It goes without saying that 2017 was exceptionally good to stock market participants. It’s hard (or stupid!) to complain when the total return of the S&P 500 was over 20%!
Even better, you can turbocharge your gains during a raging bull market by applying the 821x trading system. I’ve personally had my best year ever, capturing an over 50% gain in my IRA in 2017! That’s more than double the already spectacular performance of the market as a whole.
Our Model Portfolio put in a stellar performance as well, boosted in part by our best 821x Model Trade to date; a 127% gain on BZUN! You can see all of our top trades using our new interactive Performance Dashboard:
So how did this happen and what can we do to put ourselves in a position to be crushing it again next year?
how to generate market crushing returns
The most important factor is to consistently apply the core principles of a strong trading system:
- find stocks with good looking long-term charts and shorter-term buy signals
- set the position size correctly
- let winners run and cut losers quickly
In addition to all this, I implemented NEW rules this year to help ensure I slow down and trade less.
Trying to stay 100% invested 100% of time is a recipe for disaster. Believe me, I’ve learned this the hard way.
Instead, build rules into your trading system that limit the times you put your hard-earned money at risk by initiating new positions. Below are the rules I personally put in place in 2017 and will continue to apply going forward.
#1 new trading tactic for the new year
ONLY look for something to buy in one of the two scenarios below.
- It is the weekend AND the 5 and 50 day moving averages of the S&P 500 are both rising AND the closing price is above the moving averages.
- The closing price of the S&P 500 is above the 5 day moving average AND the 5 day moving average of the S&P 500 is rising today AND one or both of these conditions was not true on the prior day of trading AND the 50 day moving average is rising. (this can be any day of the week)
I know these rules can appear to be complicated at first glance, but actually it’s pretty simple. The first rule limits new stock purchases to weekends IF the market is rising in both the short and long term. The second rule allows for midweek purchases ONLY when a short-term pullback appears to be resuming an uptrend.
- It is the weekend and the S&P 500 info box is green.
- The S&P 500 info box was lime yesterday and is green today. (this can be any day of the week)
I am considering adding a notification feature to the app next year to automate this process even further… I’ll keep you posted.
In the meantime, if you are not happy with the returns you are pulling in, you may want to consider putting your own guidelines in place to restrict trading activity or just “steal” mine. This will become even more important when the bull market inevitably comes to an end!