a 200DMA, just adds cost). The reality is that few investors have the psychological gumption to stick with it through those periods.

    I believe it CAN work. I wish you luck.

  • LifeInsuranceCanada.com October 20, 2015, 9:29 am

    “I believe it CAN work. I wish you luck.”

    Depends on what you mean by ‘it can work’.

    If you mean ‘beat the index in the long term’, then yes, it can work. The last time I looked at the number, 2.5% of investment strategies beat the index.

    The problem is/was, there’s no way to predict or pick that 2.5%. It’s effectively random.

    So it’s much more likely to NOT beat the index. To the tune of 97.5% likely.

    Should we take a 2.5% random chance it won’t beat the index? While having to risk a 97.5% chance that it won’t? Seems to me that just sitting in an index is the most likely way to end up with the most money.

  • SST October 20, 2015, 11:41 am

    re: “This is different than fundamental investing – fundamental investing is trying to predict the future based on ambiguous data (EPS, revenue growth, etc) that may or may not continue to exist.”

    As one of my favourite financial pros has said: “…the momentum of price, as chartists often use it, is merely a representation of a fundamental macro or micro trend (I often say pure chartists are just lazy fundamental investors!). When you can understand the monetary system, the macro and micro drivers of the system and a way to benefit from the way this is all intertwined, only then have you found a truly sustainable case of momentum.”

    Lazy fundamentalist, indeed.
    The author has admitted he wants to become rich via stocks but doesn’t have the time to put in the hard work.

    Seems like just another contrived, complex, and desperate short cut in hopes of grabbing that brass ring.

  • Dwilly October 20, 2015, 11:45 am

    @LifeInsuranceCanada.com: Agree totally. For the record I am a completely passive investor with no intent to change my strategy. I have also read considerably on momentum- and value-based strategies, and two things have become clear to me.

    1) The backtested data is absolutely, completely robust. IF you had implemented one of these systems, cost effectively, over the past several decades, you absolutely completely WOULD HAVE beaten a passive / Buy & Hold strategy. And…
    2) Basically nobody has been successful in actually achieving #1. Whether tripped up by cost, lack of time, lack of discipline, or whatever, there is virtually no record of someone actually implementing the system described here for 2-3 decades continuously, without deviation.

    So, I believe it *can* work, based on the theory. I also have to believe that the likelihood of that happening (surviving the traps above) is pretty darn low. So… good luck!

  • nobleea October 20, 2015, 12:44 pm

    If swing trading didn’t work for you, what’s to believe that extending out the hold period from a few days to longer will help? Did you do a post-mortem on why swing trading didn’t work?

  • Cold Truth October 20, 2015, 5:00 pm

    Another salesman trying to generate traffic to his website so he can switch to a paid subscription model once he hits critical mass.

    He might even believe 100% in his plan and this is just another way to make money on the side. However, sincerety doesn’t remove the conflict of interest.

    Either way, MDJ is the wrong audience for this type of sales pitch.

    FT probably included it because the information is is currently free at his website afterall, but I am a little disappointed. It *is* possible to write an informative article on momentum investing without the need for alterior motives or sales pitches.

    I would have insisted on a format that was less infomercial before publishing.

  • Steve October 20, 2015, 6:47 pm

    I think others have outlined the numerous shortfalls of this strategy. I stopped reading after I saw he was taking 90 days. Does this strategy work using 120 days? 30 days? This is essentially called data-mining bias. The author is setting himself up for yet another failure in his long but miserable career of investing.

    As others have pointed out, passive investing is the way to go. There are only four types of trading strategies that beat the market consistently: 1) insider information trading (illegal), 2) spoofing (also illegal), 3) HFT (not available for retail investors; profitability on decline anyway), 4) banks colluding on benchmark rates (not available for retail investors, illegal anyway), 5) some other winning strategy that you have never heard of, nor will you ever since revealing that strategy will lead to mass implementation and eliminate any arbitrage opportunity that was available.

    So, in short, you can keep trying for #5, but I will tell you right now it does not involve technical analysis. For everyone else more down to earth, stick with passive investing.

  • SST October 20, 2015, 9:29 pm

    @Jeremy — why do you have a disclaimer on your website with statements such as the following, “The content on RoboticInvesting.com is not to be interpreted as investment advice. Our website and our services are simply an expression of our opinions and should not be relied on for trading strategies…”, when it’s very obvious what you are attempting to do is push a trading strategy and investment advice.

    Is it because you don’t want to get sued when your subscribers lose money?

    This whole thing can be wrapped up in the first line of the disclaimer:
    “This website is for entertainment purposes only.”

    • Steve Blaismith October 21, 2015, 11:27 am

      At the risk of coming across a little callous, I think this post should be treated the same way – “…for entertainment purposes only”.

  • LifeInsuranceCanada.com October 21, 2015, 10:49 am

    @SST – That disclaimer is there because if they are handing out specific investment advice, then they have to get licensed with the gov’t. Lots of financial websites have a similiar disclaimer.

    • SST October 24, 2015, 7:20 pm

      @LIC — the disclaimer is there so they don’t get sued if you lose money implementing their “entertainment” advice. RBC, for example, Canada’s largest bank which is licensed to hand out “specific investment advice”, has a 15 page disclaimer for their online content and services alone.

      The licence is used to represent a required base-line knowledge of whatever products you are selling (e.g. mutual funds); the disclaimer is used to represent the near-zero control you have over those products in the market place (e.g. future returns…).

      The license has nothing to do with the disclaimer, it’s all about liability.

  • Justin October 24, 2015, 12:26 pm

    Cool article. Definitely interesting enough to read about. I like the idea but it is a little outside my comfort zone for investing. I’ve always had the impression that momentum investing, at its core, relies on herd mentality – something I’ve never been very good at predicting. This is something I’d like to try in a simulated environment before investing hard-earned cash.

    Thanks for the info, though. I will read up on some of the topics you mentioned throughout the article.

  • Tony La October 25, 2015, 11:18 am

    So basically the TLDR is; I can’t predict the future, instead use data to predict the future instead?

  • Johnny Index October 26, 2015, 11:19 pm

    I was only able to get thru 50% of the post, because I was too excited to scroll down and read SST’s comments!

  • Roger October 28, 2015, 10:06 am

    This is the worst scam article in the Million Dollar Journey website. “I can’t predict the future” but I can predict the upward trend. What a funny?

    Simply put your money into high quality dividend growth stocks, DRIP them, sit back and relax. You will reach your goal in 15 to 20 years.

  • Investerguy October 29, 2015, 8:49 pm

    In theory it could work, but as many posts have stated, it will likely fail. There has to be timely execution of trades, cost of trades, stop loss set and monitored throughout the day, delay in data, volatile market swings, investor fatigue, and a host of other factors that will prevent maximum returns.

    Real world execution is likely to fail. Back testing with ‘perfect’ trades will give inflated results.

    Thumbs down from me.

    Also, do not like the infomercial side to this posting …

  • Erick Brunet November 2, 2015, 12:45 pm

    The article is very useful. Thank you for sharing. Hope to hear more from you.

  • Peter November 3, 2015, 2:27 am

    I like that comment that the market only gives what it can when you go index investing. Day trading is extremely dangerous and as a 40 year old, there are no patterns, there is only betting on up or down stocks. It’s tough, even for the pros. I wish you luck tho.

  • Trevor Thompson November 3, 2015, 9:35 am

    So little of this makes sense. Even the opening paragraph! You need $1.2-million in the next 20 years??? Congrats! If you add NO MORE MONEY and earn just 4.6% annually, you’ve done it! That’ll give you the arbitrary $2-million. Of course, with inflation, that’s more like $1.2-million in today’s money, but you haven’t even allowed for CPP, OAS, or any other pension you may receive. Nevermind the 4% withdrawal rate. Sad to say MDJ has suffered a huge drop in quality.

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