When I began studying for my Chartered Market Technician (CMT) designation more than a decade ago, I recall being more enthusiastic about reading some of the books over others.
To me, the material on Gann time cycles and Fibonacci ratios were a bit too “voodoo.” Their analyses more closely resembled a fortune teller reading the lines on a client’s palms than a prudent method of making buy and sell decisions on the markets.
On the other hand, I was drawn to the more rigorous quantitative methods of analysis; techniques that really study the numbers that drive financial markets.
I was a biology and chemistry major in college. So, when I saw some of the books on my CMT required reading list … Evidence-Based Technical Analysis, (Applying the Scientific Method and Statistical Inference to Trading Signals) …
I couldn’t wait to dig in!
I got through that material more quickly than any of the other dozens of books in the curriculum.
But by the end of it … I was grossly disappointed by this book’s overall conclusion:
Which was: Most “trading signals” we’ve heard of don’t work.
At least, they don’t work well enough to stand up to the rigor of the scientific method and statistics tests of significance.
Bummer!
At the beginning of the book, I expected to learn a handful of “Holy Grail” investing strategies. Ones that the book would prove to me “work.”
By the end of the book, I came to realize just how difficult it is to find consistent, market-beating trading signals.
But not all was lost! I’m a stubborn dude, and after getting over that book’s sober conclusion, I was determined to discover simple ways to successfully trade the markets.
And, of course, I’d learned that if I wanted to achieve lasting success … I’d better come up with scientifically-rigorous quantitative models, rather than relying on my eyes to make judgments about “little wiggles on stock charts,” as skeptics often characterize the craft of technical analysis.
Fortunately, I can now say — more than a decade later — that I’ve been successful at that.
My Own Investing Systems
In 2012, I presented my bosses “back test” performance metrics of a momentum-based trading system I developed.
It was based on an age-old principle (sector rotation) and strategy (momentum), both of which I learned throughout the course of earning my CMT.
We ultimately launched that strategy in late 2012 … and have been running it live ever since. The service is called Home Run Profits … and it has helped thousands of everyday investors rack up dozens of double- and triple-digits profits over the years.
All I had in 2012 was a statistically-rigorous “back test” of my strategy. But now, almost 10 years later, we have hundreds of closed trades under our belts … proving it works quite well!
A few years later, in 2014 and 2015, I was doing research that ultimately led to my second trading system. This one was a simple market-timing model that aims to position for major moves on both sides of the market — essentially, “booms” and “busts.”
Again, I rigorously back tested that idea and system before saying a word to anyone about it. And when it passed those tests, we began offering the strategy to readers in late 2016. This service is called 10X Profits. And I’m proud to say this strategy back test equity curve has continued to be profitable and make new highs in the four years we’ve been running it.
Why Systems Work
Of course, these strategies aren’t perfect. They go through rough patches, with losing trades and drawdowns. But the thing is … no strategy is perfect. As I learned when I read Evidence-Based Technical Analysis, there’s no infallible “Holy Grail” strategy.
The best you can do as disciplined investors is to find a small handful of time-tested strategies … ones that have proven themselves in both academic research and live trading … and then stick with them for the long haul, through their ups and downs.
Still, this approach is far better than shooting from the hip … taking “tips” from random folks on internet message boards … or trying to visually “read the tea leaves” in stock charts.
If you think of yourself as an opportunistic “trader,” I definitely recommend having a look at my Home Run Profits service. It’s an easy-to-follow strategy aimed at routinely capturing profits of 100% or more in the options market.
Otherwise, if you’re more interested in making longer-term “investments” in my best high-conviction stock recommendations … then you should have a look at my Green Zone Fortunes service.
I, along with Editor Charles Sizemore, use my six-factor Green Zone stock rating model (a scientifically-rigorous “quant” model) to hand-pick these stocks each month. We provide guidance on the best time to buy and sell each pick as well. Check out my Millionaire Master Class here to learn more about this valuable research newsletter.
No matter what you do, I hope you’ll learn something that took me a while to figure out: there are no “shortcuts” to success in the stock market.
Trading a time-tested strategy with discipline is the closest thing you’ll find to a “Holy Grail.” It’s no magic bullet, but it’s your best chance at lasting success in the markets.
To good profits,
Adam O’Dell
Chief Investment Strategist
