Now, I’ve got a confession to make. I’m always telling my kids to keep an open mind. I say there’s nothing to gain by closing yourself off to new ideas. Flexible thinking can lead to amazing opportunities.
But sometimes I struggle to hold true to my own words. You see, I can also be a sceptic. There are times when I simply won’t listen. I’ll make an on the spot assessment and move on without a second thought.
Any ideas when that might be?
Well, I’ll tell you. It’s to do with the financial industry.
You see, I’m often sceptical when I hear claims of astonishing success. I’m talking about the type of success that could turn you into an overnight millionaire.
I recently saw a claim that made my eyes roll back. It was truly extraordinary. The promoter was saying that 50,000 of his clients had seen a 10-fold increase on their investments.
Now, I can’t say this isn’t true. I didn’t make further enquires. But I do know this: trading is not an easy business. The suggestion of so many people making 1,000% gains is just beyond belief. Such a result would be over 100-times the annual average return of the Australian market.
You know, I began my financial markets career back in 1991. And during that time, I’ve sat alongside some of the best traders in the business. These are smart and highly successful people. And do you know what? I can’t recall any of them ever coming close to a 10-fold gain.
You see, gains of this magnitude are a rarity. While these huge payoffs can and do happen, they’re not the easy pickings some people would have you believe. So yes, be open to new ideas. But be wary of outrageous claims.
Now, that brings me to this week’s video. You see, I sometimes get emails from people sceptical about algorithmic trading, which is of course what I do.
These people simply don’t trust the results. They see what appears to be strong performance, and they wonder if it’s really true. Others dislike what they believe is ‘black box’ trading. They just aren’t comfortable following a computers trade signals.
Now, I can understand both objections. Everyone is different. And it’s OK not to like a certain way of trading. The very reason markets exist is because people have different points of view.
But I can tell you this: algorithmic trading works for me, and I’ve been using it for years.
Let me tell you about a portfolio of mine.
I put half a million dollars into a new trading account back in September 2015. My aim was to build a real life track record using a system very similar to Motion Trader. If you don’t know, Motion Trader is a subscription based trading service.
You see, I don’t just talk about trading stocks. I actually do it myself.
Let me show you how it’s been going:
This graph closely tracks my portfolio. At the time of recording on 17 April 2019, my profit (including dividends and costs) was $312,076 — that’s a total return of 62.4%, or 17.6% annually. Excluding dividends, the annual rate is 13.1%.
By comparison, the All Ordinaries is averaging just 6.6% per annum for the same period. My return (excluding dividends) is beating the market by a margin of 98.5%.
The key is to have patience and discipline during the down periods. The traders most likely to come out the other side are the ones who believe in their process, and stick to their plan.
And remember, this isn’t a simulation. The graph closely tracks my actual portfolio.
My biggest profit is a gain of 199.1% in Kidman Resources [ASX:KDR]. And I’ve had many more stocks rise by over 100%. As you’ll often hear me say, let your profits run.
I’ve also had my share of losses. But these are mostly small in comparison. The average loss for stock currently in my portfolio is around 10%. This is because I sell losing trades quickly.
So that’s a bit of my story.
Algorithms have made my trading more consistent than it’s ever been. They also identify stocks that I’d never find on my own, and greatly reduce the time it takes to manage my portfolio.
I’ll let you judge whether algorithmic trading is for you.
But for me, there’s no better way to trade.
So that’s all for this week. If you’re watching this anywhere other than my website motiontrader.com.au then come over and have a look. That’s where I have all the free stuff. I think you’ll like what you find. And if you liked this video, or even if you didn’t, scroll down and let me know what you thought.
So until next time, I’m Jason McIntosh, and let’s find some trends this week.