Tools of the ‘Trade’ - How I Invest (2013 Edition)

The new year has arrived and with it comes another edition of Tools of the Trade. This is the third installment (see 2012, 2011).

In previous years I have focused primarily on my trading and investing, after all that is the title of the post and what we are all here for. However, 2012 changed things quite a bit.

Instead of trading, I am spending my time running our parent company,  Reink Media Group, which has grown to include not only StockTradingToGo.com, but also StockBrokers.com and most recently InvestingTeacher.com. The team of 1 has blossomed into a team of 7 (mostly rock star contractors or part time staff), and we will be hiring our 4th full time team member in the next few months.

One of the many lessons I have learned about trading over the last twelve years is to not trade unless you are 100% focused and dedicated to the game. So, despite many many tempting opportunities to trade throughout 2012 (confession - I did daytrade Facebook for 5 minutes on its IPO day for a quick $120ish profit after commissions), I sat primarily in cash, earning a mind blowing .0001% return.

I know I will get back into the market eventually, it is just a matter of when and to what capacity. You can only keep a passion on the sidelines for so long.

With Mark now at the reigns handling all the market recaps, you readers are in far better hands. 2013 is going to be our best yet.

2012 Blog Traffic

The past few years have been fairly consistent for StockTradingToGo for total traffic. Since Market Recaps have a shelf life of only 24 hours, there is no longer a consistent influx of content that drives strong organic (search) traffic.

Back in 2007, 2008, and 2009 however, stock education was all I wrote, which remains to this day a good portion of the search traffic. An article explaining tips for getting started is relevant today, next month, and 10 years from now, and thus receives consistent visitors from the likes of Google, Bing, etc.

The one noticeable difference comparing 2012 to previous years is the growth in direct visitors (people who type in the site url or click a bookmarked link to visit the site), and visitors from the feed (subscribers). Both numbers are up pretty significantly which is a great sign that new and current readers enjoy the content.

Including email subscribers, StockTradingToGo has over 22,000 subscribers, of which several thousand will "interact" (ie phyiscally open the email or view the latest post) each day.

2012 Blog Highlights

Bringing Mark on board has to be the #1 highlight of this year. After starting in August, he quickly earned your approval (and mine). Now, he does 100% of the Recaps.

Next to that, teaming up with iBuyPower to prove once and for all that you do not need to spend a fortune to build a high power, badass trading PC.

Finally, I'd say being quoted in Money Magazine in June was pretty cool. I was also interviewed for a Bloomberg piece discussing the pending Facebook IPO, however I was too cloudy (ie bearish) on my outlook of the stock, and my comments never made it to print. Oh well, atleast I was right. :)

Computer Setup

In October I did a really sweet deal with iBuyPower, working with one of their engineers to build the ultimate budget trading computer. I've always been one to build my own PCs, but I really wanted to show investors that spending $2,000 - $3,000 or more on a PC is 100% not necessary and often a rip off.

I recommend reading the full post for a complete breakdown with numerous photos alongside a video review. In the end, the $1,200 machine we built out performed $2,000+ "trading computers" found on the web with little effort.

PC Specs - Three ASUS 24" LED Monitors running off iBuyPower Professional Series P300 rig (this picture was prior to the new comp purchase) with an Intel Core i7-3770 Processor, 8 GB high performance gaming memory, 1 AMD Radeon HD 7770 video card, and a 120 GB ADATA S510 SSD Hard Drive.

I was so blown away by the new rig that I ended up building an almost exact replica for my home office in December. My Dad ended up replacing his home work computer with the same setup as well.

Brokers

Because of StockBrokers.com testing, I now have money stored among a dozen or so brokers. There are a lot of great online brokers out there, and finding the right one depends on your specific needs as a trader.

If you are in the market for a new broker, I welcome you to read my online broker guide here on the site, or better yet read the StockBrokers.com 2012 Broker Review I wrote last February. The 2013 Review is due out next month (late February 2013).

Investment Sites, Services & Subscriptions

Despite not trading, I still monitor the market, read research reports, etc.

The services & subscriptions below are a part of my daily routine. In full disclosure, some of these services are provided to us at no cost since we utilize the research in the Market Recaps from time to time. I was recommending the services when I was paying for them, and I still recommend them today.

  • ChartPattern.com - $99 per month - ChartPattern.com is home to Dan Zanger (Read my full Dan Zanger review) who is the world record holder for the largest portfolio return in one year. His claim to fame is turning $11,000 into $42 million during the late 90s. Dan sends out a nightly newsletter several times a week with technical analysis and personal notes. He also has a chat room for subscribers. Overall if you enjoy our easy to read charts, you'll really like Dan's newsletter.
  • Investors.com - $259 per year - I am a big Will O'Neil fan. I use Investors.com, MarketSmith, and my favorite stock book of all time is How to Make Money in Stocks. As far as Investors.com goes though, I like tracking the IBD 50, reading the featured articles of the day, and if time permits I do enjoy browsing through the latest issue of Investors Business Daily (IBD) web edition.
  • MarketSmith -  MarketSmith ($999 per year) + eSignal real-time quotes ($42.95 p/m) + Pattern Recognition add on ($14.95 p/m) - MarketSmith is outstanding charting software that makes performing basic technical analysis easy.
  • SentimenTrader - $25 per month - Through SentimenTrader.com, Jason provides daily market sentiment reports which are a good way to start any morning. He analyzes every trade indicator known to man, including seasonal trends and over 80 years of historical data, to produce a daily report on the market.
  • StockCharts.com - Basic package $14.95 p/m - StockCharts.com is the site we use to produce all the stock charts for the nightly market recaps here on StockTradingToGo. The primary reason we have the basic package is so we can have access to more than three years of chart data and save chart layouts. The free version is the exact same as any paid package less a handful of features.
  • FINVIZ Stock Screener - Free - FINVIZ's Stock Screener is the best stock screener available on the web. Once you get the hang of using it, you will bookmark and return in dedicated fashion.

Screening & Watch List

The majority of stocks that make it to my watch list are discovered within blog posts or on websites like investors.com. If I am screening, it is done with FINVIZ or through the MarketSmith screener (great because you can include IBD ratings criteria).

Overall my watch list total on MarketSmith fluctuates. Currently, there are 212 securities.

Investment Philosophy

My philosophy has not altered much from last year's post, so I am repeating, mostly verbatim, my comments from then.

I am a CANSLIM investor at heart, and have learned to respect both fundamental and technical analysis equally, leaving the fundamental research to the Will O'Neil (IBD) team. 

Success with CANSLIM revolves around going long when the market is moving up and buying the absolute best stocks (fundamentally and technically), adding to positions as they prove themselves correct. Buys come off breakouts from chart patterns like the Cup & Handle.

When I am investing, I always use stop losses and typically shoot for a profit to loss ratio of 1:3. This means I can be wrong three times in a row, have one winner, and still be profitable.

Allocation wise I run a concentrated portfolio. When the market is favorable I will have no problem investing 50% of my portfolio in one stock (buying in increments as it moves up in price and presents follow up buy points). If I go on a losing streak I try and cut back my initial position size until I get a winner. This prevents me from losing more money if I start making undisciplined decisions. Overall I rarely hold more than five positions at a time.

Looking at the market as a whole, I see it as a life long game. Every trade is another lesson to be learned and even though I have over a decade of "experience", I am still learning from each trade.

So that's that. I hope you and enjoyed and please feel free to share your own tools of the trade via comment below. I'd love to hear from you. Stay frosty (sharp) out there and I hope 2013 brings all of your portfolios great success.

Thanks for reading!

Comments

  1. Posted by Wayne Earnshaw on January 10, 2013 at 8:06 pm

    As a trader, do you believe it's possible for the majority of people to consistently outperform the market? i.e. compared to say passive buy and hold index fund investors? When I was working at Fannie Mae in IT we were exposed to a lot of interesting courses in MBS and the like. One former Wall St broker recommended "A Random Walk Down Wall Street" to me as a good read. The author explains quite well why technical analysis and fundamental analysis won't work in an efficient market (although are markets always efficient is also discussed of course).

    Whilst working at Warren Buffet's GEICO I noted all his 401k's are passive Vanguard funds with extremely low MER's like 0.15% even (except of course BRK-A if you wanted it). He too believes most people can't beat the market through stock picking.

  2. Posted by Mike on January 12, 2013 at 2:09 pm

    Once you know how to think correctly, which will cause your actions to be correct, then "yes" you can easily outperform the markets. "As a man thinketh, so is he". I have been trading my own account since 98, I will gladly show someone my " real acct" with " real trades" and quickly show that month after month, you can make money. Unfortunately, most traders - investors, start off completely backwards, just like I did. I had a great blessing, time and money. With time and money, I was able to withstand the pain of undoing my incorrect thinking patterns. I can show someone with the last 100, 200, 300 trades exactly how the market should be approached. The Bible states- " Prove all things, hold fast to that which is true". I live by this principle and many others like it. After I went back and broke apart thousands of real live trades that I made, losers and winners, I then was able to exactly see how to walk in step with the market. Now I know how to correctly approach the market. If you are interested seeing the real screen shots of real trades, just email me and ask. I hate that everyone uses the "hypothetical and not actually real trades" on all the sites around the web. Peace.

  3. Posted by Blain on January 14, 2013 at 7:44 pm

    I agree, just look at guys like Dan Zanger, it can be done. Very few successfully make a career out of it, but it happens.

    http://www.stocktradingtogo.com/dan-zanger-review-world-record-returns/

  4. Posted by Tawhidul Islam (@rm2334) on January 16, 2013 at 9:39 am

    Yes

  5. Posted by Benjamin on January 27, 2013 at 5:49 pm

    Tradingview.com is a very good site, too! I recommend it to everybody!

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