​

Unbounded Wealth: John's Take

90% Winners are for Losers

I’m sure you’ve seen this.

If you've ever read a sales promotion for an investment newsletter or subscribed to one, you may have encountered a strategy that "wins" 90% of the time.

It’s an easy sell.

People want to be “right”.

You feel good if you're "right" 90% of the time.

Marketing people know this.

They are preying on your emotions.

There’s no room for emotions in successful trading.

But it's human nature to want to be right.

Markets change.

Human nature never does.

Great traders could care less about being right.

They care about making money.

Over the past 25 years, I have met many top traders, greats profiled in Market Wizards, and billionaires.

One thing they have in common is that a small percentage of their trades account for all their gains.

As little as 10%.

They don’t win 90% of the time.

90% winners are for losers.

When you see those strategies, ruuuuuuuuunnnnnnn…

Great traders manage risk better than most.

90% winners win often only to eventually take a big loss and wipe you out.

Happens all the time.

Those strategies are devoid of solid risk management.

One of those great traders and risk managers is the billionaire hedge fund manager Paul Tudor Jones.

Mr. Jones famously made $100 million when the market crashed in 1987.

That’s back when $100 million was $100 million.

It was a lot of money.

I have never met Mr. Jones, although I do have an acquaintance with one of his former "right-hand men."

Jones taught a class at the University of Virginia where he told his students, "I'm going to save you from going to business school. Here, you're getting a $100k class, and I'm going to give it to you in two thoughts, okay? You don't need to go to business school; you've only got to remember two things. The first is that you always want to be with whatever the predominant trend is.

My metric for everything I look at is the 200-day moving average of closing prices.I've seen too many things go to zero, stocks and commodities. The whole trick in investing is: "How do I keep from losing everything?" If you use the 200-day moving average rule, then you get out. You play defense, and you get out.”

Most individual investors don’t beat the market.

Most professional investors don’t beat the market.

Jones’ lesson provides a valuable technique for doing just that.

Below I created and tested a simple trend-following strategy based on Jones' free $100,000 lesson that has beaten the market, and most investment managers, with less risk over the past twenty years.

Here’s the rules:

Buy the market when the S&P 500 closes the month above its 200-day moving average.

When the S&P 500 closes the month below its 200-day moving average. Hold long-term treasury bonds.

That’s it.

Nothing more.

Here’s the results:

Since 2003, this simple strategy, which trades less than three times per year, has generated about 40% higher returns than the market (1,157% vs. 843%), with about 70% of the risk (38% drawdown vs. 55% drawdown).

The strategy “wins” 67% of the time. Not 90%!

It takes a couple of minutes a month to implement, and there’s no need for sophisticated software.

You could fire your financial advisor and not pay them fees.

Fees which would eat into half of your retirement savings over a 30-year period.

Now…can you do better than this?

Absolutely.

Much better.

I have developed systems that quadruple the return with a quarter of the risk.

All my Unbounded Wealth strategies contain an element of trend following.

It's a key component of stellar performance in both testing and real-time.

Higher returns + lower risk = Holy Grail

More on that for another time...

​

Got a question or comment? You can contact us at info@hsdent.com.

DISCLAIMER:

THIS COMMUNICATION IS FOR EDUCATIONAL AND INFORMATION PURPOSES AND DOES NOT CONSTITUTE INVESTMENT ADVICE. Any Publishing Service offered by HSD Publishing is for educational and informational purposes only and should NOT be construed as a securities-related offer of solicitation or be relied upon as personalized investment advice. HSD Publishing strongly recommends that you consult a licensed or registered professional before making any investment decision.

THE RESULTS PRESENTED ARE NOT TYPICAL OR VERIFIED. HSD Publishing has not verified information regarding the historical trading performance presented. Subscribers' trading results have NOT been tracked or verified, past performance is not necessarily indicative of future results, and the results presented in this communication are NOT TYPICAL. Actual results will vary widely given various factors, such as experience, skill, risk mitigation practices, market dynamics, and the amount of capital deployed. Investing in securities is speculative and carries a high risk; you may lose some, all, or possibly more than your original investment.

HS DENT IS NOT AN INVESTMENT ADVISOR NOR A REGISTERED BROKER. Neither HSD Publishing nor its owners or employees is registered as a securities broker-dealer, broker, investment advisor (IA), or I.A. representative with the U.S. Securities and Exchange Commission, state securities or regulatory authority, or self-regulatory organization.

WE MAY HOLD THE SECURITIES DISCUSSED. HSD Publishing has not been paid directly or indirectly by the issuer of any security mentioned in the Services. However, HS Dent, its owners, and its employees may purchase, sell, or hold long or short positions in securities of the companies mentioned in this and future communications.

John Del Vecchio is not an employee or partner of HSD Publishing. HSD Publishing serves solely as the marketing arm for John Del Vecchio and Unbounded Wealth: Max Profits.

© 2024 HSD PUBLISHING. ALL RIGHTS RESERVED. 15016 Mountain Creek Trail Frisco, TX 75035.