After further contemplation it has occurred to me that there probably ought to be two trading strategies for optimized chances of longer term success. The 5% and 10% Cheetah Trading System strategy being the first, and then a 30% Cheetah Trading System ‘Big Pattern’ Strategy as the second.
At this point I am thinking it better to continue with the second ‘Big Pattern’ Strategy going forward. Depending on how it works out, I will then make the next attempt the 5% and 10% Cheetah Trading System Strategy.
The reason why is because I am slowly coming to the firm conclusion that fewer trades out of bigger patterns is the best approach to long term trading success. If you are reading this then you are probably familiar with a man named Warren Buffett. If you are not, then just know that he is probably one of the top 10 investors of all time. I would not consider him a trader. But he has sold positions and bought them over very long periods of time. His tendency is to buy and hold for a VERY long time. By doing so he has become extremely wealthy. He has bought brand name companies with very strong long term sustainable economics.
So as crazy as it may sound, I like to think of the Cheetah Trading System 30%er strategy as a ‘Mini Warren Buffett Swing Trader’ type strategy. It is a strategy where targeted trades are made out of big patterns and are then ‘held’ but not ‘forever’. Only for targeted time durations. So I am applying part of the principle of Warren Buffett’s success except that I am doing it from a trader’s mindset, not a fundamental one. I am also applying the principle of compounding (which Warren Buffet always credited as key to longer term success), but on my own terms, not on annual buy and hold terms.
Trading big patterns in my mind is maybe the most rewarding type of trading because it does not rely on daily nervous exits and intra day volatility which can make for very tricky trading. Instead it works off of the principles of cause and longer term intermediate trends which are much more reliable.
Exactly what defines a ‘big pattern’ is somewhat open to debate. In my mind it should be a pattern that has at least 6 months of cause and preferably 1 to 3 years of cause. These big fish are tough to find, but over the last 15 years I have seen them show up again and again.
Both strategies could be compared side by side and each would have some benefits and some drawbacks. Of course a combination of both strategies could be used as well, there is plenty of flexibility. But knowing what strategy you are using at any one time is very important.
If we compare each strategy I see the following differences (each strategy has ultimate aim of reaching 1 million dollars from an X starting capital amount).
|
5% and 10% Strategy |
30% Big Pattern Strategy |
| LOTS of Trades, 200 or more. | Far Fewer Trades 50 or less |
| Tendency to find ‘worse’ setups | Tendency to find ‘best’ setups |
| More stressed ‘baby sitting’ of trades | less ‘hand holding’ required |
| more commissions | less commissions (important for small starting capital amounts) |
| less cause to work with and thus more ‘shot gun’ type profits | Trading out of bigger ‘cause’ means less risk and more energy for trend following |
| scarcity not such a big issue, many setups for the daily time frame | Scarcity is an issue, hard to find, time consuming to find enough Big Patterns |
| daily time frame primary focus | more focused on weekly and monthly time frame |
| precision of entry still very important | precision of entry still very important |
| patience required but much less so | LOTS of patience required |
| Don’t let the trade run too long, grab the profit | Strong need to ‘let the trade run’ |
| Top Down needed but less important | ‘Top Down’ analysis required |
| Assuming no losing trades, $1000 into $1Million in 142 trades that achieve 5% each. | Assuming no losing trades, $1000 into $1Million in just 27 trades that achieve 30% |
There are probably many points I have left out but I think this is a good initial summary.
So as the first Cheetah Trading System Project I am going to focus on the 30% strategy with some possible flexibility to mix in some 5 and 10% setups as well.
Honestly I would rather just focus on the 30% strategy because it would seem to mean less worry, less baby sitting of trades and more trend following. But of course the hard part is finding the 30%ers… the big fish that are out at sea and hard to spot.
I like it Tom,
Big fish hunting I might know something about. The trick is knowing how to protect your phat fish from spoiling before you get it to the market.
Think about the mechanics of how you are going to get 1 million. That will be your guide.
Just for your info i did it in less than 30 trades.
212% since 1APR09
You have to remember the trick…
LOTS of patience required lol
Yes patience is a huge part of it and selection is another part…
Congratulations on your success.
But now I have to admit that I find it curious that I am even writing about such a strategy at this stage of the market advance. There is about 10% upside left and the real buy was in March 2009… I suspect that there are many other ‘gurus’ out there that are maybe coming up with similar ideas at this stage of the market.
One has to wonder if I would be coming up with such a strategy or system during the 2007 to 2009 decline when most all stocks were going down… probably not.. but maybe still so since there were still some individual stocks that had some good runs..
Also I notice I seem to be getting a constant and very heavy volume of investment junk regular mail. This is like 1999 all over again..
Some gurus will be right and some wrong. And maybe the big fish do lay in deeper water now… so be it. i hope to have many more years… patience, patience, patience.
I am looking at the dividends more now but i will buy the leveraged funds when the SPX dips 7-10%. maybe only once or twice a year.
kinda hard to keep a forum alive with that kinda news… 😉
maybe we should review the different types of long term indicators. 200dayavg, support and resistance lines. big trends.
And any fellow friend would say if you are a contrarian signal, then there is the reason i have followed you for over a year now.
~You are the closet thing we have to a guaranteed trade
share in the laugh
now lets see what next week brings.