Model Portfolio Recap

Starting Monday we will post early morning each day to give you insight to opportuniteis for the day ahead... Learn the Discipline (see our posts beginning Monday Feb. 2 under Learn the Discipline) Almost five years ago we developed a paper trading strategy referred to as One Green Arrow. The strategy was taught as a paper trading and not as a real money strategy because it generates a lot of trades. Generally the strategy generates more potential trades than a trader trading real money wants to take. The purpose of the strategy was to help a trader identify trades in a mechanical-like process and give them a large number of practice trades because the skill of trading is learned by trading. Just like any other skill repetition is the key to skill development. The strategy starts with a watchlist of fundamentally sound stocks. Those fundamentally sound stocks were selected using a scoring system with a Phase 1 and Phase 2 score. The stocks are monitored each day for price crossing above the 30 DMA. That is the buy signal. The stop is placed 3% below the 30 DMA. As the 30 DMA moves up the stop is moved staying 3% below. If the stock started trending the trailing stop became the ultimate exit. In past up trends, some of the stocks have run for 3 to 6 months before falling 3% below the 30 DMA and generated significant percentage gains. If the stock failed to trend then the position would stop out within in several days. Since the strategy is an intermediate term strategy it produces small losses in a very short period of time while a good trending winner will take four to six weeks or longer to develop. The strategy is not for impatient traders who want instantaneous results. The strategy is an intermediate term strategy, looking for stocks that have the potential to run in an uptrend for four weeks or longer. Of course not all buy signals lead to such a trend. The strategy works best when the market is in an uptrend. In a sideways trend it will still generate plenty of practice trades but those trades will not lead to as many intermediate term up moves. We have been publishing our Stocks to Watch on Day of the Week list since early November when the market established its current uptrend. We had offered no explanation of how to use that list and provided it for those who were already aware of the strategy or who might use a 30 DMA entry signal with some other strategy. Starting on Tuesday we are taking the 30 DMA signals in our watchlist and creating a model portfolio for readers to follow. We will be using the core concept of the One Green Arrow Strategy but will do so with modification since the purpose is not just to generate a lot of paper trades. Since the market is in a sideways trend we will use some discretion on our entry and exits. We may use limit orders on entry and initially miss an entry, we may postpone entry until after earnings and we may wait for the first pullback after the signal as a potential entry. We will also adjust the watchlist and include some other highly liquid stocks from time to time even though they may not have met the traditional One Green Arrow fundamental screen. We will report through out the week on entries and then summarize where the portfolio is each weekend. We want to reiterate that this is an intermediate term strategy and we would expect mixed results while the market stays in a sideways trend and for the first few weeks of operation until any good trends we get into have a chance to develop. If you are a hyper-short-term trader this will be a lot like the old fable of the tortoise and the hare. Just remember the tortoise didn’t look that good in the beginning but in the end won the race. We are beginning with a $152,000 account balance and looking to make stock trades only and will put approximately $2,000 amount in each trade in the beginning. Entry and exit trades will be placed in a real-time virtual account so it will simulate the placement of real trades.