The IBD Experiment: Trade $100k into $1M In (4) Years

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paysense

IBD's #1 Investing Strategy
Are you using "The #1 Investing Strategy"? I've traded a version of this long-term method (not a day-trading system), since 1998. Investor's Business Daily has been invaluable in providing for me the proper tools to put together a market<em>-trouncing</em> investment approach. Now before you renounce this as IMPOSSIBLE, take a look at all of the facts.

AAII (American Association of Individual Investors) has deemed Bill O'Neil's CANSLIM trading method (researched & backtested for the entire life of the market) as THE top performing investment strategy.

The last decade has been tumultuous (to say the least) and volatility has recently sky-rocketed. This may be a boon for day-traders, but the benchmark indexes have languished - settling right about where they began more than 10 years ago. So, to have IBD's successful strategy compound a great CAGR (compound annual growth rate) and end with a 1000+ percent return for you, is worth taking note.

Over the last 3 years, I've used Collective2 (www.collective2.com) to provide an independent audit of my trading development. With trading risks, capital preservation HAS to the top priority. A successful investment approach must not only capitalize using a long-term edge, but max DD (drawdowns) HAVE to be contained - in order to continue stacking compounded results.

<b>I think I may have finally put together all of the components to make my particular version of this trading system a success.</b> I've seen (2) versions (AAII: 2500% & CANSLIMpc: 250%) with vastly different 10-year returns (nevertheless eye-popping), but I'm expecting to produce somewhere in-between. Colective2 has audited my trades for the last 3 years, placing me in the top 10 (based on age & CAGR) out of 10,000+ systems. As I've ironed out the fine details, I now invite you to share in the experience of this final (since 12-Oct-2010) version: trading NQ futures (long/short). Please share your feedback (per ET policy, URL is provided in the Member Profile) or PM me.

The system basics are really simple: Buys NQ contracts with "market in confirmed uptrend". Sells NQ contracts with "market in correction". Of course there are other proprietary considerations, but the IBD signals can easily be tracked.

Recent trade history and IBD signal confirmation for newer version -

01-Sep-2010: IBD's "The Big Picture" shifts to "market in confirmed uptrend" from " market in correction".

12-Oct-2010: System inception ($100,000)

13-Oct-2010: Open Positions

Opened ET B/S # Symbol Price Closed Current Price P/L
10/13/10 9:30 BUY 4 @NQZ0 2051.00 0 2128.25 $6,180

Notes:
<BR>• $11,200 margin requirement
<BR>• 6.18% return, 2.6 weeks
<BR>• Trade will be held until IBD's outlook is changed to "market in correction".
<BR>• Click <b>paysense</b> at left for actual trading site URL.
<BR>• I'll attempt to provide regular updates and you can PM me with any questions.

Disclaimer: C2 results are hypothetical
 
My initial and original "swing" trade is still <i>intact</i>, as the NASDAQ-100 continues to levitate in moderating trade.

"Price rarely goes far without volume." is an IBD mantra, yet in the current climate we have seen many divergences.

Accordingly (per IBD), <b>price & volume</b> are my main key indicators. with NQ contracts recently trading at 2151 - or a 100-point trade gain, using 4 contracts (100k hypothetical account) - has created an 8% 3-week (open) profit.

I also find the VIX or CBOE Volatility index as key in calculating LONG/SHORT exposure with my 100% mechanical system. VIX (~22) has increased with recent week gains, while the IBD A/D ratings for the benchmark indexes has declined to about a C+ from B+.

Now that the election fervor has declined somewhat, most are looking (i.e. volume or institutional investor participation) at today's Fed announcement for direction.

IBD takes a keen look at large investor distribution (days of selling in higher volume) that currently is elevated for the NYSE indexes at about 4-5. This usually portends to the next correction or market shift that will reverse our position.
 
That is precisely what "The IBD Experiment" is all about. By taking the newspapers <b>Market Direction</b> calls, my attempt is to "trend-follow" a long-term system to gains using futures contracts.

What that means is use the "M" in CANSLIM to system trade trend shifts. Novel? Probably not, but. . .

It should be noted that the NASDAQ-100 was at about 1825 - when IBD issued it's latest shift from "market in correction" to "market in confirmed uptrend".

So, with an additional ~225 NQ points (using 4 contracts) could have provided an additional sum of $18,000 in profits. Contrast that with ytd market returns - extrapolated over many years - and my goal may be reached.

:)
 
Quote from failed_trad3r:

What does value investing have in common with futures?:confused:
More...

IBD's strategies are more growth than value-oriented.

The poster seems to be using their market-timing signals alone. I thought stock selection was a big part of IBD, too.
 
IBD teaches individual investors (institutions, too) to only buy growth stocks with the market in "confirmed uptrends". As stated above, AAII has audited IBD's CanSlim approach with whopping results this past decade.

Although it's true, I am only going to be using the market-timing signals (hence the "M" in CANSLIM) for my system.

I hope these results will perform best! In some of my other threads I've shared how capturing trends and avoiding exposure during corrections is possible. I'm looking to mostly system trade futures (ETF's, too) going forward.

Thanks.
 
Volume finally came in well-above average as SPX cleared and held staunch 1200 resistance level.

NDX now has 9+ yr. highs in sight. Michael Ashbaugh chronicles technical aspects in "The Technical Indicator" (no affiliation) at Marketwatch.com -

http://www.marketwatch.com/story/sp-rises-to-second-test-of-major-resistance-2010-11-02-1141570

Our open 3-week position is now <b>up 10%,</b> with volatility (Vix: 18.52) falling off after Tuesdays breaking election and Fed news.
 
I will be providing regular updates, answer questions, provide insight into my trading methods, etc.

IMPORTANT

Capital preservation is my #1 goal. However, this is not a day-trading system! My "swing" positions are held overnight, hence, this system will experience drawdown.

This is just a reality with all long-term, trading systems. Yet, I do not average-down nor do I EVER over-leverage (like many at C2).

The NASDAQ-100 is currently nearing it's first test of '07 highs. In the event volatility (measured by the VXN) spikes with a sudden NDX 5%+ drop, for protection I will scale back contract exposure.
 
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