1/19/2010

What color is Dan Zanger's underwear


To trade profitable you need a method and a setup. In the beginning you have very little understanding of the market and how it works and what is a good setup and what is not a good setup. In stock market there are so many different setups used by people. Some of it is pure voodoo and some actually works. The easier solution for it is to model your trading on someone with big returns.




Dan zanger converted 11000 in to $18 million in 18 months


That is a return of 164000%. Before doing that he had blown up his account many  times he claims.


If we study in detail what was the secret of his astounding returns then we may be able to generate good returns.


Following someone who makes 10% in a year will at best make you 5% in a year, better buy Index fund and retire from trading.


If you have to model your method you might as well do it on someone like Dan Zanger.


That was my thinking so I studied in microscopic detail every single thing about Zanger and his method during his explosive returns period.


Since then he has changed his method a lot as he trades larger account.





Dan Zanger talks a lot about chartpatterns


In fact the name of his website itself is www.chartpattern.com . So did he discover some amazing and secret chart pattern?


If it was so you just have to find that pattern and trading is very easy.


What really is the pattern that made him 18 millions.


There are obvious answers. But remember things are not always as they look.


Chart pattern is small part of the Dan Zanger mystic.




The surprise behind Dan Zanger returns



In fact if you study very carefully the history of his trading during his explosive returns phase , you would instantly recognise the role of earnings and earnings announcements in timing of his entry.


In the initial years, it would be all about low float stocks which has announced 100% plus kind of earnings. He would enter based on earnings plus chart patterns.


Those stocks make those blowout moves because of earnings and low float.


Now with bigger account he has started focusing on large caps with earnings.


Chart pattern is part of the story but the basic fundamental reason for those moves is very important.


The 400 stocks he monitors stock patterns on and trade are all with extremely high earning growth or momentum.



Dan Zanger is a momentum trader


The second thing you will realise is that he basically selects momentum stocks.


The stocks he trades have price and sector momentum.


He looks for chart pattern on those kind of stocks.


His most often highlighted patterns are bull flags and triangles.


Besides that he talks of 10 patterns on such stocks with explosive earnings and momentum.







Dan Zanger used to trade small  stocks


When he made 164000 returns most of his trades were on small float stocks.


Stocks with less than 25 million float.


Many had less than 10 million float.


Most traders trade too big a float stocks. Unless you are a day trader , you should not trade big float stock.


Big float stock have very low probability of making big explosive moves.


If you have small account you have tremendous advantage in trading small float and small cap stocks.


Smaller stocks have greater variability in earnings growth due to their size.


So a small change in business climate can lead to sudden jump in earnings.


That results in big explosive move.




Dan Zanger used to bet the farm on big ideas


If he had a big idea he would load up like crazy.


He would often have his full account in one idea.


In the market there are plenty of small 20 to 30% kind of ideas, but once in a while you find a perfect  idea with explosive potential, that is where you can really make big money.


But to bet big and that too on margin requires confidence in your skills and ideas.




Dan Zanger was a IBD follower




Dan Zanger in one of his interviews said he has read William O'Neil's book more than 100 times and he continues to read it every now and then.




If you study the people who have made big returns in the market, you will find again and again the same thing: most of them are growth investors.


Only growth stocks make big explosive moves during their hyper growth phase.


What color underwear does he wear


This is just topline highlights of his method.


If you study his method in detail you can fill up over 200 pages of notes.


If you are looking for developing a method to find such explosive stocks you need to do your own detailed analysis of his method .


Find out every single detail about his method.

If the  secret behind his explosive returns is red Gucci underwear, then wear it and trade.







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5 comments:

Michael said...

I'm all in favor of this idea of following big ideas. I read a story about a guy that bet big on the bank stocks and made a ton. He also lost a ton on other bets. I'm going to research Dan Zanger's stuff to learn more. Of your approaches which one would you say most resembles his approach?

Allan said...

Hi Pradeep-

I just started reading your blog and really enjoy your trading philosophy and style. How were you able to study the trades Dan made during the time he traded $11,000 to millions of dollars? Is there a site that shows his exact trades during that period? Thanks.

Pradeep Bonde said...

Allan
Dan Zanger has a site www.chartpattern.com where you should be able to find his old trades.

Michael
Most of the stuff which I do is based on similar logic as his.Earnings breakout, Episodic Pivots, Top25 breakouts methods are based on similar logic.

tpgtommy said...

No one finds stocks better than Dan Zanger, and his free chat room with over 420 daily users, to help spot set ups.

I have learn how to make money following his techniques. He shares all his insights.

Zee said...

Don't forget the emotional economics involved.