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Mechanical
Stock Selection Method
I studied and
used a fundamental stock selection method developed by Nicholas Darvas in the 1960's,
revealed in the 70's and popularized and enhanced by a well known financial paper
in the 80's.
One of the things I liked most was a simple method of measuring performance which
I thought appropriately made a nice fit with my own technical analysis.
The original concept which always included the most profitable stocks with the lowest
risk/reward, it left me with usually too many stocks,(sometimes 200 or more), to
choose from and many times getting myself into situations where I had to dump the
stock shortly after takeoff because of the recommended stoploss.
Even as a technician I found it no easy task to search for the subjective stock chart
patterns.
If you are going
to invest mechanically and get the emotion out, you have to be absolute on your rules
and fixed percentage exits, while great for higher priced issues, were devastating
on lower stocks because those kinds of fluctuations can and do occur in a single
day.
The other problem I had was that following his logic I would get into an issue reasonably
later in the game after the stock had made a substantial part of its move.
Now, from prior teachings we know that this is no problem because stocks that go
much higher will always pass through the 80% Relative Strength line on their way
to doubling again or more. That too is true, but with so many picks odds are you
aren't going to be riding those horses when you get mounted.
I had been writing
my own stock analysis and trading programs for S&P,(and just about every other
market you can think of), for my own trading for almost 15 years and intuitively
I knew that what Darvas was doing was sound, but it was difficult for us "normal",
(3K to 150K) investors to administer without getting churned to death. I had worked
it with optionable higher priced stocks successfully, but that also is not a game
for the usual conservative investor. You really have to know what your are doing
or you ARE going to get burned fast.
Being a reasonably
intelligent guy I figured I must be able to beat 90% of the other folks out there...and
I did. Trouble is, it became like a full time job for me and it wasn't fun anymore.
I took these
principles, did some modification to the selection criteria in allowing for a lower
RelStr reading which got you closer to the takeoff point and then developed a purely
mechanical system which allowed me to use the newspaper or the StockTables.com website,
to "fast scan once a week in ten minutes and only come up with three to five
excellent choices which automatically met the majority of the stock selection criteria
which would be 80% winners.
I then developed a purely mechanical method for exits which would allow me to have
my protections in place so I could get the risk/reward ratio up over 8 to 1 and still
work with lower priced issues which have more opportunity for doubling and and takeovers.
The result was a system I have traded for myself for four years and which is explained
in excruciating verbosity below.
I'll be happy to answer any specific questions you have about the system and its
performance and there are new users on line who have gotten the system and will tell
you it delivers what it promises.
By the way, we
have been doing well this year. Each week we spotlight the top 5 qualifiers. Out
of the last 15 signals, 12 are up, and 3 are down. Some notables are:
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As of
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5/17/03
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As of
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5/17/03
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As of
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5/17/03
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Stock
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APOL
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Stock
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NTES
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Stock
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MTLG
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Profit
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+18%
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Profit
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+91%
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Profit
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+21%
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Duration
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8 weeks
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Duration
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7 weeks
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Duration
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2 weeks
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Sorry for all the reading, but there's a lot to say.
Also on our website, we also offer daily rankings on 10,000 stocks including RS,
EPS, VOL%, Industry Charts, Industry Rankings, and more!
Thanks for the Inquiry and Have fun Investing,
W. Henry Ford
Try It Risk Free with our Six Month 100% Money Back Guarantee:
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