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Strategies & Market Trends : Ted Warren's Investolator
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To: WEagle who wrote (1769)8/10/2025 12:36:40 AM
From: James Traylor   of 1789
 
Hi WEagle,

You are right some of those stocks will never recover. I do say in my own book that if someone is following the traditional Ted Warren investolator method of not using stops that they need to spread out their bets enough so that no single dog can kill their account (I wouldn't bet more than 5% per position with that method) and also diversify by stock group (I wouldn't put more than 25% of my account in any group). When I say group I don't necessarily mean industry I mean a group of stocks that trade together/are correlated to each other. I would consider Argentinean bank stocks as a separate group from American bank stocks for instance. Another thing I find is that breakouts out of long-term bases are more reliable than a stock simply breaking above a gradual downtrend line. Oftentimes a stock will break above a gradual downtrend line then base out for years before taking off. I never buy a break above a gradual downtrend line unless the stock has already done some basing first.

You are also right that if someone is a good swing trader they can compound their money faster than an investolator, however I would say it is more difficult to accomplish and as you pointed out earlier the losses you take can quickly overwhelm the smaller gains that you cash in as a swing trader. I take the middle of the road position trader approach as I described earlier (cut losers short but let winners run wider than a swing trader). Another sell signal I use in addition to the ones Ted talks about in his book is dumping a position if it has a monthly close below the 20-month moving average. Sometimes a stock won't have a fast enough rise to warrant selling, but it gradually rose for a number of months straight and there aren't enough points to draw through for a trend line. In situations like this the 20-month MA can be a good tool to protect your profits and I find it often gives similar results to hand drawing a trend line when it can be drawn.
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