Tim Cho - Winning System for Trading High-Performance Stocks

Developing a Winning System for Trading High-Performance Stocks TIM CHO TCI CORPORATION www.tcicorp www. tcicorp.net .net 800-992-4625

Trading plan 1.

Select high performing stocks

2.

When to buy and when to sell

3.

Money management

4.

Risk management

Stock selection Criteria – Long Position 1.

EPS rank 90 or higher

9.

Grow Gr owth th ra rate te (a (ann nnua uall com compo poun und) d) 25 25% % or or hig highe her r

2.

Rela lati tiv ve str stre eng ngtth (R (RS) 90 hi hig ghe her r

10.

3.

SMR rank A

Consecuti Consec utive ve yea yearly rly ear earnin nings gs inc increa rease se (min (min.. 2 years)

4.

Accumu Accu mula lati tion on/D /Dis istr trib ibut utio ion n (AC (ACC/ C/DI DIST ST)) A Or if accumulation/distribution (ACC/DIST) is B, timeliness must be an A ranking to select the stock

11.

Strong Stro ng earn earnin ings gs esti estimat mate e (next (next two two year years) s) 20% 20% or higher if earnings estimate only available for one year; increase consecutive yearly earnings increase to (min. 3 years)

5.

Timeliness A Or if timeliness is B, accumulation/distribution (ACC/DIST) must be an A ranking to select the stock

12.

Earni Ea rning ngs s incr increas ease e last last 2 quar quarter ters s 25% 25% or high higher er

13.

Last La st 4 qu quar arter terly ly sal sales es inc increa rease se 20% 20% or or more more

14.

No de debt bt or ve very ry low de debt bt (l (les ess s tha than n 30%) 30%)

15.

Top 3 stock Top stocks s in the the same same ind indus ustry try po poss ssess ess hi high gh RS rankings 90 or higher

16.

Fund Fu nds s and and ba bank nks s own own to total tal of 5% or mor more e

6.

Grou Gr oup p rel relat ativ ive e str stren engt gth h 85 85 or or hig highe her r

7.

Number Numb er of of outs outsta tand ndin ing g shar shares es – 20 200 0 mil milli lion on or less (the lower the better)

8.

Floa Fl oatt – 17 175 5 mil milli lion on or le less ss (t (the he lo lowe werr the the be bett tter er))

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#1. EPS rank 90 or higher


#2. Relative strength (RS) 90 or higher


#3. SMR rank A


#4. Accumulation/Distribution (ACC/DIST) A Or if accumulation/distribution (ACC/DIST) is B, timeliness must be an A ranking to select the stock


#5. Timeliness A Or if timeliness is B, accumulation/distribution (ACC/DIST) must be an A ranking to select the stock


#6. Group relative strength 85 or higher


#7. Number of outstanding shares – 200 million or less (the lower the better)


#8. Float – 175 million or less (the lower the better)


#9. Growth rate (annual compounded) 25% or higher


#10. Earnings increased from previous year


#11. Strong earning estimate (next two years) 20% or higher if earnings estimate only available for one year; increase consecutive yearly earnings to minimum 3 years


#12. Earnings increase last 2 quarters 25% or higher


#13. Last 4 quarterly sales increase 20% or more


#14. No debt or very low debt (less than 30%)


#15. Top 3 stocks in the same industry possess high RS rankings 90 or higher


#16. Funds and banks own total of 5% or more


Stock selection Criteria – Short Position 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

EPS rank 35 or lower Relative strength (RS) 35 or lower SMR rank c, d or e Accumulation/distribution (Acc/Dist) D or E Timeliness D or E Group relative strength 45 or lower Growth rate (annual compounded) 10% or lower Earnings estimate (next two years) 5% or lower Earnings increase last 2 quarters 5% or lower Last 4 quarterly sales increase 5% or lower

Stock selection for trading both sides of the market (long and short) The system is designed to trade any stock that moves in big trading ranges, up and down. The more volatile the stock, the better the system will perform. Look through Dailygraphs; use any stock that has a big trading range moving up and down. Input the stock into the TCI SOFTWARE and look at the historical spreadsheet on the performance of the stock. If the performance looks good and you feel the stock will continue to be volatile, you may want to select the stock to trade.

The Most Important Element to Trading Success: Knowing When to buy and when to sell

System Trading

Stocks, S&P futures and NASDAQ futures markets historical time cycle correlation •• Market Bias – (Use the previous day’s cash market data of S&P 500, NASDAQ and DOW JONES) Use the lowest and the highest price between 14:00 to the end of 14:29 time period as the goalpost, look for the first break out within the next 30 minute (between 14:30 to 14:59) •• Market condition – Use %D on the daily chart 0 to 40 over sold, 41 to 60 neutral and 61 to 100 over bought. •• Market direction – Use %D on the daily chart and the bend direction is the market direction. •• Time frames when major institution and big market player come into the market – (stocks, S&P futures and NASDAQ futures market) between 14:30 to 15:00, (S&P futures and NASDAQ futures market) at 15:40 and again at 15:45 to 16:15 •• Most major economic news announcements are at 8:30AM and 10:00AM EST. •• Best intraday trading (long and short position) move: EST 10:00 to 11:00 and 14:30 to 16:00 •• Best swing trading (long position) performing days of the week – Monday, Wednesday and Friday •• Best swing trading (long position) performing days of the month – First 3 days and last 4 days. •• Best swing trading (long position) performing months of the year – November, December and January •• Best swing trading (short position) performing months of the year – February, June, September and October

Money Management 1.

The total trading capital for day trading should be no more than 5% of your trading assets.

2.

The total trading capital for swing trading should be no more than 25% of your trading assets.

3.

The total trading capital for long term trading should be no more than 50% of your trading assets. The increase of trading capital goalpost is based on 50% reinvestment of your gross profits.

4. 5.

The key to success is discipline; keep your trading capital small until you develop your skill to move up to the next level. You have to earn your way up. Our goal is to use the powerful compounding trading mathematics to build your account size. Everyone has a different timetable to develop the trading skills. To be successful in trading you need to have a plan to defeat the market. The system is a part of the plan, but before you trade you have to know your limitations. Everyone has a different timetable to develop the skills to control the emotions of trading.

What are the most common mistakes most traders make?

Failure to cut loses % Loss of Trading Capital 5% 10 % 15 % 20 % 25 % 30 % 35 % 40 % 45 % 50 % 55 % 60 %

% Gain Required to Be Even 5.3 % 11.1 % 17.6% 25 % 33.3 % 42.9 % 53.8 % 66.7 % 81.8 % 100 % 122 % 150 %


What Are The Most Common Mistakes Most Traders Make? • A)

Trading before acquire the necessary knowledge and education

• B)

Trading more money than they should – Lack of discipline and patience

• C)

Lack of money management and risk management skills

• D)

Increase position size after losses to try and make it back

• E)

Trading with negative emotions

• F)

Basing trading success on winning trades vs. losing trades.

• G) Trading without a proven trading plan, a proven system or a proven methodology. • H) Taking small profits and letting losses run: the primary rule to successful trading should be cutting your losses short and let your profits run.

What is a successful trader’s psychological make up? • • • • • • • • • • • •

A) Commitment B) High level of discipline C) High level of self-control D) Financially stable E) Know your limitations F) Self-motivated, driven and have a burning desire to succeed G) Patience H) Meticulous, detail oriented I) Positive thinker J) Decision maker - Have the aptitude and the ability to make sound decisions K) Leader L) Persistence

What characteristics are needed to be a successful trader? 1)

2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13)

High level of discipline - follow the trading rules: a. Cut losses. b. Let profits run. c. Keep trading capital small. d. Follow all the system rules. High level of self-control Financially stable Know your limitations Self-motivated, driven and have a burning desire to succeed Controlled emotions Patience Meticulous, detail oriented Positive thinker Decision maker - Have the aptitude and the ability to make sound decisions Leader Commitment Persistence S

C


What individual characteristics are not suited for trading? A) Lack of discipline – Guarantee you will fail B) Lack of self control C) Lack of commitment D) Afraid to make decisions E) Under capitalized F) Out of control type, or overly aggressive individual G) Highly and easily stressed individual H) Negative thinker - negative outlook on life and always expecting the worst I) Likes to blame others when things go wrong J) Disorganized K) Impatience L) Crowd follower - this is a sure way to lose money M) Compulsive gambler


Tim Cho - Winning System for Trading High-Performance Stocks

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