"Hit the Burners and Go"
My Stock Market Trading Strategy
[Yes, the trend is your friend!]
Trading Results for 2016
[Traded with real money]
Total number of trades = 25
14 trades made money (56%) and 11 trades lost money (44%)
Average profits = 1.05% per month
Maximum draw down on equity = 2.9%
Length of trades: 1-5 days (Average trade = 3.5 days)
All trades were made in a cash account - with no leverage (debt)
Note: Returns on the S&P 500 (with dividends) averaged 0.78% per month
in 2016 with a 10.3% maximum draw down on equity.
My trading strategy therefore beat the market averages in 2016
with less risk (72%), which is always the goal.
As an investor, the game never changes. Prices rise and prices fall -- and to achieve superior returns, you must decide upon the most profitable times to both enter and exit the markets.
Making capital grow and protecting it from loss is not easy. And this of course is the reason I have been publishing The Campbell Real Estate Timing Letter since 2002.
If investment success was merely what many people think it is -- namely that you buy an asset for income and simply hold it forever -- fortunes would be made quite easily by simply letting the returns compound themselves.
But that's not the case.
Whether you invest in real estate, stocks, beanie babies or whatever, spectacular booms are often followed by spectacular busts. That means when you buy -- and when you sell -- will always play a significant role in how well (or how poorly) you do with your investments.
I have therefore always felt that it is far better to let cash sit idle and wait for the
most profitable (and safe) times to invest than it is to just buy something in order to "stay invested" or to generate income or cash flow.
In fact I have found that it is this one simple point that usually separates those professionals that are wildly successful from the amateurs who are not.
Along with real estate, I have invested in stocks, options, futures, and physical gold and silver since 1966.
One of the things I've learned is that mistakes are a part of trading just as they are in life. The key is to survive your mistakes until you eventually learn how to start making money. That's why to a large degree, there is no such thing as failure — only learning lessons.
Of the many trading strategies I've employed over the years, the one strategy that has been the most consistently profitable for me is trading what are called "trend retracements."
This strategy is also known as "buying the dip" -- and I trade it today in my Roth IRA
with real money.
The Four Most Important Qualities
For Successful Investing/Trading
What have I learned during the last 50 years?
To do well in the markets -- and it doesn't matter one iota whether you invest in real estate or whether you trade short-term trend retracements in the stock market -- I have found that the following investment principles must be adhered to:
(1) You must be AGILE and FAST -- and embrace change;
(2) You must keep an OPEN MIND to ideas that are different
from your own;
(3) You must be UNBIASED about what is going to happen
in the future;
(4) EGO IS THE ENEMY -- once you let it into your investment
decisions, you're done for.
As you may or may not be aware, the same exact principles that allow you to prepare
and profit from the rise and fall of one asset class (such as stocks) also apply to other asset classes (such as real estate).
That's because markets are markets -- and whatever asset class you invest in, all price movements are driven by supply and demand forces and the swings in human emotions.
My Trading Strategy Also Requires
Discipline and Patience
To trade these trend retracements, I use three indicators -- so the strategy is fairly simple. First and foremost, I always trade with the trend - and never against it.
My trading system also requires that I be disciplined and very, very selective about when to take a position in the market -- and that I patiently watch and wait ... and do absolutely nothing until all three indicators are a "go."
Once I do enter the market, I am typically in a trade for 5 days or less. Based on a trade
I made in RSX in September 2016, the chart below illustrates my strategy.
As indicated by the slope of its 39-day moving average, the price of RSX was generally moving higher from July to August -- which meant the trend for RSX was up.
The "Set-Up" for the Trade
After RSX hit a short-term peak of $19.00 in the middle of August, it started to sell off --
and once it's price had "retraced" to a level that was overdone to the downside, this was my
signal to buy RSX.
In other words, once market sentiment of RSX investors had become too pessimistic relative to the prevailing trend (which was up), it was time to "buy fear" as Warren Buffett so famously tells investors to do.
This, therefore, is the principle I trade by. I look at every sell-off that occurs in a rising market as a potential opportunity that can work in my favor.
That's why I bought RSX at $18.24 -- and this was Day 1 of the trade.
On Day 2, the price of RSX fell slightly. But at the start of Day 3, RSX "hit the burners"
(as it often does) and did what jet pilots call a "quick climb" for the next two days.
This, therefore, is my objective: to make a fast 1-3% profit from a quick climb in prices -- and then sell and wait for another "set-up" like this to develop.
With my exit strategies in place, I sold RSX for $18.86 on Day 4 of the trade -- which represented a 3.2% profit in about a week.
While this specific trade was clearly profitable, this short-term trading strategy is by no means a magic formula that is always right and never wrong.
No, not even close.
A high % of the trades (60-65%) however, tend to be profitable. In addition, the maximum draw downs on equity tend to be low (less than 5%) and the strategy generates roughly twice as many profits as it does losses over a 6-12 month period of time.
Without in any way minimizing the hazards, that's why I trade this strategy.
If you want to be a superior investor, I've learned that it is imperative that you be patient and selective. You must size the markets up as they really are, calculate the risks, and make the right decisions at the right times.
This selective principle will serve you well in whatever you do in life -- and this is especially critical to those of us who seek to make money as investors.
And lastly, and as I have been telling readers for a long time, I want to reemphasize the point that markets are markets. So whether you choose to make short-term investments in the stock market or longer-term investments in real estate -- what I have discovered is that (1) being in sync with the trend, and (2) the timing of your entry and exit points is the safest and most profitable way to achieve superior returns.
At least that's the way I see it. How about you?
Comments and questions are always welcome, and you can send them to
My "Hit the Burners and Go" strategy is not for the novice investor and it is not for sale --
in case you wondered.
However here are four other investment strategies that I use -- and that you might want to consider using too:
1. "The Best Investment Strategy I've Seen in 30 Years"
2. "How to Make High Returns in Real Estate - Without Tenants and Toilets"
3. "Dare To Be Great Investment Strategy"