Q: What is your track record?
A: I’m proud of my personal trading history and used to publish it, but I quickly discovered promoting annual performance attracted subscribers with unrealistic expectations. They would see an XX% return, divide it by 12, and then assume that is what they could make every…single…month. When these same people were unable to achieve those results every month, they complained. Sorry, but the stock market doesn’t work that way.
Trading is hard and even when done successfully, performance is irregular and lumpy. Trading profits often follow the Pareto principle, also known as the 80/20 rule. Typically, 80% of our year-end profits come from just 20% of our trades. These home runs are the windfalls that make an entire year.
Outside of these infrequent big winners, most of our other trades end up doing a lot of nothing. I consider myself lucky if the other 80% of small gains and losses are a wash and don’t cost me any money.
Unfortunately, subscribers with unrealistic expectations don’t understand good years come from patiently waiting for those two or three golden opportunities each year. People who insist on big results every…single…month wash out because they end up taking far more risk than is prudent. I quickly learned my lesson and once I quit promoting my performance, I stopped attracting the wrong subscribers and my hassle factor dropped dramatically.
While you cannot judge this service based on its historical performance, I invite you to try the Free Two-Week Trial so you can experience this service for yourself. In addition to the free trial, I also offer a 30-day money back guarantee on annual subscriptions and a low-risk monthly membership with minimal commitment. But if you are like most of my subscribers, it won’t take long before you appreciate the value and upgrade to an annual subscription.
Q: How come you are not a professional money manager?
A: I enjoy working from home and spending extra time with my family. Being a professional money manager is far more than just trading. It means having a staff, processing mountains of paperwork, subjecting myself to SEC audits, and spending the bulk of my time and energy recruiting new investors. I love trading and keeping this an educational service allows me to focus on the markets, not running a business.
Q: What do you trade and how many positions do you hold?
A: My market exposure is split into three categories for risk management and diversification purposes.
The largest piece is buy-and-hold index funds. I stick with these positions for multiple years and only trade them when the market is going through a major change in direction. This portion of my portfolio does well in strong uptrends.
The next chunk is dedicated to swing-trading the indexes using leveraged ETFs. Most of the time I only hold one position at a time and my timeframe ranges between days and weeks. This portion of my portfolio does best in sideways, choppy, and uncertain markets.
The third and smallest chunk is allocated to the most speculative, highest risk, and highest reward trades. These are the lottery tickets that will either be hugely profitable, or crash and burn. Because of the high-risk nature of these positions, this also represents the smallest portion of my portfolio. These investments do best in euphoric markets where greed overwhelms common sense.
Q: How often do you trade?
A: Obviously it varies based on market conditions, but one or two trades a month is typical.
Q: Do you use stop-loss orders?
A: Stop-loss orders are a must for new traders and those with busy lives, but I follow the market every day and don’t rely on automated stops to close my positions. For my style of trading, the why matters as much as the what, meaning I evaluate the sources of the weakness before I sell. Occasionally that means I get out later than if I had an automated stop, but more often than not I sell poor price-action long before a traditional stop-loss level is reached, or I confidently hold through a routine dip. But this is how I manage my risk. Everyone needs to develop a personalized plan designed around their risk tolerance, schedule, and willingness to admit defeat.
Q: Why don’t you do more with options?
A: Getting the direction right is challenging enough. To successfully trade options you also need to know:
Miscalculate one of these factors and a great trading idea produces disappointing results. There are other ways to profit from options, but for swing-traders, most of the time it is better to stick with the underlying so you only have to decide up or down.
Q: How long have you been doing this?
A: I’ve been trading for more than two-decades and doing it full-time since 2008. I started the Cracked.Market blog in 2012 and have been offering a premium subscription since 2013.
Q: Why do you blog?
A: It all started on an investing forum. I found engaging other users helped me be more thoughtful, rational, and deliberate with my analysis and trading decisions. Putting my best ideas out there for all to see (and criticize) held me accountable and helped mitigate the emotion that always tries to sneak into our trading. The blog grew from wanting to share these thoughts and ideas with a larger audience. And it really is true, the best way to learn something is to teach it to someone else. I get as much out of this experience as my loyal readers, and for that I thank everyone.
Q: If you are a successful investor, why do you charge a subscription fee?
A: I enjoy supporting the trading community that has already given me so much. That is why much of my content is available for free. But for traders that want more actionable content, it is reasonable to charge a fee to those profiting off my ideas. I use the subscription revenue to cover the blog’s overhead and related expenses, making it possible to continue doing this for both free users and premium subscribers.
Q: Why shouldn’t I simply follow the guy with the best performance last year?
A: Many retail investors underperform the market because they chase what was hot last year. If there is one guarantee in the market, it is that a trader’s performance will be different next year. Some will do better. Some will do worse. But outside of a statistical fluke, no one will do exactly the same.
If a person believes in reversion to the mean (I do), then a hot investor will invariably cool down and a cool investor will eventually warm up. Unfortunately most retail customers bail on the cool guy who is about to warm up and give all their money to the hot guy who is about to cool down. It doesn’t take a math degree to realize abandoning someone who is about to get hot, only to jump aboard someone else on the verge of cooling down doesn’t produce worthwhile results.
Q: If chasing performance doesn’t work, what is the best way to pick a mentor?
A: Find a mentor who has a similar view on the market as you do. No matter how impressive the mentor’s track record, if you are a square peg (value), don’t try to fit in a round hole (momentum). Compatibility and consistency are keys to long-term success. Some years the performance will be great. Other years it won’t. But it averages out over the long-term if you stay true to your strategy.
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