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Methods and markets

Posted on 11/21/2006
Market is ever changing. Market is not predictable. Market is complex. Market offers too many choices. Market is not controllable. But methods are controllable. Methods can be constant irrespective of the market situations. Methods are under traders control. Your trading mix is completely controllable and that is the key to profitability.

In marketing there is a concept called marketing mix. The central hypothesis is that you can not control the consumer behaviour but what you can control is the marketing mix.

Marketing decisions generally fall into the following four controllable categories:

* Product
* Price
* Place (distribution)
* Promotion

The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis.
These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response.

Same way your trading mix is completely under your control. The elements of trading mix are :

Market selection (equity selection in stock market case)
Entries selection
Exits selection
Risk selection

Like in marketing the product is critical no amount of price, promotion or place variable changes can substitute for poor product strategy. Similarly as a trader your most important decision is equity selection. Which stocks to trade is 80% of the solution to profitable trading success. That is why technical analysis often does not produce the desired results because it primarily deals with entry and exit selection.

In a complex market offering too many choices (around 8000 stocks), dynamically selecting the equities is the key. The dynamic selection should bring to your trading conveyor belt a series of best possible opportunities for given time periods.In a bear market or sideways market the method must select the best opportunities for that period dynamically. Similarly in a runaway markets it selects the best opportunities with runaway characteristics.

There are various way to select equities dynamically. But most of the one which work are based on some statistically proven anomalies. Traders may or may not be aware of them. No matter the markets certain things work. The amplitude of return might be different but few key anomalies work across market situations and across stock markets in various countries. The earnings drift is one such thing. Earning momentum is one such thing. Price momentum is one such thing. Neglected IPO effect is one such thing. Like this if you start focusing on finding anomalies, you will find around 50 such anomalies which have edge. Some highly secretive hedge funds and traders may have found even more.

While there is a belief amongst most traders that if you share you will lose your edge, it might be true of certain anomalies, but some of the robust anomalies just do not disappear. They have been written about for donkeys years and various explanations have been offered as to why they work, but they continue to work. Knowing does not translate in to profitability. Making these insights work is a craft.

Making Pizza is very easy but only certain pizza outlets are extremely successful. The ingredients of pizza are no secret, but the craft of making it differs and most very successful or famous pizza places have a small unique twist to the method, which makes them stand apart.
Similarly knowing a trading concept or method and making it work and making money out of that idea requires a trading craft. It might be qualitative pattern recognition or quantitative pattern recognition. Look around there are so many hedge funds (pizza shops), they use same ingredients, have similar calibre quants or technical analyst, they know most of these anomalies (having worked in investment banks before), yet some hedge funds (pizza shops) consistently do well while others struggle.

Converting idea in to profitable idea is the craft. One way to learn craft is by watching others who are more proficient at it. Deep knowledge works. Breaking down craft in to small units work. Mentoring works in high skilled professions. Crafts are difficult to transfer from one person to another. Transfer often requires an extended period of interaction between the two parties involved. Learning craft also requires extraordinary level of motivation and dedication and time efforts. Both the person imparting the skill and person learning it must have extraordinary motivation for the process to work successfully. Most successful traders may not want to commit that level of time to transfer craft unless they find someone with potential. That is why trading remains so difficult and elusive craft.

Every week I take my daughter to ice skating classes and watch some very skilled skaters and observe their training schedules and talk to some of them and their coaches. The efforts involved plus the cost involved are beyond what most people are willing to put in.

Day after day I trade the same set of methods which I have selected for my own kind of financial objective. None of them is secret all involve focusing on few (less than 100) stocks with outstanding earning surprise, earning momentum, sales momentum, or price momentum. Besides that I trade one neglected IPO's anomalies. By focusing and perfecting few it is now an automatic task. It is like chopping onions without looking at your fingers, the onion or the knife.

The markets change but methods remain same.

Are you serious about your trading?

If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.

It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.

Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.

Why traders come to stockbee?

The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial  and no tall claims of making you instantly wealthy, and yet the site attracts new  members everyday. Members come from all walks of life and all kinds of trading size and trading styles.

You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.

Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.

What will I learn in the members site?

The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.

As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.

You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.

You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.

You will learn about  Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.

You will learn about  Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.

You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.

You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.

You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.

You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.

You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.

You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.

You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.

The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.

The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.

If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.

Do you have a trial?

If you are just looking for trial you are better off trying thousands of other trading site that offer free trail or one month trial and offer you promise of riches.

It is for those who are ready beyond the trial phase and ready to put serious months or years  of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.

The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.

How can I become a member?

To sign up go to and follow the sign up process. The site uses Paypal for payment processing.



walter said...

make anything of this:

Like many of you, I'm hearing lots of chatter this morning about the VIX which fell below 10 yesterday, moving it close to the all-time low of 9.3 in December 2003. Obviously, we all know that investors have a lot of confidence in this market and the VIX reflects that in spades.

Pradeep Bonde said...

The Vix has been in secular bear market since 2002.I think it has been making 52 week low for last 3-4 years.
Some years ago I used to track 24 indexes like these and was convinced of their utility.I was even convinced Vix was holy grail. Now days I have at best 3 things I monitor. My profitability has improved since then.

walter said...

what do you monitor, if you dont mind my asking, and you dont mind sharing...

Pradeep Bonde said...

1 number of stocks up 50% or more in a month. Readings above 20 indicate extreme momentum often leading to reversals
2 Number of stocks up 25% or more in 65 days/ numbers down 25%. Readings of less than 50 are bearish. That means when you ave less than 50 stocks down more than 25%
3 Bonds , dollar and equity co relationships

walter said...

thanks for sharing!

Pradeep Bonde said...

There are no secrets. I just like keeping things simple. Most methods sold as proprietary indicator or some super secret sauce for calling market tops/corrections use some very simple logic.