Yes - believe it!
The organization of your ChartLists is an extremely high leverage investing activity that YOU control. It does and will determine your profitability. Hence, it's worthy of your time and effort. As I often quote the entrepreneur and investor Michael Dell, "You don't have to be a genius to be successful. You just need a framework."
So in that spirit, I'd like to share eight simple yet high-leverage things you can do to boost your organization and fuel your profitability in the process:
Two weeks ago, I wrote a detailed blog about understanding the "trumping hierarchy" within ChartLists. If you use the symbol "!" and the "#" as prefixes when you name your ChartLists, the "!" will trump the "#" and be placed above it. In the blog, I describe ten of these symbols and how to use them to enhance the order of the equities in your ChartLists.
SUGGESTION:For those of you who have downloaded our ChartPack in the past and wish to keep your existing lists and comments as is, you should rename those ChartLists by simply installing a prefix of your choice as the new ChartPack only overwrites or replaces ChartLists of exactly the same name.
Simplifying the complexity of the market and boiling it down to a manageable number of ChartLists which I can then review has regularly produced powerful profitable returns. As the old advertising adage goes, I never go anywhere without them. My essential ChartLists are my Permission to Buy ChartList, Market Dashboard ChartList, and Permission to Sell ChartList, to name just a few.
I keep a ChartList of the 250 of the most active ETFs based on volume. By slicing and dicing and sorting this ChartList, I'm able to literally have X-ray vision into the market's present sentiment and money flows.
Fact: There are software bundles in the investor universe with over 300 different charting indicators. The more the merrier is fine for Thanksgiving but it should not be the basis of your investment methodology. Your ChartLists only need ten indicators. I have my favored ten which I understand intimately and which tell me trend, volume, momentum, risk and reward. Pick your own ten but show some restraint!
For twenty years, I taught my post-college classes that the stock market operates based on the "Law of Groupings." Individual ‘Bubble" stocks may levitate by themselves for short periods of time, but those are low probability trades. The most profitable stocks from an investor's standpoint are those with the highest probability of making you money with the fewest downside probabilities. Most have similar characteristics. Those stocks are usually the "Best of the Breed" within their industry group populated with sister stocks in the same industry. This specific Industry is usually one of the top Industry groups within its Sector.
For example, the Healthcare Sector (XLV) is one of the eleven Sectors that comprise the total market. That Sector (XLV) is comprised of five Industries: Medical Supplies; Pharmaceuticals; Medical Equipment; Biotech and Healthcare Providers. Year-to-date (YTD), the best Industry Group has been Healthcare Providers. Six stocks within this Industry Group are up 157% to 437% YTD. That's the "Law of Groupings" at work.
My point is this principle which is detailed in our book, "Tensile Trading", is also the basis of monitoring all my equities (including ETFs and Mutual Funds). Every position gets its own ChartList populated with the appropriate Sector ETF, appropriate Industry Group and a collection of the most appropriate Sister Stocks. So, the rule is that you monitor the entire family of stocks, not just the one you own. In the case of ETFs and mutual funds, the family composition is similar but obviously unique when you construct those ChartLists.
I've often had retired professionals attend my seminars and make pronouncements such as "I'm here for the day to have you teach me exactly what you do." Okay then, let's get started and tomorrow you can teach me how to be a plastic surgeon! My point being that learning how to become a consistently profitable investor takes dedication, hard work and lots of experience. In my mind, the best tool for that is the name I gave to this blog over a decade ago: The Traders Journal. A personal journal of your experiences is the ticket. To that end, don't overlook the Comments section of each ChartList. It's an ideal place to record specific lessons and observations about your equities and past trades very much akin to the majority of the ChartLists in our new Stock Market Mastery ChartPack which are jam-packed with educational insights in the Comments section of many ChartLists.
History matters. I keep a ChartList of all the market tops and bottoms going back over 40 years— with extensive notes, observations and commonalities listed in the Comments section beneath each chart. As Mark Twain once said, "History doesn't necessarily repeat itself, but it often rhymes." Use this ChartList to your advantage as Twain suggested.
Before I pull the trigger to buy an equity, it has cascaded through my four ChartLists — having been investigated, analyzed, dissected and debated. In other words, it's been thoroughly vetted. These four ChartLists are labelled as follows:
- To Watch
- To Stalk
- To Buy
For me, it's a routine and consistent system that has decreased risks and increased probabilities in executing profitable trades and minimizing my losers.
So there you have the eight insights regarding ChartLists that I feel have contributed mightily to my own success for over 30 years of investing. The bottom line is that your ChartLists are worthy of your dedicated focus and your precious time. The rewards are there. For those of you who've read our book, these eight principles will be familiar. You know of the synergy between the book and the ChartPack. Others of you might wish to save yourself hundreds of hours to organize, populate and format all the same ChartLists that Grayson and I use. To delegate all that work to us, simply download the newly revised Stock Market Mastery ChartPack.
Trade well; trade with discipline!
Gatis Roze, MBA, CMT
- Author, "Tensile Trading: The 10 Essential Stages of Stock Market Mastery" (Wiley, 2016)
- Developer of the "Stock Market Mastery" ChartPack for StockCharts members
- Presenter of the best-selling "Tensile Trading" DVD seminar
- Presenter of the "How to Master Your Asset Allocation Profile DVD" seminar