How I Outperformed the S&P 500 for 16 Consecutive Months
With over 25 years of trading experience, I’ve recently been able to outpace the S&P 500 for 16 consecutive months, achieving an impressive 110% annual return. Here’s how I’ve refined my investment strategy to consistently achieve these results.
My Journey from Value Investing to Strategic Trading
Two and a half decades ago, inspired by Warren Buffett, I ventured into the world of long-term value investing. While I still dedicate a portion of my portfolio to this traditional approach, my investment technique has evolved significantly over the years. After the COVID-19 pandemic, I began exploring day trading, blending it with my value investing knowledge to navigate market volatility. This metamorphosis led me to develop a robust system that has driven significant portfolio growth.
Last year alone, I realized a 110% increase in my portfolio, and in 2024, it’s already up over 30%, maintaining a win rate above 75%. The key to my success lies in a methodical and automated approach to understanding market trends, which I execute with precision.
My Proven Strategy: Combining Automation with Tactical Insights
My current methodology leverages automated systems to detect short-term trends, typically spanning one to four weeks, in particular sectors or markets. Here’s how I approach the market:
Market Screening Techniques
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Focus on Growth: I identify companies with steady revenue and earnings growth, focusing on those with a market cap exceeding $2 billion to concentrate on growth-oriented businesses.
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Consider Analyst Opinions: Companies with new analyst buy ratings catch my attention as they suggest institutional confidence, which frequently leads to positive price movements.
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Seek Volatility: As a swing trader, I thrive on volatility, enabling me to capture short-term gains. My target is stocks with a one-month volatility exceeding 2.5%.
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Steer Clear of Earnings Announcements: To evade unnecessary risks, I avoid stocks with impending earnings releases within two weeks.
This rigorous filtering process usually reduces my watchlist to about 50-150 potential stocks, from which I further narrow down based on momentum indicators.
Selecting Momentum Stocks
To finalize my selections, I employ a combination of technical indicators and price-volume analysis:
- Momentum Analysis: Utilizing volume-weighted RSI and Heikin Ashi candles helps identify stocks that are gaining momentum, refining my list to 10-20 stocks poised to
One response
Your strategy of consistently outperforming the S&P 500 is certainly impressive, and there are several key insights and practical takeaways here for aspiring traders. Let’s delve into what might be contributing to your success and how others might adapt similar principles to their own trading practices.
1. Blending of Strategies:
Your approach is an excellent example of blending different investment philosophies—value investing with volatility trading. By maintaining a long-term value investing strategy alongside a short-term trading approach, you’re diversifying not just your asset allocation but also your investment time horizons. This dual strategy allows you to capitalize on various market conditions, potentially reducing overall risk while maximizing return opportunities.
2. Strategic Stock Selection:
The process of filtering stocks using criteria such as consistent growth, positive analyst ratings, and specific volatility metrics is valuable. It ensures that you focus on stocks that have inherent business strength with the potential for short-term price movements. This approach helps narrow down the vast universe of stocks to a manageable watchlist, making it easier to act decisively.
3. Emphasis on Momentum Trading:
Your use of technical indicators such as volume-weighted RSI and Heikin Ashi candles is noteworthy. These tools provide a robust framework for identifying momentum, a critical element for short-term trading gains. Using momentum indicators not only assists in identifying entry points but also aids in enforcing discipline through hard stops.
4. Rigorous Risk Management:
By focusing on momentum-based stops rather than purely price-based stops, you enhance your risk management framework. This tactic likely contributes to your high win rate, as it prioritizes cutting losses quickly and letting winners run.
5. Tools and Execution:
The utilization of tools like TradingView for screening and Thinkorswim for