CNBC analysts are the biggest hacks around. Sara Eisen is top on the list. Now, she makes $700,000 per year which is a dream job if you can get it. CNBC is there to promote companies which they have ties with. Conflict of interest but, too many sheep love CNBC and think they will make millions listening to those hacks. CNBC spreads a lot of negative news, market is going to crash or positive news, we are reaching the sky. Depending on what their narrative is to fool and mislead the legions of retail traders.
Mark Minervini (Meltdown)
- Thread starter trader778
- Start date
CNBC analysts are the biggest hacks around. Sara Eisen is top on the list. Now, she makes $700,000 per year which is a dream job if you can get it. CNBC is there to promote companies which they have ties with. Conflict of interest but, too many sheep love CNBC and think they will make millions listening to those hacks. CNBC spreads a lot of negative news, market is going to crash or positive news, we are reaching the sky. Depending on what their narrative is to fool and mislead the legions of retail traders.
I suppose in a way I'm adjusting my rules depending on my interpretation of the chart. I'm not exiting on a fixed percentage but rather on a break of a trendline or a moving average. I might also take off part of a position if price goes parabolic.
OK I can't argue with that. If my strategy is to trade momentum shouldn't I be overweight momentum?
In that case I'll probably take a small loss.(As small as I can at least, I have no control of the market) It happens from time to time. Can't win them all.
Exactly that is correct, I'm choosing stocks based on price and volume. I like to see both increasing. I can't say for sure that institutions are involved and I guess it doesn't really matter. As long as price and volume are increasing there is a good probability it will continue. If it doesn't then I don't have to stay in the trade.
I expect I could make the same decisions based on the data in an excel spreadsheet. A price and volume chart just make the data more visually pleasing. With a click of a mouse I can see a days data or a years data. A quick look at a chart will tell me whether I'm interested in a stock. I'm all for making a process less complicated.
I believe he offers a trading workshop for around 5k for a few days.
Cool sounds like we are on the same page (at least in what we are discussing)!
If you buy stock A because you perceive it as having momentum then your portfolio return = market_factor*weight + momentum_factor*weight + all_other*weight
You can compare your portfolio with a benchmark to see if you have more or less momentum than it. That would be useful for you to see how well you are tracking your strategy. Doesn’t need to be complicated and something in google sheets with a basic regression would probably suffice.
From a managers standpoint I’m always looking at my actual returns vs my benchmark and how I’d like to be positioned. It’s really helpful to make sure I’m focused on my priorities.
Are you agreeing that with a momentum strategy I can trade with nothing more than the information I get off the charts?
Simple strategy, buy stocks that are showing price increases on volume and exit when they stop increasing.
Priority number 1 is to protect capital. No holding on to losers based on fundamentals. The result although anecdotal is being able to outperform the S&P 500 index. ( I use the S&P because it is what most use as a benchmark)
We started this discussion when you said that you had looked at Minervini's criteria and felt it couldn't out perform. Have you changed your mind?
As a manager what are your priorities? What processes do you have in place to make sure you achieve them? My priority is to protect capital, my process is to not hold losers.
Yes, I've said many times that the only useful information from a chart is momentum, but that you could get a better signal of momentum using an excel spreadsheet. E.g. if you base your decisions on a spreadsheet it'd be more in-line with your rules than your visual review.
This is the basic concept behind momentum and stock price autocorrelation. And the best way to measure it is through the rate of change (e.g. period new / period old -1) applied to price and volume. Does that make sense? That is literally the definition of what you are saying.
Now, as to whether or not a strategy around that is profitable, is a different story. A review of the literature (papers on the topic) reflect an expectation of a positive but time varying return from momentum. So sometimes this strategy works and sometimes it doesn't. This means that sometimes buying a stock that is increasing in price and volume underperforms.
No it's the same, let me explain.
Basic idea of momentum strategy:
- buy stock seeing new high conditional on rising volume
Minervini claims that he follows a process which includes:
- Trend
- More specifically, price uptrend
- Fundamentals
- Superperformance stocks (superperformance phases in stocks) are driven by better earnings, revenue, and margins.
- This improvement usually starts before the superperformance phase, but continues within it.
- Catalyst
- The big winners have a catalyst which drives institutional interest.
- This could be a drug approval, a new product or a big contract, or a new CEO.
- He cites Blackberry, Apple and Google as examples.
- Entry points
- Mark doesn’t explain here how to find these, but simply states that most super performers have at least one low-risk entry point.
- Exit points
- Not all trades will work out.
- So you need a stop loss to force you out of losing positions in order to protect your account.
- You also need to identify the end of the super performance stage in order to sell at a profit.
Catalysts are a true thing -- these are informational events. Permanent stock price change (e.g. from non-random traders, also known as informed trading) occur from information on future cash flows or discount rates. Big public catalysts however are already priced in, so at the time of catalyst you are 50/50. That's why there's that adage of "buy the rumor sell the news". This is another step in the process that doesn't make sense.
Long story short, Minervini claims to use a process that was decent in the 90s. It's clear he doesn't use it anymore because almost all of his twitter stuff is technical and his interview snafu shows he didn't review the company or have a catalyst. He doesn't his process because it no longer is enough to make money. In the 90s it might have done ok, but still hard vs wall street folks with more resources. Nowadays that is like using Thalesian physics to build a rocket.
Side note: Thales was a greek philosopher who believed all matter was created from water -- from his works is where the term physics came from
So tl;dr his "process" doesn't exist anymore and would probably underperform the S&P.
Protecting capital and making sure that my portfolio reflects my views. My rule is that positions need to be matched to a view that is active. A stock my lose, but if it's within it's standard deviation it's not a big deal, unless there is information about cash flows or discount rates.
Then his performance in the championship this year is just luck?
As for entry points I believe he look for breakouts from a base but also will enter a trade in the base if the stock moves on volume.
His position size also challenges conventional wisdom as he is not well diversified.
If your view of the market is the correct one, let's see some P&L statements to back it up.
I think his performance is suspect, yes, given the nature of these trading championships. I would love to see him establish an audited track record.
I think he doesn't understand exactly the mechanism behind size. All active strategies have capacity constraints because active implies sensitivity to price.