Tom Meyer: My name is Tom Meyer, and I’m pleased to be joined today by Naresh Vissa, our Director of Special Events. Good afternoon, Naresh.
Naresh Vissa: Hey, Tom. Happy summer.
Tom: We are very excited to have welcomed thousands of new TradeStops members in the past week. This has created a backlog with our Customer Success Team. We’ve received literally thousands of emails and calls, and we wanted to let everyone know that we’re working our way through them, and we appreciate your patience.
Hopefully, today’s presentation will answer many of your questions and help you on your way to using the TradeStops site effectively and easily. TradeStops is the one tool that can help you become a more successful investor from the very first time you log in.
Dr. Smith and his team have spent years analyzing the risks of individual stocks and portfolios ‑‑ yes, they are different ‑‑ and our TradeStops members are the beneficiaries of this research.
Today, we’ll take you through the basics of getting started with TradeStops and introduce you to the website and terminology.
These are going to be the 10 steps to getting started with TradeStops. The very first step is, you’re going to log in, you’re going to set up notifications and alerts. In doing this, you can set the parameters for how you want TradeStops to notify you, and you’ll be able to customize the TradeStops website to make it easier for you to use.
What we are going to do is after each step, we’re going to go onto the website itself. Here we are. Here’s the TradeStops’ website, the home page. We can just go ahead and log in. I’ve got this set up so that we can log in automatically for two weeks, and this is the home page on TradeStops.
The very first thing that you should look at when you use TradeStops is this help center button right here at the upper right, right next to your name. Click on that, and an entire new window opens up. Now, this is the getting started with TradeStops help center, and pretty much, 90 to 95 percent of your TradeStops questions can be answered here.
We’ll start with the getting started tab. Where do I begin? How do we add portfolios and positions? We’ll go over those today. What are Trailing Stops? What is a Volatility Quotient, Stock State Indicators, and so forth? We have a number of Dr. Smith’s investment articles within easy reach. We’ll show you how to get those as well later.
The tabs at the top are organized the same way that the tabs are organized at the top of the TradeStops’ website, positions and alerts, portfolios, research, etc. If you click on the stock analyzer it will show you how to use the stock analyzer and what else is involved with that. We’ll look at that along the way as well.
The help center is the very first thing for you to look at, and it should be able to answer the vast majority of questions you have about TradeStops. Now let’s go ahead and change the settings and get them set up the way we want them to. Click on the lifetime. If you’re a premium member, click on that, and let’s click on settings.
Now, there are a number of different ways to be notified. For instance, here’s my email address. If you want to change your email address, you do have to call that in, but otherwise, all of your information, your address information is there.
Let’s go down to the subscription page, it shows you which subscription you have, and the alerts, and portfolios that you have, the site page. Now, this is when you log in, where you’re going to go. I want to go to the welcome page.
When I go to positions and alerts the last positions and alerts that I actually looked at, but on research I want to change this, and go directly to the stock analyzer, so I click on save. Just that easy, it’s been made.
Now let’s look at the notification, because this is how you get your alerts, when they trigger with the TradeStops system. Here’s your primary email address. You can add another email address if you wish. If you want to receive text notifications as well, you put in your cell phone number and your carrier. This is something that’s really cool.
When do you want to be notified? As a good number of our folks around the Eastern Time zone, let’s say I don’t want to be notified before eight in the morning. I don’t want to be notified after nine at night. You can just go ahead and make the changes on the slider, click save, and it’s all done for you.
Next, we look at the positions. You can set up your portfolio currency. The majority of our members will be working in US dollars, but we do have the ability to use Canadian dollars, the British pound, the Euro, or the Aussie dollar. If you have a commission per trade, you can add that in.
Now, on closed positions do you want to know when a new entry signal has been hit? The answer is yes. Just go ahead and click on the slider button. You want to transfer your tags and notes on positions.
If you sell a position and you have fractional shares like something from a DRIP program, do you want to close those fractional shares? Do you want to know all of the countries that are available? Click save, and now we’re all set to go on our positions. This is the fun one. For the alerts, what kind of alerts are we going to deal with? How are you going to be notified?
How many times are you going to be notified? Do we want to create alerts for stocks? Yes. Now, what kind of alert? We have a couple of different types of alerts that are set up as our defaults on this alerts tab. Most all of us are going to have the stock‑state indicator. I recommend that you leave it there for the time being, as you’re getting used to the website.
Do you want to create alerts for options? We don’t have VQ or SSI alerts for options, only trailing stops. You can choose one of these defaults, but you can customize it later. How many times in a row do you want to be notified? I just prefer to be notified once, but some people like to be notified several times. Once I’ve received an alert, do I want to remove the alert? Yes.
Again, you can change this or not change this. That’s up to you. Do you want to know when a stock goes ex‑dividend? I sure do. When the VQ changes on a weekly basis, do you want to be notified? I like that. If you have a new high profit in a stock that you’ve owned, do you want to be notified of that? Very simple to do. Do you want the stocks to be adjusted for dividends and spinoffs?
Our default is yes, and we do have information about this in the help center that can explain this in more detail. I’ll go ahead and save that. Tags are set up if you have any way that you want to tag stocks. Whether it be by newsletter, sector, or industry, or whatever it might be, you should be able to do that under the tags.
That’s how we go about logging in for the very first time on TradeStops. This is before we set up portfolios, before we set up any positions or any additional alerts. That’s the first thing that we do. Now let’s go to the second step. We’re going to be setting up investment portfolios. We’re going to show you how to synchronize with your brokerage firm.
We’re going to show you how to create a manual portfolio. For this presentation, I have done a couple of things in advance to make it easier for us to look at some things. Let’s go back to the website. Click on portfolios. Right now, I want to add a portfolio. If you don’t have any portfolios set up, this page will be totally blank. You’ll click on this green box.
I have an old account that’s a dead account at TD Ameritrade. Let’s go ahead and bring that over. I just type in my credentials, the password. Click log in. We are using bank‑level encryption when we’re going in and getting this set up. This is also only an information portal. There are no trades that can be made through this.
There’s no way you can transfer funds or securities between accounts. We at TradeStops do not hold onto this information. Even Dr. Smith doesn’t have it. He has no way to get this information from our provider. You’re as secure as secure can be. Some of you have two different types of passwords that you have to go through. That will show up.
Right now, TradeStops is importing the portfolio from TD Ameritrade. Let’s close this window, and we will be notified when this is been…There we go. The portfolio has been imported successfully. I click on view portfolios. This bottom one here, 9097, was the old account that has now been synchronized. That’s how you synchronize a portfolio.
I have an investment portfolio that I did set up called Blue‑Chip Stock. In this are a number of stocks. This was set up a while ago. I forgot to add one position. I’m going to show you how to add a position in this really easily.
I click on “Add Position,” and the position that I had was a position in Walmart. My entry date was in April of 2016. We go back. Miss for 130 shares. We’ll keep this SSI indicator and we’ll close. If we wanted to add more we could add more, but we’ll save it and close. You can see here’s the position now for Walmart.
One other thing that we can do if we go back to the portfolios tab, here’s how we create a manual portfolio. We click on Add Portfolio, Add Manually. I’m just going to name this Tom’s Stocks. We can choose between investment or watch. I want this to be an investment portfolio for now. We’re not going to put any cash and just for notes we’ll put Tom’s 401(K).
Now you can see that this has been setup and if we want to add the positions we would go back and do the same thing as we did when adding the position to Walmart, just click on the Add Position. That’s our second step on getting started with TradeStops.
Let’s go to step number three and that’s to setup watch portfolios. I love watch portfolios, Naresh. There’s so much that you can do with the watch portfolios. This is a way that I keep track of what’s going on in different types of markets. Now watch portfolios operate in the exact same way as synchronized portfolios.
The only difference is you have to enter the information yourself. Not a big deal. This is an incredibly powerful way to manage potential new investments. You’ll see here when we go to portfolios. I went ahead and for this presentation setup several watch portfolios. The first one that I’d like for us to look at is Sector ETFs.
I like following all the different sectors, Naresh, because it gives me an idea, more of a breakdown, more of an x‑ray as to what is going on with the different sectors of the market. Now we know that the S&P 500 has had a nice bull run for a long time, but is everything following along with that?
We’ll get to these SSI indicators in a bit. You’ll notice that all except two of them are green. XLRE, which is real estate is a relatively new Sector ETF, and it does not have two years’ worth of trading history. Consequently, there is no SSI available.
Let’s take a look at XLE. This is the energy sector. The energy sector, it’s been in the yellow zone. It looks like it has a little bit of a down trend. We can click in XLE itself, and you can see that the high was made in December, and we’ve been moving lower ever since. Now we’re still away from the stop.
Our stop price on this is 62.94, and we closed yesterday at 65.44. We’re still a couple of bucks away from hitting the stop, but it’s not performing nearly as well as the S&P 500.
Naresh: Tom, really quickly Tom. What we just saw that was in the yellow zone. Can you tell us what yellow means? It’s not green. It’s not red.
Tom: I’m going to tell you to hold on for just a moment. We’re going to go over some of that a little more in depth in the next slide or two. What I want you to see so we saw XLE itself. Now I created watch portfolios of the top 10 holdings from each of these Sector ETFs. I can click on XLE and these are the top 10 holdings.
Take a look at this. You’ve got two of them that are in the red, two in the green, and six of them that are in the yellow. Suffice it to say that this is not the way that the S&P 500 looks. This is telling you that the energy stocks are diverging and this is a way for an investor to be able to look at the different sectors. Let’s go back to our portfolio page and take a look at XLK.
Now we know that the technology stocks have been performing really well. These are the top holdings in the XLK Technology Sector ETF, Apple, Cisco, Facebook etc. You can see that almost all of these are in the green. Now let’s do one more thing here, Naresh, before we go along. Let’s add one more portfolio.
I know we have a lot of people that like to follow gold stocks. I’m going to call this Gold Stocks. We’re going to make this a watch only. I’m only going to add three positions. We’ll save this. We’ll click on Gold Stocks. Now there are no positions. Let’s go ahead and add Gold Corp. We’ll just use yesterday’s closing prices.
For this example, the number of shares isn’t all that important. We’ll add Franco‑Nevada, and we’ll add one more. We’ll add Silver Wheaton, which actually just changed its name recently to Wheaton Precious Metals. Now I’ve got a way that I can set this up with more if I’d like to be able to watch individual gold stocks and see what their stock state indicators are.
That’s the way that we’re going to setup watch portfolios. They’re so powerful. I recommend that everybody who’s listening setup your own watch portfolios. You can change them around. Watch portfolios are a great way to get used to the TradeStops website, and the tools in setting up with various alerts and so forth.
Now let’s go to step number four. How do we manage the portfolio information? Within TradeStops we can create custom views that best suit your investment needs and you can decide what information and how the information you want to see is displayed.
Let’s go back and let’s go back to that original blue‑chip stock portfolio. Now when we talk about changing the way that you see this, so right now this setup is our default view. We’re with the latest close number of shares, the gain per share with the dividend, the percentage gain, the value, the entry date and so forth.
I want to change it to a different view. You click on the Add View, and look at all the different things that you’re able to do with this. I want the entry date, definitely. I want the entry price. I don’t care to know if I’m long or short, because I’m going to be long only in this.
I’d like to know, of course, the number of shares. I’d like to know the value of the shares. I’d like to know the gain with the dividend, but not the percentage. I want the latest close. Watch how we’re going to do this.
We’re going to actually be able to adjust the columns here. The first thing I want, I want to see shares. Then the next thing, I want to see what my cost basis is, or here, I want to go what the entry price is. I want to see what the entry date is. I’ve got the gain per share, the value.
We can also add a number of things. We can add some fundamentals if we wanted to. We can add, if we wanted to know the maximum profitable close, the days and SSI state, and so forth. I’m going to call this, “Tom’s View.” We’ll save this. Here we go. We’ve got all this information that’s available.
If I want to go back to the default view, I just click on that. I’m back to the default TradeStops view. I would recommend that for people who trade options, you set up a particular view. For people that trade stocks for income, you might want to set up a particular view, and so forth. That’s a way that you can customize TradeStops for the way that you want.
Naresh, we are going to go into the bit where we’re talking about not only managing positions, but we want people to understand what the volatility quotient is, and what the stock state indicator tools are, how to use the research tools to analyze current and potential investments.
What is the volatility quotient? Dr. Smith created the volatility quotient to tell you how volatile a stock is. In other words, how much room you can give a stock in order to not get stopped out too early. The volatility quotient looks at the last three years of price history and tells you what is the normal volatility of a stock going back one year in time.
The lower the VQ, the more stable the movement of that stock. High VQ percentages indicate the stock is more volatile and its market moves over time. Let’s take a look at some current VQs so we can judge volatility.
The SMP 500 is 10.5 percent. Gold has dropped over the last year. Gold is actually 11.6 percent. Naresh, did you ever think you’d see when Gold was less volatile than Johnson & Johnson?
Naresh: I don’t think, no. Not in my lifetime.
Tom: Johnson & Johnson is a little more volatile, 11.9 percent. Still very conservative in the scheme of things. Apple at 17.3 percent. Silver, slightly higher at 17.5 percent. Tesla, 29.3 percent. Twitter, 35 percent, and a company called Northern Dynasty Minerals, NAK is the ticker symbol, 76.8 percent.
That’s the normal volatility. If you buy NAK and you put a 25 percent trailing stop on it, you’re probably going to get stopped out at a loss, but the stock is still within its normal range of volatility. Same thing with Twitter.
Naresh: Quick question that maybe a lot people would be interested in. The SMP has a VQ of 10.5 percent. Where does that stand historically for the SMP? Would that be considered more volatile or would that be considered…
Tom: No, very low. This is very low volatility…
Naresh: …very low compared to the historicals.
Tom: That’s a great question. Dr. Smith has written a lot about that. We’ll show people where they can access a number of his past editorials just a little bit later in this presentation.
That brings us to the stock state indicators. What is the SSI? The stock state indicators are very simple, green, yellow and red indicator, that uses the volatility quotient to determine the current state of any stock, or fund, or index.
We like to use the SSI as a roadmap. Where is the stock right now and in which direction is it headed? Then we look at SSI alerts. What stock price has been hit that has caused a change in the condition of the stock?
We have actually five different stock state indicators. We have stock state indicator in the green. Sometimes we’ll call it the green zone. When the stock moves from red to green, it will have done so because it triggered the SSI entry.
After a stock has been in the green zone and it moves down a little bit more than 50 percent towards its stop but it has not stopped out yet, it is in the yellow zone. We like to tell people if the yellow zone, if the stock is still in an uptrend, if it’s sideways trending, or if it’s in a downtrend.
Lastly, when a stock has violated its normal volatility according to the volatility quotient, then the stock will hit our SSI stop indicator and we’ll be in the red zone.
What is the difference between VQ stops and SSI stops? This is something that we get a question all the time. A VQ stop is the volatility quotient from the date of purchase or the date that you actually set up the stop. An SSI stops is a volatility quotient stop, but it’s from the most recent high price.
If we’re looking at a stock today, Naresh, that ABC stock that’s trading at $90 a share. Let’s stay the stop price is $80 but the high was $100, our SSI stop would be from based on the volatility from 100 down to 80. That’d be a 20 percent.
That would be based on the most recent high. If we use the volatility quotient and we’re at 90, then that 20 percent would be $18 below that. A VQ stop would be $72. The SSI stop and the VQ stop can be the same if you bought a long time ago, and a new near‑term high has been hit. The VQ stop and the SSI stop will be absolutely the same.
Let’s go ahead and look at how you can see the volatility quotient on every stock. Click on “Research,” work the stock analyzer. We’re going to take a look at a few stocks right now. Let’s start by looking at Apple. We want to look at it long. This is the way that you can see the setup. There’s our ticker symbol.
Tom: It’s the SSI is on the green zone, our volatility quotient is 17.31 percent. You can see what happened over the latest year. We had an entry signal in August of 2016. The most recent high was May 12th, so three weeks ago. You can go back and look at Apple three years. You can go back and look at Apple five years, even 10 years. Our default is one year.
We give different analysis here. This is a great example. The stop price is 129.38 using the SSI. But, if we were to use the volatility quotient based on yesterday’s close, our stop price would be 127.32. If we used a 25 percent trailing stop, 114.57 would be the stop.
We cannot make recommendations to anyone. We are not advisors. You are individual investors and you’re able to set your own stops and your own risk parameters, but 17.31 percent is normal volatility going back one year for Apple.
It can move against you 17 percent, and still be considered in an uptrend. But, that uptrend would be broken if it moved against you by 18 percent, or 19, or 20 percent. This is a rhetorical question, why would you want to put a trailing stop of 25 percent on that?
Let’s go ahead and look at another ticker. Let’s look at Berkshire Hathaway. Rather than look at the A shares that are quarter million dollars each. Let’s look at the Berkshire Hathaway .B, how about that? Click on our “Analyze.” Now, Berkshire Hathaway SSI green zone, 11.77 percent volatility quotient. Very low.
If you already use a 25 percent trailing stop, you’d be taking more than double the risk, the more than double, the normal risk in Berkshire Hathaway. The high for Berkshire was back in March. You can see that it’s come down a little bit since then. Our SSI stop, 156.49.
If you bought Berkshire Hathaway today and you wanted to use a full VQ, your stop would be 145.83. There’s quite a difference there and obviously if you use the 25 percent. You can even change this number if you’d like. If you wanted to change it to 17 percent, you type that number in. Click, “OK.” It’s going to reset for us, raised our stop price considerably.
Let’s take a look at gold. We have a lot of people within TradeStops that follow the gold market and believe in gold as a hedge against some financial calamities. Again, we talked about gold, 11.6 percent as the volatility quotient.
We did have a new entry signal that triggered about a month and a half ago. The stocks hold off a little bit, and has now been rising ever since then. Our SSI stop is 108.56. If we used a VQ stop, that 11.64 percent would be a 106.59. If we go back to our 25 percent that a lot of people like to use, they were looking at a stop that is under $100, $90.46. That would be taking a lot of risk.
Let’s look at one more slightly more volatile stock, and that’s NVIDIA. That’s the hottest stock out there or pretty close to it. See, the VQ 24.6 percent. It is in the SSI green zone as well. We’re a little just a touch off the high. The SSI stop is 109.21. The VQ stop is 108.81, so very nearly the same thing.
You can see that this entry signal goes back a long, long way. This goes back almost a year and a half. We write about a lot of special situation stocks in Dr. Smith’s editorials. Be sure to keep your eyes out for some of those.
Let’s go back to our presentation, Naresh. Let’s look at how do we manage the alerts that we get. Remember when we first set up these positions, we used the stock state indicator alert.
It’ll tell us when it moves into the green zone or moves into the yellow zone or moves into the red zone. There’s a lot more alerts that we can use within TradeStops. You can have more than one alert for each position. It’s easy to edit the alerts, and it’s easy to delete alerts.
Let’s go ahead and add a few alerts to the stock‑state indicator alerts that we already have. Let’s go to our portfolios, and we’re going to go back to this blue‑chip stock portfolio. You’ll notice that opens the positions and alerts tab. Now we have our positions over here where we see the black bell shows that we do have an alert in place.
The number one next to that means we have one alert in place. If we click on the alerts themselves, this shows you the alerts that we have for each position. What I’d like to do is I’m going to add an alert. In this case I want to add an alert for Apple. I want an alert that’s going to tell me when the stock closes above $160 a share. It closed at 152.76 yesterday.
This is a price alert, a fixed price, so I want to know when the close is above 160. I click Add Alert. You’ll notice now I have two alerts set up on Apple. Let’s go back to our positions and alerts page. You’ll see this second alert was added down to the bottom here. Latest close was 152.76. That’s our alert for above 160. Let’s go ahead and add an alert for GE.
Remember GE is in the red. If you look at the stock, technically speaking it’s a pretty ugly chart. You’re looking back. The most recent high was almost a year ago. It’s been moving down ever since. You know what? Let’s go ahead and add an alert. Click the box again. We’re going to add an alert on GE. I want to be notified when GE has a particularly impressive bullish move.
I want to know when GE has what we call a golden cross. That is when the 50‑day moving average closes above the 200‑day moving average. I want to know when the stock is two percent. You know what? Let me get to the crosses. I did the wrong one. I want to know when the 50‑day moving average is two percent above the 200‑day moving average. Add alert. There we go. Just that [laughs] simple, Naresh.
Naresh: Really simple.
Tom: This is the type of thing. If you’re bearish on the market and you want to have death crosses, you can set those up or any alert. Let’s set up one more alert. Coca‑Cola has been poorly performing. Let’s add an alert on Coke that when the stock is 30 percent above our entry price. Let’s go back to price. Here we want to know when the stock closes 30 percent above our entry price.
There we go. When we go back to the positions and alerts page and we look at the positions card, you’ll notice two alerts for Apple, two alerts for GE, two alerts for Coca‑Cola. Now, let’s edit the Apple alert. Let’s go back, and let’s go down to this alert. Instead of closing above 160, let’s edit this for when it closes above 165. All we do is click on that one button. We’re going to set this.
Let’s have a close above 165 and save. There we go. There’s our alert that’s been changed. Now let’s say, “OK, GE. We’ve got the alert of a breakout. It looks like it’s going to be forever before that breakout happens. Let’s not have that alert taking up any space.” Let’s go back to alerts. Let’s go back to our GE alert that we have here.
The 50‑day average closes two percent above the 200‑day average. Let’s just delete this. Just like that, Naresh. Just like that. It’s so simple to manage these alerts. This is one of the reasons I recommend that people go into the watch portfolios. Set up a few watch portfolios. Play around with the different alerts so you’ll know what they do.
Naresh: Can you tell me, Tom, how often do people get these alerts? Is it once every three months? Once every week? How often do you [inaudible 36:27] ?
Tom: It depends on the movement of the stock. We can have stocks that are in the green zone and moving higher for literally years at a time. On that type of stock, you just won’t see an alert because the stock continues to move higher. We can have a stock that hits the yellow zone and then bounces back up. Hits the yellow zone, bounces back up.
Each time you’re going to get an alert that it goes from yellow to green and so forth. It really depends on the type of stocks that you have, but it’s so important to keep an eye on these alerts because the alerts are your discipline. This tells you when your stock has moved against you by normal volatility. That’s the time that you want to get out.
To be successful in this business you can’t take large losses. It’s OK to take little losses. Any investor that does this for a long time is going to take small losses, but the key is don’t turn a small loss into a big loss. All right, now we’ve looked at the volatility quotient on individual stocks. Now let’s look at portfolio‑level volatility. This is something that TradeStops has.
I’ve never seen it available or anything close to it anywhere else. This is fun. I really like this, Naresh. This is high‑level research right now. Let’s start with the asset allocation. All of the members that are listening have this available to them. We’re doing the blue‑chip stock. Now check this out.
Here’s your sector allocation, information technology, industrials, consumer staples, consumer discretionary, and so forth. That pie chart gives you a great visual that you’re pretty well‑diversified. Click on the largest, which is information technology, and you see we have a position in Apple, Microsoft, and Visa. Click a position consumer discretionary.
We have Netflix and so forth. Consumer staples, Walmart and Coke. You can do this for industry. The sectors are the large categories. Then the industries are the sub‑categories under sector. You can see. Again, look how well‑diversified we are among the 10 or 11 stocks that we own. Now this brings us to our portfolio volatility quotient.
The portfolio volatility is the volatility of the entire portfolio as it works together. Now you’ll notice here that our volatility for the entire portfolio is 12.29 percent. We have 40 percent in low‑risk stocks and almost 60 percent in medium‑risk. Now in our world medium risk is 15 VQ up to 30. Low risk is below 15, yet the overall portfolio volatility is very low.
I’m going to go back to this portfolio so the people can see what the volatility is of each position. Apple 17. Caterpillar 19. Chevron 18. GE 13. Really, you’ve only got one stock in here. Let’s go back to positions. That’s Coca‑Cola that has a volatility lower than the overall volatility of the portfolio. What this shows you is the correlation between the stocks that you own.
Not every stock goes up at the same time. Not every stock goes down at the same time, so we look at the correlation between the stocks. You might have on a bearish technology stocks might move down, but drug stocks could move higher. That’s what we’ve come up with, with the portfolio volatility quotient.
Now here’s something that’s really, really fun to do. Let’s add a high‑volatility stock to our portfolio. Let’s click on the blue‑chip stock. We’re going to add a position. Let’s add that Franco‑Nevada. Here we’re adding a position that is going to have a volatility in the high risk over 30 percent. You can close this. FNV, 30.8 percent. Wow.
We just added a position that you would think could destroy our portfolio volatility quotient, but look at this. Naresh, it’s the same thing. It’s the exact same portfolio volatility quotient. You’ve added stock with a risk that’s above 30 percent. The overall portfolio volatility has remained the same. Again, this shows you the correlations that gold stocks are going to go down.
You could have technology and industrial stocks move higher, etc., etc. This gives you a really good idea as to what you should expect under normal conditions with the volatility of your portfolio even though most of the stocks in the portfolio have a higher volatility quotient than your overall volatility in a portfolio.
I love doing that. I love looking at that. I highly recommend people create these watch portfolios. Practice adding different stocks in and looking at what it does and how it changes the portfolio volatility. They could possibly be adding. They could take advantage of adding a couple of gold stocks, silver stocks, or maybe the stocks like Twitter or Tesla and not ruin their volatility.
Rebalance to equalize risk. This is one of the foundations of TradeStops and one of the seminal works that Richard and his team have uncovered. That is investing, not using equal dollar amounts but investing using equal amounts of risk. We’re going to show you how that risk rebalancer works right now. Let’s go ahead, and we’ll go back to the website.
We’ll go to the risk rebalancer. Now we’re going to go ahead and run this blue‑chip stock. Remember we added that FNV to it. I don’t want to invest any more cash, so I’m going to be working with $112,000. We’re going to use those 11 or 12 stocks. Literally all we have to do is click rebalance, and the TradeStops’ algorithms go to work for us.
Look what happens here, Naresh. We went from a low volatility anyway, 12.29 percent, and we reduced our volatility by over one percent. We’re now at a portfolio volatility quotient of 11.10 percent. We’re only taking 1.36 percent risk in each position so just a little bit more than $1,500 of risk in each position. How do we get there?
With Apple, we’re going to move down from 70 shares to 57 shares. With GE, we’re going to move up to 406 shares and so forth. We actually have a tab here that shows you. These are the steps you take. It’s just as simple as can be. Now you don’t have to do this obviously.
This is what we have found to be the most effective solution for staying in stocks for the longest period of time and not putting too much into stocks that have great stories like FNV because a stock like FNV, even though it’s in the green zone right now, these gold‑miner stocks with volatilities of 30 percent up to 70 percent could crush a portfolio if you put too much money in them.
We could actually save this as a new portfolio, risk rebalanced, so we go ahead and click save. Now it shows you with the actual shares that the risk rebalancer figured out. There’s our portfolio. One other thing. I know that I’m taking $1,500 risk in each stock right now, Naresh. Let’s say I want to add a stock. Let’s say I want to add ULTA. I go to the position‑size calculator.
Let’s type in U‑L‑T‑A. I don’t want the amount that I’m going to invest. I want the amount that I’m going to risk. I’m willing to risk $1,530 in ULTA. I’d like to know how many shares I can buy or high much I can invest based on the SSI stock price. We go ahead and calculate this. This tells me that I can invest $8,535 or I could buy 28 shares.
I’m taking the same $1,530 of risk that I am with every other stock in the portfolio. Now let’s go. We’ll get back here to our 10 steps. For lifetime members, we have just introduced the Billionaires Club. The Billionaires Club allows you to look at 14 high‑profile investors including Buffett, Einhorn, Bill Gates, Carl Icahn, and George Soros.
You can know what they’ve bought and sold. The best part is you can leverage their research to assist you in your own stock research. We’ll go back here. That’s available under our newsletter section. Now for our members that have Stansberry newsletters or Gore newsletters, Oxford Club, etc., you can log in and follow your newsletter on TradeStops.
Let’s click on the Billionaires Club. Again, this is available to every lifetime member. You’ll see. We have sorted these by the personality ‑‑ Van Den Berg, Barrow, Ackman, Gates, etc. We show you all the holdings. We show you what the VQ is, what the SSI stock price is, and the current stock state condition. Let’s click on Warren Buffett.
Naresh: This is really cool because TradeStops gets to see. Not just give access to billionaire portfolios but we can see, for example, what’s in the red. This is Buffett’s portfolio. We see that Delta Airlines right now is in the red. We can see where they’re too overinvested, too underinvested, mistakes that they’re making. We have access to that. That’s really awesome.
Tom: [laughs] It is a lot of fun to look at. We get these from the SEC 13F filings, so this is public information. At TradeStops we put this together for you, and we aggregate the data. As soon as the SEC gets the data, then we’re able to post it onto TradeStops. Now here’s something that’s really cool. What if want to have a watch portfolio of nothing but Warren Buffett stocks?
Just click on this “Add as watched portfolio.” It takes another moment here. Your portfolio has been added successfully, so let’s get out of the Billionaires Club. Let’s go to our portfolios. You’ll see. Here we have our Warren Buffett portfolio set up as a watch list. Just click on that. This shows you all the stocks that he has owned, the entry date.
The entry date is usually the SEC filing date. You can organize this any way that you’d like. For instance, if you’d like to know what the VQ percent is and organize it by VQ, you can go from low to high. Not too surprising, Warren Buffett has nothing in the high risk. Everything is low and medium risk.
Then if you want to do it by the SSI indicator, these grays mean that they don’t have an SSI for whatever reason. Then we’ve got the greens. Then it’ll be the yellows and then the reds. It’s really easy. You can set up individual watch portfolios with this. That’s going to bring us to Item Number 10. Again, this is for our lifetime members. This is “How Do You Use the Pure Quant Tool?”
We just introduced this last week. You can now build risk‑balanced portfolios using newsletters, billionaires, or your own watch lists. It’s easy to manage, and the rules to follow this are very simple. Now I’m not going to get into the details of what’s built into the algorithms today, Naresh. We just don’t have time.
Maybe we can do that next week, but I want to show people how they could set up a couple of portfolios pretty easily. Let’s go back to the website. Let’s go back to research. Click on pure quant. Now for the first one let’s take a look at Warren Buffett’s. How about that? Let’ stake a look at the billionaire portfolios for Warren Buffett, and you can look at it.
Click this way or we can click and use the watch list. Let’s say we wanted to add $100,000 into this. We can use 15 stocks. We recommend between 10 and 20. We run the research, and now here we go. This is all based on the formulas that we have created. This would be your pure quant Warren Buffett portfolio.
Again, you can save this as a new portfolio if you’d like. I’ve got one other thing, Naresh, that I’d like to show under the pure quant.
Let’s take a look at pure quant. Now, remember, I had all those sector ETFs? Let’s add multiple portfolios. Let’s look at all those. Let’s find, of these 90 stocks, which are the best ones to own. XLB, basic materials. XLE, energy. XLF, financials. XLI, industrials. XLK is technology. XLP is consumer staples. XLU’s utilities. XLV is healthcare, and lastly, XLY, which is consumer discretionary.
Now, let’s use the same 100,000, but this time let’s look at 20 positions within the portfolio. Click on Run Research, and here you go.
Cisco, International Paper, Berkshire Hathaway B, Disney, Philip Morris, etc. etc. etc., the best 20 stocks to invest in, based on our Pure Quant Technology. Since we don’t have the same name, I’ll just add ETF. This way, I can follow it simply. Click on Save and it’s going to open up to that portfolio, the exact number of shares to invest etc., etc.
We’re taking equal risk in each position. In this case, we’re going from 11.2 percent to 26.8 percent, so, not a volatile stock at all.
Anyway, that’s the way that you can use the Pure Quant tool. We have had a little bit of information come out on this, and over the next few weeks, we’re going to be coming out with more articles and more information, so that you’ll really be able to x‑ray what goes on underneath the hood.
Now, one of the things we like to do at TradeStops, as Naresh knows, we’ve said we’d give you the 10 steps to get started. We want to deliver more than what we promised. Here we have step number 11, and that’s how you actually monitor trade stops. This is really important.
Even if you’re not an active trader, you should log in at least once a week, if not a couple of times a week. You want to monitor your portfolio synchronization. You want to check your alerts. You want to look at Dr. Smith’s investment articles. You want to look for some updates. We’ll show you how to look at a couple of those right now.
You see this little microphone here, and I’ve got the number one? That’s an update. We’ve got a notification that there was a new release on February 23rd. We can click here for the details. It opens up in a new page, and it gives us all the information.
Now, if we go to our portfolios, and this is really important. If you’re synchronizing portfolios, if there is a problem with the synchronization, we’re going to give you a little warning symbol. I don’t have one to put up here, but we’re going to give you a warning signal. All you have to do is click on this refresh, and it will then go ahead and link to your brokerage firm and get you the updated information.
Sometimes, if we’re having difficulties with the synchronization process, we let you know about that in the help desk. You click on the help center, and we let you know, up here, if there’s any problems with the positions and with the alerts and the synchronization.
If you can’t synchronize, if there’s a problem, we’ll let you know. If it doesn’t work just by clicking here, there could be a problem with the brokerage firm itself.
Now, if we go back to the welcome page for TradeStops, look at this blog. Click here. We publish four articles a week. The articles range from Dr. Smith’s information about things that he’s looking at within TradeStops or the overall market. I write an educational piece once a week. Beverly writes a help‑center piece once a week.
You can go here and look at the most popular articles that we’ve had, and you can search for them. For instance, we created an ETF strategy. If I type in ETF and click enter, this comes up with the “TradeStops Sector ETF Strategy.” Click on that, and this goes back to our article in September that tells you how to set this up and what our strategy is.
There are a lot of things that are available here. As we showed you earlier on this help screen, you can go to the “getting started.” Then click on Dr. Smith’s investment articles. We show a lot of the best stuff that you can just click on and be able to view.
It’s important that even if you’re not doing a lot of trading log into the website. Make sure that everything is updating. Make sure that the alerts are showing, that you’ve updated your alerts. I set up my portfolio so that it only gives me one alert and then erases the alert after I get that. I could miss a dividend if I’m not checking for that. Be sure to monitor your TradeStops.
For active traders, you might be on our website two to three hours a week. If you’re not an active trader, maybe 30 minutes a week. It doesn’t take a lot of time, but we give you the tools to do a lot. Now one of the things that Dr. Smith has said that has stayed with me is, “Successful investing is about staying in the game.” Successful investing is not about finding nothing but home‑run stocks.
If you take too much risk, you’re going to be out of the game. The whole idea is to set yourself up and to set your risk up in such a manner that you are taking the appropriate amount of risk per stock, the appropriate of risk per portfolio, and that you have the discipline to get out of the positions when your alerts are hit.
[laughs] There are only 10,000 other stocks that you can invest in, so patience is important. Staying in the game is the way that you’re going to be successful over a long‑term period of time. Now there are two ways to contact us at TradeStops. As you know our phone lines are very busy, and we have received tons of emails.
Please bear with us as we work our way through these. Our 800 number, our toll‑free number, 866‑385‑2076, or send an email to support at TradeStops.com. I was monitoring during the presentation, Naresh, that there are tons of questions coming in. I know that we’re not going to be able to answer every one of those.
We are collecting these so that we can answer a lot of questions next week, but what were some of the questions that stood out to you?
Naresh: Before we get into some of those questions, we had a couple of people ask about the billionaire stock that you showed. I want to mention again that the billionaire portfolio, the quant portfolio, is available only to lifetime subscribers. You premium subscribers who are on the call do not have access to this. You got a sneak peek of it through Thomas.
If you’re interested in upgrading to lifetime, you can dial that phone number that Tom had on the screen. Our people with customer experience will take care of you. Again, that is only available for lifetime folks. That phone number is 1‑866‑385‑2076. That’s 1‑866‑385‑2076. They can tell you more information about that.
Now getting to some of the questions, we had a couple of questions about the SSI. The first question comes from Michael. Michael asks, “When we get a buy signal or a sell signal, does that mean to sell immediately or should we wait around maybe a day or two? What does that mean?”
Tom: In our world, and this is the way that Dr. Smith and this is the way that the team invests, when we get a red signal, we sell. The red signal is based on a closing price. If you have intraday price movement that pierces below the stock, and then moves back higher, we don’t consider that as triggering the stock. When it closes below our stock price, we want out.
We don’t want to wait around. This is not a “Could it come back? Might it come back?” Hope is not an investment strategy. Solid math, solid diversification, solid discipline is the way to be successful as an investor.
Naresh: Yeah. Good point. Moving on to the next question or several people have asked about this, “Will I be able to access this training session again, because I had work or I was driving…?”
Naresh: Yup. The answer is yes.
Tom: Absolutely. We have been recording this. We’re still recording this, and we will be processing the recording overnight, and first thing tomorrow morning. We’ll be sending out a link to everyone with the recorded session. I know that we went through it quickly. There was a ton of information.
We wanted to get in a concierge level experience for our new members. This way you can see a lot of the website. You’ll be able to go back to the recording. If you have two screens that you work with, maybe you put up the video on one screen and the TradeStops on another screen, and listen to a little video, stop it.
Create your watch portfolios, create your investment portfolios, look at different alerts, etc. You’ll definitely be able to watch this as soon as tomorrow afternoon.
Naresh: I want to reiterate, we mentioned earlier that these training sessions are just the beginning. This is the first one. Look out for your email over the next few days, and this weekend, and early next week. We’re going to add more training sessions that are targeted and specialized available to you, and they’ll be live.
We’ll have some Q&As. We’ll have some sessions that are meant for lifetime only folks, that are meant for premium only folks. Stay tuned to your email. This is just the beginning of our training. Now, let’s get to the next question and that is from Chris. He asks, “Can I buy stocks through TradeStops?”
Tom: The answer is, no. We are not stock brokers, nor can we take orders that are executed through your brokerage firm. TradeStops is an information only site. You’re able to get the alerts. You’re able to set up your portfolios, set up your watch lists, etc. We do not facilitate trading. We do not make that happen, nor are there any plans in the future to do so.
Naresh: Yup. Good question, because this is a great tool. TradeStops is a great tool and it would be easy if we could do things that way, but we are not a brokerage or any of that. Good question. Next question, “I have a new portfolio and I want to add a new stock to this portfolio. How can I calculate the optimal size to add?” This ties right in to some of TradeStops most valuable features.
Tom: Sure. Remember when we were working with the blue‑chip stock? We added that position of FNV and then we did the re‑balance. We had $1,530 worth of risk. We’ll go through that same example again.
Naresh: Let’s do that.
Tom: Instead of adding ULTA, let’s go ahead and let’s add a position. Naresh, what are you looking at these days?
Naresh: I have been looking at Valeant actually, Bill Ackman’s famous pharmaceutical stock.
Tom: VRX is the ticker symbol?
Naresh: VRX, yup.
Tom: I want to enter that yet, because I need to know, how much can I buy? Let’s go to our position size calculator. We’re going to type in VRX. We’re going to risk $1,500. $1,530 was the exact amount. The position has been stopped out, we’ll use the VQ percent as our stop loss. We’ll go ahead and hit, calculate.
Now, this shows to take $1,530 of risk. We can only invest $3,000 into the stock. That’s 249 shares, our stop loss will be $5.93. The reason for that is the VQ is over 50 percent, because we drop from a few hundred dollars a share down to over 90 percent. This is a great example.
If we’re looking at $1,530 of risk, we can only buy 3,000 of Valeant, but what if we wanted to buy Target? We know that Target’s going to be a stock that’s a lot less volatile. We’re still going to update the results.
Now this is showing you that we could buy $9,375 of Target, $3,000 of Valeant, $9,300 of Target, and take the exact same amount of risk. This is powerful.
Naresh: Good question and good example. The next question that I’m going to go through is, “Is it possible to use TradeStops to find good stocks that pay good dividends?” Before you answer that Tom, is I will say you can find a lot of great stocks just by looking at billionaire portfolios and what’s in the green. That’s a way you can certainly find stocks.
His question is on top of that, find stocks that pay good dividends and how do dividends tie in to the TradeStops’ algorithm?
Tom: We don’t have a search feature within TradeStops. That’s why the watch lists are important. You could set up a watch portfolio. Let’s go ahead and do this. Let’s go to portfolios. We’re going to add a portfolio. Let’s just call it income stocks. We set this up.
Now we can add all sorts of income stocks, whether they be common stocks, preferred stocks, closed‑end funds, REITS. Whatever it might be that you’re interested in to follow for income, just go ahead and add a number of positions. You could start with maybe looking at a couple of the ETFs, add some of those stocks that make up the dividend ETFs, and you’ll be on your way to a good start.
We don’t have a screener, but this is how you use watch lists to keep an eye on a number of different potential candidates for your portfolios. As far as how dividends determine within TradeStops, we don’t use our algorithm to determine the VQ.
The volatility quotient is determined by the underlying movement of the stock itself. We do adjust the prices for dividends paid, so you can get a good feel as to where you are within your portfolio.
Naresh: Next question. I am an options trader and also a futures trader, how can I use TradeStops?
Tom: You’re able to use TradeStops. You can certainly enter the option tickers themselves. Now, options pricing is at least a little bit based on the underlying price of the security. You might want to set up watch lists of options themselves and their securities, what the underlying security is. You can see and get a good feel of what the volatility of the underlying is.
Now, options themselves don’t have the volatility quotient. We need more than one year’s worth of data to determine the volatility quotient. We need two years’ worth of data to determine what the stock state indicator is.
We can’t do that with options. We don’t have that type of history. We also know that options are eventually going to expire worthless. When I say worthless, they might be in the money but if it expires on a Friday, you’re not going to be able to trade that option on a Monday.
They do expire, they go away, and following them can be really different than following stocks. Definitely, use the underlying. We do have some educational pieces on options. Go to the blog. I think if you type‑in options, it should allow you to see a couple of these.
There we go. Tracking options and TradeStops, etc., etc. There we go. I apologize. We don’t do futures. Futures trading, yes, it’s financial trading but it’s completely different. It’s different exchanges, a different way. Now, you can follow some tickers. For instance, let’s go to our research. Let’s go to our stock analyzer.
Here’s a little hint. Type‑in $gold, and this is the closing price of gold. Understand that our stock state indicator is still based on one year’s worth of volatility. I don’t know anyone that’s going to be in futures for longer than a year except maybe the producers to hedge their prices.
Most investors are in and out of futures in a relatively short period of time. You can type in $WTI, you get West Texas intermediate. Here’s your West Texas Intermediate. SPX is your S&P 500. You can use the spy and get just about exactly the same thing.
You can use the Diamonds for Dow Jones Industrial Average. We can do DJIA. We’ll do his one more. Yeah, Dow Jones. We’re actually in the process at some point in time adding bitcoin, but I don’t know when that’ll be, Naresh. Here’s the DJIA.
Naresh: [inaudible 72:40] .
Tom: Yeah, I’m going to cover my head with my hands and wait for those questions.
Tom: What do we have next?
Naresh: This is going to be our last question, because we are running out of time. Unless somebody asks an amazing question within the next minute or so, this is going to be our last question. This is a good one.
We have Joseph who asked, “Should I sell a stock based on the SSI color or the VQ of the stock?” What are you saying is, should he wait for the red‑light signal or if the VQ is about, say, 15 percent, should he wait until the stock is down 15 percent?
Tom: Keep in mind, if the VQ is 15 percent, and the stock added high, then the SSI stop is going to be the same. The SSI stop and the VQ stop will be close to the same. We’re going to look at two different things here.
Remember, we looked at NVIDIA. Let’s pull that up again. Now, here’s a stock that is very, very close to its all‑time high, right here. That was just a couple of days ago or one day ago, and then it trailed off. It closed down just a little bit.
Our SSI stop, our SSI is 24.62 percent. Our SSI stop on NVIDIA is $109.21. The VQ stop from the close yesterday, $144.35, which was down 52¢ is $108.81. You’re looking at 40¢ difference between the stops. It’s not that big of a deal.
Now, let’s go back and look at Berkshire Hathaway. Remember, Berkshire Hathaway had set its high quite a while ago. Berkshire Hathaway’s high was in March. Now, we’re underneath the yellow zone, just barely.
Take a look here. Our SSI stop is $156.49. That is based off of this high price ‑‑ where that red pin is ‑‑ from March 1st. If you were to buy it based on yesterday’s price of $165.28, your stop would be $145.83, almost $11 difference by using the VQ.
I can’t tell you which one to use but I can tell you can look at the two different ones and decide what makes most sense for you. If you’re just buying Berkshire Hathaway and you have a confidence in it and you don’t mind taking the extra risk, go ahead and use a VQ stop.
If you’ve owned it for a while, then you’ve already seen it pass its high, consider the SSI stop. Naresh, thank you so much.
Naresh: This was awesome. This was extremely beneficial to the attendees. The feedback so far that we’ve gotten from folks has been really, really good. Thank you, Tom. Thank you everyone for joining.
We had a lot of great questions and a lot of good audience participation to make this a huge success. Tom, we didn’t even have enough seats. Some people couldn’t get into this webinar because so many people…
Tom: I’ve never had a webinar like that. I’m sorry that they couldn’t, but they’ll get the recording.
Naresh: They’ll get the recording. Look out, check your emails. Like we mentioned, next week, we’re going to have more training sessions.
Tom: I know. We get to do again next week. This is going to be so much fun.
Naresh: Actually, we’re going to have a couple of cohosts. It’s not going to be me this time. It’s going to be a few other people cohosting with you, and they’ll be specialized. Really, really good stuff today. We covered the basics, how to login, how to connect to your brokerage account, the SSI system, what is VQ, billionaire portfolios.
If you have any questions about these add‑all, again, the phone number to reach 1‑866‑385‑2076. That’s 1‑866‑385‑2076. That’s our customer success team. If you have any questions about how to use this or if you want to upgrade your premium subscription to lifetime, they’ll take care of you there.
As we said, Tom, in the beginning, we are committed to your success. We want you guys to do well. TradeStops is meant for you guys. Thanks again for all of you coming out. Tom, any last‑minute words?
Tom: No, Naresh. Thank you so much for handling this and being the quarterback. I look forward to working with you next week. This is going to be fun.
Naresh: Tom, thank you again and to the hundreds of…Actually, that more than a thousand people who have joined us today on the call. Thank you and welcome to TradeStops. This is Naresh Vissa along with Tom Meyer. Thanks again and have a great rest of your day.