By Robert Buran

DIRTY LITTLE SECRETS

At the start, let’s discuss a dirty little secret that has less to do with how to trade stocks successfully than it does with how NOT to trade. Financial experts and brokers, unfortunately, may not always have your best interest at heart. If you’re following their advice, it’s unlikely you’ll do anything more than contribute to their salaries and retirement.

These Wall Street insiders were instrumental in the 2008 economic crash. However, the market has since recovered, and we have seen a full-blown bull market that did not see any sign of weakness until 2022. Things may have gotten a little rough in the summer of 2015 for example ( see the crash of 8-24-15), but the current state of the market, even in 2023,  is looking optimistic.

Trading is good and the economy will certainly recover in 2023.This is a prime time for stock market investment. You don’t need to buy my software to do well in this market – keep reading to find out how you can succeed on your own.

Do It Yourself Stock Trading 

If you want to make money in the stock market, the best approach is to do it yourself (see Stock Investors). So, how do you navigate DIY stock trading? Do you need to study companies, economics, or even delve into technical analysis? Emphatically, I say no. All you need to make it in this market is a simple automated trading approach and the discipline and willingness to follow your strategies.  One of my algorithms, like JORDI FUSION, might help.

I have been trading using automated trading systems for nearly 35 years. Starting with practically nothing, I have built a successful trading career. In fact, the only thing I care about concerning brokers is that I pay them the bare minimum for transaction costs.  And now with zero commission trading Nirvana is here!

Understanding Automated Stock Trading

When I talk about automated stock trading, I’m not suggesting you let a computer do everything. What you delegate to a computer is the decision-making process – to buy or sell a given market and to do it while you are sleeping and away from your computer. But you are still going to have to pick the stocks my algorithm is going to work with. This manual stock selection process is central to the success of JORDI FUSION,  and our choices are enhanced using artificial intelligence.

Understanding Stock Market Behavior: Simplicity Over Complexity

It’s a common belief propagated by brokers, market advisers, and well-intentioned individuals that understanding stock market behavior is akin to deciphering an instruction manual for constructing an atomic bomb. They imply that a truly profitable automated trading system, one that accurately predicts market behavior and generates consistent profits, would necessitate a level of complexity beyond the grasp of most people.

Throughout my years as a successful trader, I have encountered many individuals who have been ensnared by this mindset in their pursuit of profitable trading strategies. One story that particularly stands out involves a highly accomplished engineer.

An Unexpected Perspective on Stock Market Investment

This engineer was renowned for his creative ideas, which had earned him significant wealth. However, his ambitions extended beyond his current achievements. He had set his sights on developing a definitive mathematical formula that could predict all market behavior. With his profound confidence in his mathematical prowess, he envisioned this formula being extensive, possibly spanning over 50 pages.

I recall vividly an interview with this individual, during which we deliberated on the need to fortify his home against potential threats. The logic was simple: upon discovering our formula to predict all market behavior, we would inevitably draw attention, likely necessitating security measures akin to a high-security military base. In essence, we would become a financial superpower.

Notably, this engineer wasn’t delusional; his brilliance was undeniable. However, his line of thinking is an extreme illustration of a mindset that I have observed in several other bright individuals, all aspiring to discover the ‘Holy Grail’ of market prediction.

The Most Crucial Trading Strategy: Embrace Market Randomness

As a seasoned trader, I am inclined to share with you a critical element of my trading strategy: an accurate formula for predicting market behavior. To best understand it, let’s engage in a simple demonstration.

Find an open space with soft grass, bring along a tennis ball, a pen, and a notebook. Standing in the center, look around and write down where you think the ball will land when you throw it. Close your eyes, start spinning around until you’re on the verge of falling, then throw the ball as hard as you can. Open your eyes, note where the ball landed and compare it with your prediction.

This exercise illustrates a fundamental principle of market behavior: a majority of market movement is random. Only a minor fraction of it is non-random, hence only slightly predictable. This insight debunks the notion that the secret to market movement can be unlocked with complex mathematics. Elementary math will suffice.

When you come across an advertisement for a trading system claiming 90% accuracy, treat it with skepticism. High accuracy predictions from data that is predominantly random are more of a fantasy than a reality. Remember, your trading approach should be realistic, taking into consideration the randomness and unpredictability inherent in the stock market. This is a key secret to understanding how to trade stocks.

The Power of Systematic Trading

The key to becoming a successful trader lies in simplicity. When you’re dealing with market data that is largely random, the most reliable way to identify the predictable component is by sticking to straightforward strategies with minimal parameters.

Consider this example of a streamlined stock market trading system: see automated trading systems. At the end of a trading day, subtract the day’s LOW from its HIGH, then take half of that value and add it to the CLOSE. For instance, if on Monday, WUZOO reached a high of 20, a low of 10, and closed at 14, the calculation would look like this: 20 (High) – 10 (Low) = 10. Half of 10 is 5, and 5 plus 14 (Close) equals 19. This number, (.5(H-L)) +C, represents the market price at which you should consider buying on Tuesday. If the buy price is reached on Tuesday, maintain the position until the market opens on Thursday, then sell. This straightforward system has the smallest number of parameters possible.

The Beauty of Simplicity in Stock Market Investment

Having conducted market research since 1984, I can confidently vouch for the effectiveness of this simple system, even without detailed programming or exhaustive testing. For those skeptical about the power of simplicity, I’ll present some data and test results. To maintain clarity and brevity, I will limit the data here, though I’d certainly use more if I were to defend this theory in a court of law.

I randomly selected four markets from the top of my list of stocks I previously traded, organized alphabetically: ADCT, ADSK, AMD, and ABGX.

For one year, I tested each market using this straightforward trading system. I allocated $10,000 to each trade, meaning if a stock was trading at $5.00, you’d buy 2000 shares, or if it was trading at $50.00, you’d buy 200 shares, and so on. I tested ADCT, ADSK, and AMD from mid-January 2009 to mid-January 2010, and ABGX from mid-August 2000 to mid-August 2001 as a check against correlated markets.

In the realm of stock market trading and trading on margin, it’s feasible to trade all four of these markets simultaneously with about $10,000 in cash. You would also rarely receive a margin call on a trading system that exits the trade at the open of the third day, as you would have already exited the trade by the time a margin call arrives.

The net profits for each market were: ADCT $2,376, ADSK $2,401, AMD $4,308, ABGX $7,299. Aggregating the numbers for all four markets, the performance looks like this:

• Net Profit = $16,385
• Gross Profit = $35,604
• Gross Loss = $19,219
• Number of Trades = 111
• Number of Wins = 72
• Number of Losses = 39
• % Profit = 65%
• Average Trade (win-loss) = $148
• Maximum Intra-Day Drawdown = -$2,848

This demonstrates quite decent performance for trading primarily random price behavior. You can replicate this test across various markets and extend data as far back as needed, and you’ll likely observe similar results. While it’s not a miraculous solution, it’s a practical approach to navigating the market’s randomness while safeguarding your trading capital.

A proficient trader can leverage such performance to achieve a 100% annual return on investment. And with such returns, you can significantly increase your wealth.

Simplicity is the key

My Three Decades of Real-Time Trading Experience

I’ve been engaged in this style of trading in real time for over thirty years. Despite dealing with volatile markets, I haven’t had to bunker down in a fortress with high walls or electric fences. Let me share with you an open secret of the marketplace: THERE ARE NO TRADING SECRETS. The strategies I publish here won’t sway the market behavior, nor will they affect my system performance. Posting my techniques on a website doesn’t change this fact.

This strategy is far from being rocket science. Given an evening, I could come up with four more systems of equal efficacy. With a dedicated effort, I could develop approximately 100 such systems in a month. I know of several successful fund managers who adopt this exact approach. When managing a $100,000,000 fund, having a multitude of trading signals is beneficial, and this strategy is perfectly suited to that.

An Ideal Approach for the Small Investor

This approach isn’t limited to big fund managers; it also works wonders for small investors.

I like to capitalize on the short-term nature of this kind of system and apply it to numerous markets. With short-term stock trading, we adopt a hit-and-run approach, spreading our investments across a broad spectrum of markets, and we trade frequently. I’m currently managing around 50 stocks with a similar trading system I’ve named “JORDI FUSION”. In some of my accounts, I invest no more than a thousand dollars in a single trade (or only $500 on margin). Consequently, $20,000 covers the margin requirement for 50 stocks. However, you could feasibly cover 10 to 12 stocks with just $3,000. Trading across 50 stocks offers significant protection against steep draw-downs. When you’re trading that many markets, there always seems to be a silver lining, even on bad days.

That’s precisely why I advocate for the use of mechanical trading, automated stock trading systems for trading stocks. It’s impractical to analyze 50 companies or monitor 50 markets simultaneously. But, with these simple systems, a computer can track everything and execute the trades for me; fully automated trading is fantastic. Every day, I sit comfortably in front of computers sometimes in my pajamas, sipping coffee, and capitalizing on market movements—most of the time, anyway!

For small investors, the marketplace need not be an intimidating landscape. If you develop a simple short-term trading strategy and apply it systematically, methodically, and with discipline, you can outperform the majority of traders, both professional and amateur. Don’t be fooled by the Wall Street professionals with their big salaries and polished exteriors—they are not infallible. My advice to you, the small investor, is to engage the market with robust, systematic, automated trading. Understanding and implementing this approach is a vital part of mastering how to trade.