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ICT Mentorship Core Content - Month 10 - Stock Trading - Using Options
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ICT Mentorship Core Content - Month 10 - Stock Trading - Using Options

Introduction

In this section, the speaker introduces the topic of stock trading and valuation. He emphasizes the importance of having Investors Business Daily as a resource for investors.

Importance of Investors Business Daily

  • The speaker recommends Investors Business Daily as a valuable resource for investors.
  • He believes that it provides the best fundamental slant on stocks compared to other resources.
  • The speaker suggests that everything he talks about in this lesson will be highly dependent upon knowing or getting familiar with Investors Business Daily Newspaper.

How to Access Investors Business Daily

  • The speaker recommends subscribing to Investors Business Daily with a free four-week trial subscription.
  • Alternatively, you can buy the newspaper once or twice a month from a local newsstand.

Importance of Reading William O'Neill's Book

  • The speaker recommends reading William O'Neill's book "How to Make Money Trading Stocks" as it is an excellent resource for learning about stock trading.
  • However, without using Investors Business Daily Newspaper, the information in the book may not be useful.

Conclusion

In this section, the speaker concludes by emphasizing his love for Investors Business Daily and how it has helped him become successful in his trading career.

Final Thoughts

  • The speaker expresses his love for pouring over the weekly printed edition of Investors Business Daily and how it has helped him become successful in his trading career.

Introduction to Valuation Selection on Growth Stocks

In this section, the speaker introduces the concept of valuation selection on growth stocks and explains how it can lead to big stock surges. The speaker also discusses the acronym CAN SLIM, which is used for stock analysis.

Fundamental Basis for Stock Analysis

  • The speaker uses the CAN SLIM method for stock analysis.
  • The first portion of the acronym is C, which stands for current earnings. The speaker looks for stocks with earnings growth of at least 25% in the last reported quarter and larger growth is even better.
  • Earnings acceleration over the last three quarters is also important.
  • The A in CAN SLIM stands for annual earnings. Annual earnings growth of at least 25% each of the last three years is ideal.
  • Best margins in industry group and return on equities at least 17% are also important factors.

New Factor and Timing

  • N in CAN SLIM stands for new factor. Companies with something new such as a new product or service, leadership, management, price high or condition in industry are selected by this method.
  • Timing the market is an important aspect that William J O'Neal's approach did not cover sufficiently according to the speaker. Seasonals and fundamentals together help with timing.

Conclusion

The speaker emphasizes that real stock selections and going through the process will help understand these concepts better. He plans to demonstrate this process during a live session later on.

Can Slim Methodology

This section discusses the Can Slim methodology for stock investing.

New Horizon Opportunities

  • Look for new companies or companies with fresh ideas.
  • Changes in management can spur new interest in buying.
  • Identify stocks with strong current and annual earnings.
  • Search for any new developments or products that could draw investor attention.

Supply and Demand

  • The law of supply and demand is a basic economic principle that affects the stock market.
  • Strong demand for limited shares will push up prices, while oversupply of shares and weak demand will cause prices to decline.
  • Look for well-valued stocks above $20 per share with a reasonable float (outstanding number of shares).

Leader in Laggard

  • True leaders are companies showing the best earnings growth, strongest sales, and superior price performance in leading industry groups.
  • Consider buying high and selling higher by using relative strength analysis to identify leadership issues.
  • Results from William J O'Neill's company Investors Business Daily show that "the strong got stronger."

CAN SLIM Trading Strategy

In this section, the speaker introduces the CAN SLIM trading strategy and explains its various components.

Institutional Sponsorship

  • The "I" in CAN SLIM stands for institutional sponsorship.
  • Institutional support is important in tracking stocks.
  • Mutual funds, pension funds, and banks are the big players that drive the market in stocks.
  • For a stock to be a top performer, it has to have institutional support to fuel its price moves.
  • Suggests buying stocks that have at least 10 mutual funds that own it and have two to three quarters of increasing institutional sponsorship.

IBD Ranking System

  • IBD's ranking system saves time by providing information on all stocks that fit specific criteria.
  • The stock table provides information on all these stocks.
  • IBD also has a stock scanner for those who like to do those types of things.

Market Direction

  • The "M" in CAN SLIM stands for market direction.
  • Three out of four stocks follow market trends, so you should only be buying stocks in a confirmed uptrend.
  • Protect your capital during corrections.

Dow Theory

  • Dow theory is all you'll ever need in terms of technical analysis for stocks.
  • Coupled with how he looks at institutional sponsorship and order flow and premium and discount arrays simple stuff applied with Dow Theory as confirmation looking at quarterly shifts and seasonal tendencies is how they time the market.

Seasonal Influence

  • Studying the market right before seasonal impact can help identify companies showing evidence of strong earnings annual earnings are increasing they have new products or management drawing attention

and reasonable open float for shares that are existing that can be purchased.

Seasonal Tendencies for Stock Market

In this section, the speaker talks about seasonal tendencies in the stock market and how to use them to make investment decisions.

Basic Rule for Buying and Selling Stocks

  • The basic rule is to buy stocks from February to May, sell stocks from May to mid-September, and then buy stocks again from mid-September to the end of the year.
  • The speaker emphasizes that it's important to understand when large deep-pocket investors (smart money) are looking to operate as buyers or sellers.

How to Filter Out Stocks

  • During times when we're looking to be a buyer of stocks, we should filter out stocks that are already showing leadership and failing to make lower lows.
  • Investors Business Daily can be used as a resource. We can use their institutional sponsorship rating column in their smart readings section.
  • The speaker will go through all the stock tables during fall analysis. He will sort through 7,500 stocks using fundamental and technical analysis.

Darlings of the Dow and Dogs of the Dow

  • The speaker will go through both concepts during fall analysis.
  • Darlings of the Dow: Strongest index stocks for S&P, Dow, and NASDAQ
  • Dogs of the Dow: Another stock selection concept that can be found with a Google search.

Finding Strong Leadership Stocks

  • The speaker looks at timing the market while finding strong leadership stocks.
  • Investors Business Daily has fundamentally ranked stocks with relative strength ratings in their IBD smart tabs. However, sometimes they won't have enough technical support.
  • The speaker emphasizes that there are many stocks out there to follow, and it's important to find the ones that have large institutions pouring money into them.

Introduction to High Growth Stocks

In this section, the speaker introduces high growth stocks and explains how they differ from index stocks. He also discusses the importance of Investors Business Daily as a tool for front running.

Characteristics of High Growth Stocks

  • High growth stocks can have explosive growth on the upside but can also come down quickly.
  • Investors Business Daily is a great front running tool for high growth stocks.
  • The stock selection process for valuation on high growth stocks involves blending in technical analysis of institution order flow Market structure and premium and discount array modeling.
  • Blue ribbon results are achieved by using divergence between three averages.

Money Management Rules

  • William J Neal's advice to risk up to eight percent for each stock is not necessary.
  • Money management rules will be taught through practical application.

Buy and Hold vs. Velocity Trading

  • The speaker does not believe in the buy and hold mentality but rather in buying, holding it for something at a premium, letting others fall in love with it, and selling it to them.
  • Traders who swing trade these stocks take out profits and reinvest those new profits into another move make more money than investors who keep their money tied up waiting for stale markets to push these stocks up higher.

Conclusion

  • There will be instances where you potentially would have had a really long-term hold but traders that buy and hold keep their money tied up while traders that take out profits make more money.

The Importance of Swing Trading

In this section, the speaker emphasizes the importance of swing trading in the stock market and explains why day trading is not a viable option.

Swing Trading vs. Day Trading

  • Day trading is not recommended as it is considered gambling.
  • Institutional sponsorship moves stock prices, making long and drawn-out moves that are ideal for capturing swing trades.
  • Mutual funds, pension funds, and insurance companies pour money into stocks over time, which propels share prices higher.
  • Smart money cannot take on their position at first price; they have to keep building it up by buying at higher prices.

Applying Concepts in Live Market Conditions

In this section, the speaker discusses how to apply the concepts he has described in live market conditions.

Divergence in Market Averages

  • Wait for September to November when there is divergence in the three major market averages.
  • When foolish divergence occurs and the market is traded down into a discount, apply all these concepts.

Using Investors Business Daily (IBD)

  • Use an IBD edition from that week to see how it's done with current information.

Sampling Index and Growth Stocks

  • Have a sampling of index and growth stocks to choose from.

Conclusion

The speaker concludes by wishing good luck and good trading until next lesson.

Playlists: 2017 ICT Private Mentorship Core Content Month 10
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in June 2017. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.