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Strategies & Market Trends : Ted Warren's Investolator
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To: WEagle who wrote (1769)8/30/2025 12:03:57 PM
From: James Traylor2 Recommendations

Recommended By
investolator2000
toccodolce

   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 much wider than a swing trader). In Ted Warren's book he speaks out against "watching the market too closely" and doesn't like stop losses so I don't think he actually advised people to watch the market daily (in fact he suggests the opposite). Ted's methods are very useful for people who are working full-time and don't have time to watch the market everyday. Even though some stocks might be duds if you don't have time to watch the market daily, an overall portfolio should do well by using his methods if you properly diversify and limit position sizing (I would avoid margin/leverage as well).

In my opinion however, you can do better than Ted's traditional method by cutting losses short if you are watching the daily and weekly charts as well as the monthly charts. When a stocks breaks out on short-term and long-term time frames at the same time there is a greater chance of the stock going up from the start. This will give you cushion for when the stock inevitably has a drawdown and make it less likely you'll get stopped out (thus leading to less whipsaws). If I don't get stopped out then I just use the same sell signals on the monthly charts as Ted Warren. If you average a 10% loss when you're "wrong" and average a 200% gain when you're right then you only have to be right 4.76% of the time to breakeven. You should be right much more often than that even with the whipsaws. Disregard my previous reply where I said I use the 20-month moving average as further research indicates to me you'll get smaller gains if you use that as a sell signal.
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