Educative How To

Implementing 2 VQ Alerts in TradeStops

For the past few months, we’ve talked about the 2 Volatility Quotient (VQ) strategy in TradeStops. We originally presented this idea of Doubling up on your winners and have since followed up with several other articles. There are good discussions about the 2 VQ strategy here and here.

Many of our members want to know how to set up 2 VQ alerts in TradeStops so that they can easily implement this strategy. We don’t have a specific “2 VQ” alert, but it’s easy to get around that.

We’ll set up a separate portfolio for this and use a stock that has had a strong uptrend for the past year as our example.

Here’s a new Watch portfolio titled “2 VQ”.

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Next, we’ll add the stock Nvidia Corp. (NVDA) to the 2 VQ Portfolio. NVDA has had a strong run in the past year and is trading close to its high.

The Stock State Indicator (SSI) Entry date for NVDA was almost a year ago on 2/22/2016. The price at that time was $31.22. It is still trading in the SSI Green zone.

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The VQ at the time was 20.80%.

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Let’s assume that we decided to take a position using $1000 of risk. In other words, we were willing to risk $1000 of NVDA’s normal volatility on the trade.

We can use the Position Size calculator to determine how many shares we could have bought. When you go into the calculator, you can change the Entry Price so that you’ll be able to use the exact historical price. Then, set up the stop loss strategy as a trailing stop using the historical VQ.

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The calculator lets us know that we can buy 153 shares of NVDA.

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We can now add that position into our 2 VQ portfolio. We’re going to use an SSI alert for this position.

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As you most likely know, you can have more than one alert set up in TradeStops. Here is where we’re going to add the 2 VQ alert. It does require a little work on our part before we can enter this alert.

The VQ at the time of purchase was 20.80%. We’ll multiply this number by 2 and we come up with 41.6%. This is the alert we want to create for this position. In the “Positions and Alerts” tab, click on the “Alerts” tab and then we’ll add an alert.

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Click “Next” and then the Alert window opens up. We want to set up a “Price” alert that notifies us when NVDA has moved 41.6% above the entry price.

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This 2 VQ alert will then trigger at 41.6% above our entry price. That works out to $44.21. It’s that easy.

We can now repeat the process for the additional 2 VQ trades that have triggered. Here is a list of all of the 2 VQ purchases of NVDA.

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This is the current 2 VQ Portfolio in TradeStops. There are a total of 4 positions. Each of these positions has 2 alerts. The first alert is the SSI alert to let us know when the SSI Stop is triggered. The second alert is the 2 VQ Price alert that we originally created for each position.

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The triggered alerts are in purple. The alerts that are not triggered are in black. The triggered alerts are the first 2 VQ alerts that we set up. The 2 VQ alert for the last position of NVDA has not been triggered.

Setting up the 2 VQ alerts are easy. If you have some additional questions about this, please send us an email to support@tradestops.com and we’ll be glad to answer them.

To profitable trading,

Tom Meyer
Education Director, TradeStops

Equalizing Your Risk

For the last two weeks, we’ve focused on understanding the differences between stock risk (here) and portfolio risk (here). We even have a short video for you that explains these concepts (here).

Today we’re going to show you how to equalize the risk of the different stocks in your portfolio in a way that most likely further minimizes the overall risk of your portfolio.

Last week, we took a broadly diversified portfolio that has seven stocks in seven sectors.

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These seven stocks have a Portfolio Volatility Quotient (PVQ) of 12.04%.

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We added Franco-Nevada (FNV) to the portfolio. FNV has a Volatility Quotient (VQ) of 31.2% which is much higher than any of the other stocks in the portfolio.

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Because these stocks are so well-diversified, we were able to add a high-risk gold mining stock to the mix and actually lower the volatility of the entire portfolio. The new PVQ is now only 11.17%.

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Now, there’s one last thing for us to do. We want to be sure that the risk we’re taking in each stock is equalized. This means we are going to take the same amount of dollar risk in each stock. For our new TradeStops members, this is a new concept. We call this “right-sizing” our portfolio.

To accomplish this, we will invest more money in our low risk stocks and less money in our high risk stocks. For instance, we are going to take the same amount of risk in FNV as we take in GE.

And according to Dr. Smith, this is the single most important thing we can do to set up our portfolio for future success. Right-sizing our portfolio forces us to be disciplined and not put too much money in the stocks that have flashy stories. We’ve all probably had the experience of getting excited about a stock and putting a lot of money in it, only to see it move against us and causing large losses in our portfolios.

Here’s an example of what an individual investor could have done by following the TradeStops system and right-sizing their portfolio. The stocks that he owned were not changed.

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Let’s take our well-diversified portfolio and right-size it. We use the Risk Rebalancer to do this. All we do is choose our portfolio and then click on the “Rebalance” button.

By right-sizing our stocks, we have actually lowered the volatility of the portfolio again. Now, the PVQ is only 10.78%.

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What does this mean for our individual stocks? The right-sizing has equalized the risk in each stock. We are taking about 2% risk in each stock (that’s 2% of the portfolio value) which, in this case, equals about $970.

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The Risk Rebalancer makes it easy for us by letting us know the actions we need to take.

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Once you’ve rebalanced your portfolio, you probably don’t want to do so again for several months or more. We suggest that for most investors an annual rebalance is sufficient. Active investors might want to rebalance every six months.

The TradeStops tools are designed to give you the best opportunity to build and manage profitable investment portfolios. As Dr. Smith has said “Successful investing is about staying in the game”. And equalizing your risk is a giant step towards being a successful investor.

Always judging risk,

Tom Meyer
Education Director
TradeStops.com

Understanding the Difference Between Stock Risk and Portfolio Risk – Pt. 2

Last week, we looked at how to determine the risk you’re taking with individual stocks. This week, we’re going to follow up and look at how to determine overall portfolio risk.

Portfolio risk describes the overall risk that is inherent in your portfolio. This is determined by the individual stocks that you own and their correlation or lack of correlation.

When we use the term “correlation”, we’re referring to how each individual stock moves in relation to the other stocks in the portfolio. If you don’t understand what this term means now, you will by the end of this article.

TradeStops has three portfolio-level tools to help you manage your investments. These are the Asset Allocation tool, the Portfolio Volatility Quotient tool, and the Risk Rebalancer. We’ll be looking at the first two of these today.

We’ll also be looking at two different portfolios to show you how these tools work and to explain the correlation principles.

The first portfolio is a highly-diversified portfolio containing blue-chip stocks that are all a part of the DJIA. Here’s the makeup of this portfolio:

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This portfolio consists of low-risk and medium-risk stocks.

The second portfolio is highly concentrated in gold and silver mining stocks. These are all high-risk stocks.

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The first tool, the Asset Allocation tool, lets you x-ray your portfolio to see its diversification by both sector and industry. Here’s the sector breakdown of the first portfolio.

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There are seven stocks in the portfolio and each represents a different sector.

Now let’s look at the second portfolio.

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All nine of these stocks are in a single sector (Basic Materials).

This brings us to the Portfolio Volatility Quotient (PVQ). Similar to the Volatility Quotient that measures the risk of your individual stocks, the PVQ measures the risk of your entire portfolio based on the correlation between the individual stocks in your portfolio.

For instance, in the first portfolio, it’s unlikely that all of the stocks would move up or down together. An energy stock (CVX) is going to be affected by the price of oil. If oil is going down in price, CVX would likely be trending lower. But a technology stock (AAPL) is not going to be affected by the price of oil. AAPL could move higher and CVX could move lower. These stocks are not highly-correlated.

However, in the second portfolio, all of the stocks are gold miners. If the price of gold moves lower, most likely all of the stocks in this portfolio will move lower. These stocks are highly-correlated.

A portfolio of stocks that are not highly-correlated will usually have a PVQ that is relatively low. We can see that the PVQ of the first portfolio is only 12.04%. Of these 7 stocks, only KO has a VQ lower than 12.04%.

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This shows the power of having a highly diversified portfolio. The majority of the stocks are designated as “Medium Risk” which means they have a VQ of greater than 15%. Yet, the overall risk of the portfolio is in the “Low Risk” category. This is because the stocks are not highly-correlated.

Now, let’s check out the PVQ of the second portfolio.

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The stocks in the second portfolio are all considered to be “High Risk”. This means that the VQ of each stock is greater than 30%. And the portfolio reflects this high degree of correlation. The PVQ is 31.06% which is a high-risk portfolio. The portfolio is high-risk because all of the stocks have high risk and the stocks are highly-correlated.

Now, what happens if we were to put one of these high-risk stocks into the low-risk portfolio? One would think that putting a high-risk stock into the portfolio would cause the PVQ to increase. Let’s add FNV to the first portfolio.

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The VQ of FNV is much higher than the other stocks in the portfolio.

Let’s check out the Asset Allocation of the new portfolio.

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We now have eight stocks and eight sectors. The portfolio is actually better diversified now than it was previously.

Let’s go to the Portfolio Volatility tool and check out the new PVQ.

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We’ve actually lowered the PVQ from 12.04% to 11.31%. And we’ve done that by adding a stock that is considered to be “High Risk”.

This shows you the power of having stocks in your portfolio that are not highly-correlated. You can hold a few riskier stocks and still have a very conservative portfolio.

Be sure to check out the short video that we created, Stock Risk vs. Portfolio Risk and let us know if you have any questions.

Successful investors understand the risk of both their individual stocks and their overall portfolios.

To successful investing,

Tom Meyer
Education Director
TradeStops.com

Understanding the Difference Between Stock Risk and Portfolio Risk

One of the questions that comes to us often is about the difference between stock risk and portfolio risk. We’ll look at the differences and the effect they have on your investment success.

In this article, we’ll focus on stock risk and some of the comparisons you can make between different stocks. Next week, we’ll look at portfolio risk and how individual stocks work together within a portfolio.

Individual stock risk is fairly straightforward and easy to understand. Each stock or fund has its own risk profile.

The term we use to describe this risk is “Volatility Quotient”. When looking at the Volatility Quotient (VQ) of a stock or fund, we talk about the VQ% of a stock. It represents the normal volatility one can expect over a one year or longer timeframe.

The VQ can be used to understand the volatility of a single stock and it can be used to compare the volatility of different stocks. An example that we use often is comparing a stock with a low VQ% to a stock with a high VQ%.

You can easily find the VQ% of any stock by using the Stock Analyzer. Start by clicking the “Research” tab and then on the “Stock Analyzer” tab that opens from there.

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Type in a ticker, in this case JNJ (Johnson & Johnson), and the VQ pops right up.

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Of course, JNJ is a fairly conservative stock and has a low VQ. From an investor’s point of view, the VQ of 11.58% means that if you own JNJ, it can move against you by 11.58% and still be within its normal range of volatility. If it moves against you by more than this amount, then that is the signal to exit the position.

The gold mining stocks are more volatile and their higher VQs reflect this. Here’s a look at the volatility of ABX (Barrick Gold).

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The VQ of ABX is 41.99%. This means that if you own ABX, a move of almost 42% against you is to be considered normal.

What is the takeaway here? Let’s assume that you normally use a 25% trailing stop. If you invest in JNJ, then you’re letting the stock run more than double its normal volatility before it hits your stop. This could really damage your portfolio.

On the other hand, if you use a 25% trailing stop for ABX, you risk stopping out while the stock continues to trade within its normal range of volatility and negate the potential upside of stocks with high VQs. This could limit the potential profitability of your portfolio.

One of the important decisions for you as an individual investor is to determine how much risk you’re willing to take in any stock. If you make the decision that you’re not willing to take on too much risk, the VQ can help you with your investments.

Let’s assume that you have made the decision not to take on more than 20% risk in any one position. By knowing that the normal volatility of ABX is almost 42%, it’s easy to make the decision to not invest in ABX as its volatility is more than double what you’re willing to risk.

The Volatility Quotient is a dynamic number and it changes every week. The changes aren’t large, but you can track them on the same Stock Analyzer page. Over the course of time, though, the changes can be significant.

Here’s the 3-year chart for ABX. We’ve highlighted the historical VQ. In early 2014, the VQ was under 30%. Today, the VQ is almost 42%.

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Knowing the direction in volatility and if a stock is becoming more or less volatile can help you with your decision-making.

As the VQ% is adjusted each week, so is the underlying stop loss on each stock. For instance, if a stock becomes less volatile over time, then the stop loss for that stock will be adjusted upwards automatically. However, if a stock becomes more volatile, there will be no adjustment made to the stop loss.

Next week, we’ll focus on portfolio risk and look at the portfolio tools that are available on TradeStops. In the meantime, we have created a short video that discusses the difference between stock risk and portfolio risk. Here’s the link: Stock Risk vs. Portfolio Risk in TradeStops

If you have a question, please send it to support@tradestops.com and we’ll get you an answer quickly.

To understanding and controlling your risk,

Tom Meyer
Education Director, TradeStops

Setting Up Investment Portfolios

One of the most powerful features of TradeStops is the ability to synchronize your portfolios with a large number of online brokerage firms. This makes it easy to follow your investment portfolios on the TradeStops site.

But it’s also easy to set up and follow your investment portfolios even if you don’t synchronize them with your brokerage firm.

We’ll show you how to do both.

Whether you’re going to synchronize with an online brokerage firm or set up your portfolio manually, the first thing is to click on the “Create Portfolios” icon on the TradeStops home page.

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This opens up a new window and it’s here that we start for either synchronizing a portfolio or setting one up manually.

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For those wanting to synchronize their portfolio, our system works with the following brokerage firms:

TD Ameritrade
thinkorswim
optionsXpress
Fidelity
Fidelity (401k)
Vanguard
E*Trade
Charles Schwab
USAA
Wells Fargo
Capital One Investing
Merrill Edge
Scottrade
Morgan Stanley
T. Rowe Price (Investment)
Ameriprise Financial
Edward Jones

If you have one of these brokerage firms, you’ll then go to the next step which is to enter the User ID and Password of your brokerage account.

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Be sure that you are logged out of your brokerage firm account so that the bank-level encryption can exchange information with your brokerage firm.

It takes just a few minutes for this to occur and when it is finished, you’ll receive a notification that the account has been synchronized.

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Your portfolio is now set up in TradeStops showing the last four numbers as the identifying characteristic.

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For those wanting to set up a manual portfolio, you’ll start by clicking on the “Manual” tab in the new portfolio window. Then you’ll fill in the name of the portfolio, how much cash (or money market) you’ll be holding, and any notes about the portfolio.

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After you save the portfolio, this is how it will show up on your TradeStops portfolio page.

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You can then enter the positions in your portfolio by going to the “Positions and Alerts” tab, choosing the portfolio from the dropdown on the upper left, and then clicking on the green “Add Position” button.

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We created a short video to show you the steps on the TradeStops website itself. Here is the link for the video: Creating Investment Portfolios in TradeStops

For the questions you have, please check out our Help Center which is accessible from either of these two links.

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The most successful TradeStops members are those who take the time to use the Help Center. The answers to most of your questions are there and they’re easy to find. Just click and search.

We’ve made it simple for you to set up your portfolios. It will take a little time at the beginning if the TradeStops site is new to you, but will become easy as you get used to it.

And we’re here to help you along the way.

Tom Meyer
Education Director, TradeStops

Managing Your Alert Notifications in TradeStops

Alert notifications TradeStops is one of the key components to managing the positions in your portfolios is the ability to get alerts when your stocks hit certain targets. And TradeStops lets you set up an almost infinite number of alert types and helps you manage your alert notifications.

The default alert for individual positions is the Stock State Indicator Alert (SSI Alert). This alert is actually five alerts in one. It lets you know when a stock has triggered an SSI Entry signal, when a stock has triggered an SSI Stop signal, and three different alerts when the stock moves into the SSI Yellow Zone. These include whether the stock is up trending, sideways trending, or down trending.

This is the way it looks when the SSI Alert is being set up.

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If your accounts are synchronized, you might not even know that these alerts are set up automatically.

But sometimes, less is more. As the market’s climb has paused recently, we’re seeing some stocks trade in narrow ranges, and this can cause new alerts to be triggered several times a week as a stock moves above and then below a certain target price.

Here’s an example.

XLV is the ETF for the Health Care sector. Here is a 3-month chart of XLV.

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The stock was in the SSI Green Zone at the beginning of October. Since the middle of October, the stock has moved from the Green Zone into the Yellow Zone and back into the Green Zone. This stock movement has caused 11 SSI Alerts to be generated in the past several weeks.

Each of these alerts are then sent to your email address and your cell phone (if you have the cell option turned on). Multiply this by 50 or 100 stocks, and it’s easy to see how clogged up your inbox can get.

Many of our members have asked if there’s a way to be notified of just two things. They want to know when a stock has triggered an SSI Entry signal, and is moving from the Red Zone to the Green Zone. And they want to know when a stock has triggered an SSI Stop signal, and is moving from the Green Zone to the Red Zone.

This removes the clutter from your inboxes and only alerts you when actionable alerts have been triggered.

It’s easy to do. The first thing we’ll want to do is go to the Templates page. That is accessed in the upper right hand corner of the TradeStops site.

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After getting into the Templates page, it will most likely look like this:

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The Stock State Indicator is the default. Let’s set up a new default that will only trigger when a stock hits the SSI Entry signal or SSI Stop signal. Just click on the “Add Template” button and by default, it will open on the SSI Alert screen. Click on the “Show Additional Settings” link.

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Now, unclick the three boxes that show the SSI Yellow Zone. Then click on “Add Alert,” name the new template, check the “Make Default” button, and then “Save.”

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After clicking “Save,” this is how it now shows up in the Templates page.

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We’re now set up to make easy changes in our portfolios. Here’s a sample portfolio that contains the XLV example from above. This portfolio shows all of the Sector ETFs, and they all have the normal SSI Alerts. This is how it appears on the “Alerts” page.

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By clicking on the box in the upper left hand side, it will highlight all of the boxes. You can then delete all of the alerts. The TradeStops program will ask you if you want to do this.

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You’ve now removed all of the standard SSI Alerts. It’s really easy to add the new “Green Zone/Red Zone only” alert that we created earlier. Just go to the “Positions” tab and check the box at the upper left hand side again and click on “Add Alert.”

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The last thing you’ll do is click on the alert you want, and you’ll have set up this alert for every position.

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It’s that easy. Now you’ll only recieve the alerts that matter to you most.

If you have any questions, please contact our Customer Success team at your convenience.

Best wishes for the beginning of 2017 and your investing success.

Tom Meyer
Education Director

How to Invest Like a Pro in 2017

With only a few trading days left in 2016, many investors are making their resolutions for 2017.

“Next year I’ll follow the trading signals.” “In 2017, I’ll get rid of the stocks that are hurting my portfolios.” “I’ll set up my portfolios for the best return possible really soon.” And the big one, “Next year I’ll stop being so emotional with my stock picks.”

Why wait? There’s no better time than the present to look at your portfolio in the same way that a professional would and figure out how to invest like a pro in 2017!

Have any losses from 2016? Then consider “harvesting” those losses. Tax-loss harvesting means selling the stocks that are losing money. You can use these losses to offset the capital gains you’ve made in other stocks throughout the year. If your losses are more than your gains, you could potentially carry forward these losses into 2017 and beyond.

After a pro has finished harvesting his losses, the next thing he does is take a look at his portfolios and determine if he is invested too heavily in one or two sectors. The TradeStops Asset Allocation tool can help you with that. It gives you a quick overview as to how you’re invested from a sector or industry perspective.

This sample portfolio has over 34% invested in the consumer discretionary sector. Having that much money in a single sector could mean that it’s overweighted in your portfolio.

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The next thing that a professional would do is to see if there are any potential “time bombs” in his portfolio. These are stocks that could damage a portfolio by pulling down overall returns. These stocks should be considered for removal from the portfolio.

TradeStops Premium makes this task simple. Just go to the Risk Rebalancer and have all of the stocks that are in the SSI Red Zone removed from the portfolio. The Rebalancer will reallocate the funds from these potentially destructive stocks into those that are better-positioned to move higher.

Here’s a sample portfolio that has 11 positions, and 3 of those are in the SSI Red Zone.

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We can remove the stocks that are in the Red and reallocate the funds into the stronger stocks.

And we’ll take the exact same dollar risk per position. This is how a pro is able to stay in trades for a longer period of time and maximize the potential gains.

This is what the same portfolio looks like after removing the red and right-sizing the remaining positions.

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In this example, there is $1422 of risk in each stock. That means you can own 321 shares of GE but only 34 shares of NFLX.

If the only thing you did this year was to rebalance your portfolio so that you’re right-sizing your positions and taking the same amount of dollar risk in every trade, the long-term results could be outstanding.

Here’s an example of one investor who went from a loss of $100,000 to a gain of almost $60,000 just by right-sizing his portfolio.

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I’ve heard predictions for 2017 that run the gamut from new all-time highs at the end of the year to portfolio-crushing bear markets. I don’t know if either of these will be correct or if somewhere in the middle is the more likely outcome.

I do know that by managing your portfolio like a pro using the TradeStops tools, you’ll give yourself the biggest opportunity to succeed profitably in the years to come.

Here’s to profitable New Year’s resolutions,

Tom Meyer,
Education Director, TradeStops

The DPZ Domino’s Pizza Trade – Slice by Slice

Last week, Dr. Smith wrote How to make a killing in pizza. He discussed a trade in Domino’s Pizza (DPZ) using the tools and research that have been introduced this year in TradeStops.

Today we’re going to slice that trade and show you the step-by-step process he used to make this happen.

The chart shows that DPZ hit a low in 2008 below $4 a share. It triggered an SSI Entry signal in early 2010 at just under $10 a share and has been moving higher ever since. (Note that the chart uses a log-scaled “y” axis … each gridline is a 100% gain.)

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This is a great example of the power of investing with momentum and “unlimiting” your gains by staying invested for as long as the stock continues moving higher.

Another important element in the success of investing in DPZ is the concept of “doubling-up on the way up.” This means adding to the position every time the stock moves 2 Volatility Quotients higher (for instance, if a stock trades for $100 and the VQ is 10%, then the stock must rise 2 x 10%, or 20%, before adding to the position).

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Another element that made this trade so compelling was the pent-up momentum in the stock after crashing in 2008. The Volatility Quotient spiked throughout 2008 from the 20% level to above 40% and plateaued there until 2011 when it began moving lower. Our research has shown that these types of moves can act as fuel to propel a stock higher over a multi-year period of time.

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We determined that at each entry point along the way, we were going to buy $250 of risk. In other words, we wanted to take $250 of risk in each purchase of DPZ. How did we figure out what the investment should be?

The Position Size Calculator makes it easy. Here are the parameters we want to use to determine the amount of stock to buy. For the initial purchase of DPZ in 2010, the price of the stock was $9.73, and the Volatility Quotient for DPZ was 43.13%. This is how we set it up in the Position Size Calculator.

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Why did we use a Trailing Stop of 43.13%? Because that was the VQ for DPZ at the time that the SSI Entry signal was triggered in 2010.

Now let’s calculate this and see how many shares we could buy.

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The analysis shows us that we could invest $574 and buy 59 shares of DPZ for our $250 of risk.

You can do the same analysis for the other six purchases of DPZ. Remember, you’re only going to take $250 of risk in each position.

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And here are the results through December 15th of buying just one time when the SSI Entry signal was first triggered vs. buying at the Entry signal and then each time that DPZ moved 2 VQs higher.

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And here are the results through December 15th of buying just one time when the SSI Entry signal was first triggered vs. buying at the Entry signal and then each time that DPZ moved 2 VQs higher.

This chart shows the results of each purchase.

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We’ll be giving you more examples of this type of trading strategy in the future.

Nobody knows how long a stock can continue to move higher. And at some time the run will end. But in the meantime, we need to find ways to make as much profit as possible as our “once-in-a-lifetime” stocks climb higher.

And TradeStops will be here to help you Make More and Risk Less.

Best wishes from all of us at TradeStops for a healthy, happy, and prosperous 2017.

Tom Meyer
TradeStops, Member Services

Know the Right Amount of Risk

Last week, TradeStops introduced its last major upgrade of 2016. Our development team upgraded the TradeStops Position Size Calculator to make it more user-friendly and to give you more information at a glance.

The Position Size calculator now lets you determine either how much risk you’re taking in a position based on your total investment or how much you should invest in a position based on the amount of risk you’re willing to take.

Let’s take a look.

The Position Size Calculator is in the same place as it was before. Just click on the “Research” tab and then on the “Position Size” tab. Here’s what the screen looks like.

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(Click on image to enlarge.)
Now let’s look at each section. For this example, we’ll use Facebook (FB). FB triggered an SSI Entry signal in April, 2014 and has been moving higher all this time, more than doubling in price. The most recent high on the stock was in October and the stock has moved a little lower in the past two months. It’s still a long way from its SSI Stop price of $103.70.

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In the top section of the Position Size calculator, we’ll enter the symbol FB. The Entry Price box will automatically be filled in with the previous day’s closing price.

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If we want to enter a different price, we can go in and change it manually. If we want to look at an option or if we want to consider a short position, all we have to do is click those boxes.

The middle section allows us to look at FB from two perspectives. First, let’s look at how many shares of FB we can buy if we know how much money we are willing to risk. Let’s assume that we are taking $1500 of risk in each stock. So, we’ll click on the “Risk” box, then we’ll select the “Custom” box, and we’ll enter $1500.

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We’ll come back to the “Invest” box in a moment.

Now, let’s look at the bottom section. The Position Size calculator lets us look at different stops based the SSI Stop price, the VQ of the underlying stock, a percentage trailing stop of your choosing, or a set stop price. We’re going to look at the SSI Stop price. To do that, we just check the SSI box.

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Then we press the “Calculate” button.

The analysis tells us that if we are willing to take $1500 of risk in FB, we can buy $10,610 of FB stock or 88 shares.

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(Click on image to enlarge.)
Now, let’s go back and change the entry on the middle section. If we know how much we want to invest, the Position Size calculator will let us know how much risk we’re taking in that investment.

In this case, we want to invest $15,000 in FB. How much risk will we be taking?

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Now, when we press the “Calculate” button, we can see that if we were to invest $15,000 into FB, we’ll be taking $3329 of risk.

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(Click on image to enlarge.)
It’s that simple! We recommend that you take a few minutes to try this out and familiarize yourself with these new capabilities. The Position Size calculator can help you know exactly the right amount of money to invest in any new position, whether it’s a risky stock or a conservative stock.

Best wishes for a healthy, happy, and prosperous New Year with TradeStops.

Tom Meyer
Member Services

Manual Portfolios Made Easy

TradeStops makes it easy to manage your portfolios. Some of you are able to synchronize your portfolios, but many of you have to manually enter your trades. This article will help you understand the process and get a head start.

To create a manual portfolio, just click on the “Portfolios” tab at the top of any page. You can also click on the “Create Portfolios” circle on the “Welcome” page.

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This will open the “Add Portfolio” window. Be sure to click on the “Manual” tab to get started. For this example, we’ll create an Investment Portfolio and title it “THM Portfolio.”

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What’s the difference between an “Investment” portfolio and a “Watch” portfolio? In the way that they work…nothing. They both are updated at the same times and send you the same alerts. We created these two designations to help you separate actual investment portfolios from portfolios of stocks and funds you’re watching, but don’t actually own. We recommend that you organize your portfolios this way so that your actual investments are in “Investment” portfolios and the stocks that you’re watching are in “Watch” portfolios. This will be important when you use the Risk Rebalancer and want to get a good overview of all of your portfolios combined.

The only investment information that we’ll add at this time is the amount of cash that’s in the portfolio. In this case, we’ll start with $1000.00. Here’s what this looks like after we save the portfolio.

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Now that we’ve created the THM Portfolio, let’s add our stocks to it. That’s easy to do as well. Find the THM Portfolio under the “Portfolio” tab, and click on it. Then, click on the green “Add Position” button.

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We’ll add the first stock here. We bought JP Morgan Chase (JPM) in 2015. It’s important that the date and the entry price are correct, not only so you can see your profit or loss, but also so TradeStops can keep track of your recieved dividends. This is an important part of the TradeStops service.

But the most important part of TradeStops is that we give you the ability to manage the positions in your portfolios. The last data point that we enter is the type of alert for each stock that we enter.

The Stock State Indicator alert is our most advanced alert as it actually acts as five alerts in one. This will tell you when your stock has triggered an SSI Entry signal and is in the Green Zone, when it has triggered an SSI Stop signal and is in the Red Zone, as well as moves into the Yellow Zone. There is more information in the Help Center about the different types of Alerts that are available.

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The first few stocks might take a minute or two each to enter, but after that, it should be very easy. Our guess is that you can enter twenty positions in your portfolio in less than 20 minutes.

And this is what it looks like after we’re finished entering our positions.

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We recommend that you practice creating Manual portfolios. As you become proficient, you’ll see that you can set up many Manual portfolios, each of which allows you to easily track dozens of stocks. Each portfolio can follow a different sector, industry, or investment newsletter. The choice is yours.

Tom Meyer
Member Services