A strategy that beats the market

The trade is determined each weekend and the position closed every week.

By Stock Traders Daily Dec 4, 2012 11:16AM

Alamy Creativity AlamyStock Traders Daily has secured 18% from a short recommendation made last week on VeriSign (VRSN). This call was made in conjunction with a proactive trading strategy called Stock of the Week where one stock is chosen every week with a defined trading plan associated with it.


Each week we choose a new stock based on Stock Traders Daily's expectations for the week that follows. The basis is anticipated market direction, and from there proprietary correlation tools are used to determine what stocks are likely to be most responsive. From the list, we select one stock as a prime candidate for trading, and last week that stock was VRSN -- short from near $40.99.


Over the past few weeks we've selected other notable stocks for this strategy: Wynn Resorts (WYNN), KLA-Tencor (KLAC) and John Deere (DE). Since its inception in December of 2007, this strategy is up 235% versus the S&P 500 ETF (SPY), which is down 0.40%, the Dow Jones Industrial Average ETF (DIA), which is down by 0.3%, the NASDAQ 100 ETF (QQQ), which is up about 25%, and the Russell 2000 ETF (IWM), which is up about 9.3%.


The Stock of The Week strategy is up so significantly against the market because it is proactive, rule-based, and can work in any market environment regardless of economic conditions or market direction. And it does something else that is very important.


The Stock of the Week also ends every week in cash, and that means investors can make positive headway without worrying all the time. Investors can be present with family on the weekend without worrying about what the market will do on Monday, and they can also automate the strategy using simple conditional orders at their brokerage firm so they don't need to worry about it during the week either. The strategy can be used by anyone, but it has its drawbacks too.


Inherently, investors want to be right. They do not like having stops -- they even hate it if there are a series of stops -- and that is exactly what can happen in this strategy over periods of time. The risk controls are tight, normal stops are small, and the gains are designed to be significantly greater than the stops in percentage terms. But there will be more stops than gains, and that is something most people cannot wrap their heads around. Even with the great performance, investors still run the risk of failing because they let human emotions get in the way. But for those who can overcome those, this strategy has worked well over time to beat the market no matter the conditions.


Here's how to do it:


The Stock of the Week is easy to follow and easier to understand.


1. Using simple technical analysis determine where the market will go in the week ahead.

2. Use filtering tools to identify the stocks that are most likely to correlate.

3. Investigate the top candidates in more detail and avoid stocks set to report earnings.

4. Select the long or short trading plan based on the determinate in step 1.

5. Conduct this analysis over the weekend and avoid mid-week changes.

6. Execute the trades during the week (this can be automated with existing tools).

7. Close the trade and the strategy on Friday before the market closes.

8. End every weekend in cash.

9. Enjoy your weekend.

10. Repeat the process.

Dec 4, 2012 12:01PM

Go with the market using index funds that track the market.In1982 the Dow was at 777.It`s

up 5,000 points with Obama, that`s why we`ve made so much money.The people that didn`t

invest are now bitter birthers.

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