Question about Steve Woods 2400% return

Dear Babak,

Thanks for the info on the professional trading auditors at Effron. I'm going to contact them today.

What does "pm" mean in your comment "hope you got my pm first of all" ?

Concerning your question about exits, position sizing and stop losses. You have to analyze each stock according to what's happening with price and volume in relation to its present float turnover and then in relation to previous float turnovers. A key concept in float analysis is that a true picture of a stock includes not only price and volume but also the number of shares that are trading as seen with float turnovers.

When I made the "in the process of being verified, 2400% return in 17 months" I created a group of stocks that I called "silk shares" ( a term I learned in some obscure and forgotten book on the stock market). These shares were owned outright free and clear. They were created by throwing as much money as possible into any one stock. I then would exit the position (if it was profitable) by leaving my profits instead of taking them. These free and clear silk shares worked in my favor as the broad market kept going up and allowed me to play other stocks as I saw them. So exiting a position was often determined by the fact that I saw something that looked better than what I was currently into. Then when the market topped and I started trying to learn shorting I exited all the silk share positions.

Stop losses have always been rather a challenge for me. During the 17 months in question, I generally just let my belly tell me when to stop my losses. I had dollar amounts that I didn't like to lose. So if a position had me down by say $500 I might get out. But then again as the pile got bigger it was easier to handle say a $1000 loss.

I was definitely caught up in the mania of the bull market. I have never really seen myself as a professional trader. I have learned a lot about my strengths and weaknesses from playing the stock market. My real strength is being able to take in a lot of information and boiling it down to its essence and sharing what I have learned with others. I learned to do this from teaching fifth grade for ten years. That's what I did in making the discoveries of float analysis. And what I am trying to do with my newsletter.

Best regards,

Steve Woods
FloatAnalysis.com
 
Hi Eli,

When I said I like float turnovers that are turning over every 15 to 40 days, I am referring to how they look when I first put my indicators and begin an analysis of them. Realize that float turnovers are changing every day much like a moving average. As new volume gets added in on the front end then the other sides of the float turnover rectangle often changes as well.

The rectangle gets recalculated everyday just like a moving average except instead of using an average price over a time span, I'm adding up volume and comparing the cumulative total to the number of shares in the float. When the cumulative total equals the float then the software draws lines around this area so I can see what the present turnover looks like. But tomorrow the shape of the rectangle may change dramatically or stay relatively the same. It all depends on the stock I'm tracking and the amount of volume it's going through.

Best regards,

Steve Woods
FloatAnalysis.com
 
Hi Dufferdon,

The question of "Why would support and resistance appear typically halfway back into the previous float turnover range?" is an interesting one. Rationally I'm not sure there is a good explanation for it. To me I guess it makes "intuitive" sense because as a stock in an uptrend goes through normal corrections, the price has to find support somewhere if it is going to turn around and head back up. The mid way point then can be thought of as a fulcrum point where support had better come in or too many people in the top half of the turnover will be holding losing positions if the mid may point doesn't hold.

A hedge fund manager I know who uses float analysis more than anyone other than myself not only tracks the 50% float point but other levels as well i.e. 70%, 80%, 90%. These he believes gives him an edge on seeing when the price is going to drop below the float turnover completely. When that happens the support has turned completely to resistance.

Concerning float analysis and fibonacci numbers, I think you could probably find some correlation between the two but I haven't been interested in pursuing it.

Concerning your comment "I am still having a hard time understanding why price range defined on the basis of one float turnover is more rational than price range defined by trading range (for consolidation) or range between significant intermediate high and lows (for a trending stock)."

I see float turnovers and float analysis as having two very distinct characteristics. One is rational and one is intuitive. The rational part is that a float turnover is like a tape measure. It's simply the distance on a chart in which the cumulative volume equals the number of shares in the floating supply and the price range of same. This is just hard cold data, very rational and gives the stock analyst a new measurement tool to put in his toolbox. The intuitive part occurs when you try to determine what percentage of the floating supply actually traded hands in a sideways move. If you look at charts in hindsight you find a large number of sideways moves that measure exactly one turnover in length and then the price broke above the range and moved up much higher. Intuitively one is lead to the conclusion that there must have been a large amount of the float that changed hands there and that the new ownership held their shares tightly.

So when you find a stock that has gone up and then sideways for one float turnover you have to ask yourself the question "Did a large percentage of shares actually change hands here and are they being tightly held?" To do a really good job you have to look within the sideways move and see how the stock is acting on big volume days and low volume days. Also if you have look at the breakout above this trading range and ask "Is it moving up on big volume or is the breakout on light volume?" So a study of price and volume in relation to the current float turnover adds a new dimension to the analysis process and has both rational and intuitive characteristics.

As an example, look at Autozone (AZO). In its sideways move from July 11th to September 24th the cumulative total of shares traded was 51.5 million shares. This is the same as the number of shares in its float. Now this past Tuesday Sept. 25th it broke above this trading range on more volume than any day prior. Notice also that the volume on the 25th was more than the volume of its previous high on July 30th. These all lead to a bullish scenario. BUT since the breakout on Tuesday the volume is decreasing from the day before. My take on this then is that this baby is headed higher but that an entry point would be when it corrects back down to support which is around $48. Now the question is if this scenario actually plays out would I really want to put money into it. This can only be answered by looking at the broad market direction. I find it hard to go long in this market because there continues to be on my daily scans so many stocks breaking to the downside of their float turnover ranges.

When a new bull market begins in earnest my daily scans will produce a large percentage of stocks that are breaking above their float turnover ranges. This is because you can't have a bull market unless stock prices are moving to the top of their float turnover ranges.

Back in 1997 I told a group of traders that the bull market would be over when the big "generals" Intel, Cisco and Microsoft all broke below their float turnovers. This is what happened.

Now when will the next bull market begin in earnest? When the same three all get above their float turnovers at the bottom. We are presently nowhere near this occurring.

Hope this has been helpful.

Best regards,

Steve Woods
FloatAnaysis.com
:)
 
Hi Steve,

Please don't let my banter bother/bug you at all. Actually, it appears it hasn't, and I am happy that you had the temperment to deal with it.

I only gave you the needles because when I first started stating my returns, I got the same rants "get an audit". So I did. And these rants were from my best friends from high school, no less.
We have more in common than you think, I'm not just some nut who wants to bug people.

So when I embarked on a trading career that put me in the public eye, I was engaged by the same biting, ranting, "go away" type responses that I gave you. I wish I had your demeanor, but It's not in my blood, so I confronted people. I especially confronted those who tried to distort what it was I was actually doing. Makes for a good argument, but wastes alot of time. I learned, you can't change some people if they want to attack.

As far as your record going short, I want to give you a person who most likely can help you, if you want:

www.shortboy.com

I'll tell him you may email him. He has consistently profited from short selling (even through the great bull market from 1996-1999). See why people would want those results verified through an audit? No one believed it at first, how can someone outperform the S&P from the short side, when the S&P was rising 20-30% a year (form 1996-1999)? Seemed impossible.

Take a look at his website, and if you think he can assist you in any way, email him. He is very polite through emails, and very quick with his response (even if you don't subscribe to his "Today's Strategy" page). He, like you said, makes a few picks a week, sometimes does not trade for weeks at a time, but his track record is extremely impressive. What's more impressive is that his strategy can be implemented using a $100,000 account, so the returns you will see, in my opinion, should be MUCH higher in 2001.

Some people on this board like to attack his interest earned, and they are truly missing the point. This guy has consistently profited even thruogh the great bull market, and in 1999 when he went online. Next year, when he goes to a $100,000 account, there won't be much interest paid to him per month (you know if you exclusively short sell, you earn full interest on your account), so that little squabble will vaporize.

Subtracting most interest he made this year, and adjusting his account to $100,000, and he's up around 40% just this year.

I hope now you understand why I did what I did with you. You're a good man. Good Luck,

Sam
 
Hi Silvius,

I'm in the process of having my returns analyzed so until that is complete I'd rather not comment on them.

To your second question, I can only say that I am constantly trying to learn from mistakes and refine my methods. I don't have a system. It's more of a methodology. So I see the negative returns as a learning process.

To your third question, yes recently I've added price targets on all the stocks in my newsletter.

Sign up if you care to, it's going to be free for another week or possibly two. And when it comes out on a monthly subscription basis it's only going to be about the cost of one online trade or a little more 1/8 of a point on a trade of 100 shares. One good trade will pay for it many times over.

Best regards,

Steve Woods
FloatAnalysis.com
 
I went to the website and also read the S&C article. There is a basic flaw in the reasoning that is common for "magic indicators." The article shows several examples that happened to work perfectly. There is no neutral backtesting or walk-forward testing, at least none that I could find. I have not read the book so perhaps there is some in there.

It is easy to concoct a magic pattern or indicator and find numerous examples that "prove" it works. But there may be thousands of times when it didn't work. Mr. Woods returns may be just the product of buying with leverage in a bull market. Plenty of other approaches would have also produced eye-popping returns if you went max margin on one volatile stock at a time and happened to do it during the greatest bull market in history.

For all I know this is a great approach and a true breakthrough. I just haven't seen any data to confirm that.
 
Hi Silvius,

I'm in the process of having my returns audited so I'm not sure how to go about answering your first question without incurring the wrath of the readership here for not having returns verifiable.
Understand that when the account hit $72,000 around March of 2000, I went on a manic spending spree, big vacation for the family, hired part time staff, new office furniture, new super fast computer, trading books and expensive software. I spent about $30,000 in short order. So it's hard to say what my approximate net return would be.

I tend to do really well in up markets, for example my most aggressive trading portfolio was up over 20% today (10/03/01) as I bought BRCD before the close yesterday and it did quite well today {Brocade Communications Sys Inc BRCD 17.11 +3.68 +27.40%} I took out my capital and left the free and clear 'silk' shares to 'ride on up' when the general market turns north in earnest.

To your second question, I can only say that I am constantly trying to learn from mistakes and refine my methods. I don't have a system. It's more of a methodology. So I see the negative returns as a learning process.

To your third question, yes recently I've added price targets on all the stocks in my newsletter.
Sign up if you want, but be sure to follow your bliss and find what works for you.

Best regards,

Steve Woods
FloatAnalysis.com:)
 
Steve, you didn't have Brocade on your e-mail of tips yesterday... what gives here? Are you just playing the momo baskets like most of us?


~EC
 
Dear El Cazador,

I recently had a long talk with a lawyer at the Securities and Exchange Commission and it turns out that my newsletter may not be "impersonal and disinterested" enough of a service for me to qualify for the exception that applies to most newsletter writers. They advised me that it would "probably be best" to not buy or sell anything that I mention on the newsletter. There is an exception for most newsletter writers but apparently because of the nature of mine they are saying that there may be conflict of interest.

This has left me a little "betwixt and between" as they didn't outright say not to trade stocks that I mention in the newsletter.

Now in the case of Brocade, I only looked at the market a couple of times during the day and then noticed that the broad market indexes were coming on strong at the close. With only a couple of minutes to do something I remembered that BRCD had had a nice bounce off its intermediate bottom in April. So after a quick look at its chart, which looked good for pop today, I took a position just as the market was about to close.

In my Disclosure and Disclaimer Statement I plainly say that I may or may not be in any stocks mentioned in the newsletter. I also say that if I take a position in a stock that is mentioned in the newsletter then I will let everyone know what it was and when I took the position, and whether I went long or short. Because I haven't mentioned BRCD in the newsletter, I didn't feel I needed to make it known that I took the position.

Steve Woods
FloatAnalysis.com
 
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