How do I subscribe to Trade Anatomy?
To subscribe to Trade Anatomy, simply go to the Subscribe page and follow the steps necessary to become a member. For convenience all membership subscriptions are handled through Paypal.
What happens after I subscribe to Trade Anatomy?
You'll receive a confirmation email welcoming you to Trade Anatomy. Following your confirmation email, you'll have access to all the member areas of Trade Anatomy.
When do I receive an email of a additions or deletions to the Trade Anatomy portfolio?
Email's are sent immediately for all additions and deletions to the portfolio that day. You can also log in and view the Trader's Corner page after 8 pm CST each day with all updates.
If I'm new to Trade Anatomy, how should I use the open position's page?
How you use the open position's page will depend on when the trades were initiated, and where the current price is relative to our entry price. If the current position has been held for awhile and has appreciated in value then it might be best to wait for a pull back to support. However, if the new position was recently placed and is near the entry price then you might find it acceptable to use.
How do you determine your position size for each trade?
For the Trade Anatomy portfolio, our position size is determined by first knowing how much we are willing to lose on a particular trade. For example lets say I'm willing to lose .50% of my total portfolio value on one trade. The amount and number of shares to purchase will also depend on my initial stop value. Below is a quick example.
Portfolio Value=$100,000 Risk %= .50 Entry =$50 Exit=$45 Amount I'm willing to lose is $100,000x.50%=$500 so 500/(50-45) is equal to 100 shares. 100 shares x 50=$5000 or 5% of my total portfolio value. The one caveat to this rule is that the position size will not be greater than 15% of my total portfolio value.
Note: Many traders prefer to invest a fixed % for each trade as well as have a fixed % stop based on their entry price. For example, I might invest 5% of my capital on each trade and allow the stock to lose 10% before selling. If I buy a $50 stock and my account value is $100,000 then I'm going to purchase 100 shares and be willing to lose $500. At first glance, both methods appear identical, but further investigation will explain the key difference.
The difference is the first method relies on an initial trailing stop set below the entry price which will vary for each trade. Sometimes it will be 8% away while other times it could 15% away from our entry price. The second method is always a constant % away from our entry regardless of where a logical stop should be placed. Many times a fixed % stop can create unnecessary whipsaws which is why we prefer the first method.
What is an initial stop and how do you determine where to place it?
The initial stop is the price at which your trade is no longer valid and should be removed from the portfolio. It's also used to determine our position size and when set correctly will keep whipsaws to a minimum. It's important to develop your initial stop criteria based upon your trading methodology's time frame. For example if you are a day trader then a 10% stop in a stock is probably not going to work, likewise, if you are trading for longer term trends than a $1 dollar drop on a $100 stock won't work either. When you observe our charts you'll notice a fuchsia colored line and a blue line. The fuchsia colored line is our initial stop while the blue line is our trailing stop. Both were developed based on our specific trading style which helps create a higher percentage of risk/reward outcomes.
When do you decide to exit a trade?
There are several ways in which we decide to exit a trade.
- The price closes below our initial stop loss value.
- Once a stock has appreciated in value, the trailing stop's value will then be greater than the initial stop value. When this happens, we then switch to the trailing stop to determine our exit. An exit occurs when the price closes below the trailing stop.
- Another determining factor is the use of a trading indicator specific to Trade Anatomy that occurs during a strong price trend move in a stock. Depending on when this happens it could cause us to sell our position or adjust our trailing stop closer to the current price.
- If for some reason a particular stock is slow in appreciating in value it can be removed, especially when new candidates are emerging.
Why focus on closing prices when a new trade is first initiated?
Through many years of researching big historical winners as well as our own trades, it was clear that closing prices help eliminate whipsaws. During the first few weeks it's important to stay focused on closing price values. All of our indicators are based on closing prices to determine their values. This allows us to stay focused and trust our trading process. Many times the price can move below our initial stop or trailing stop during the day, only to close above the stops by the end of the trading day. By using closing price we're able to eliminate a lot of trading noise. The noise produced by intraday price swings generally results in over trading a portfolio and poorer long-term performance.
What is the average hold time for each position?
Trade Anatomy attempts to find stocks which exhibit characteristics found in stocks that produce big trends. It's not suited for those looking to day trade. Swing traders, on the other hand, with time frames of 4-14 days have had success with our trades because many trades will have a momentum burst during the first few weeks during the initial breakout phase from a long base. Generally we are looking for trades that will last between 7-20 weeks depending on the strength of the trend. However when we are wrong and our stop loss is hit, we sell regardless of time.
How would you describe your trading methodology?
The trading methodology used by Trade Anatomy encompasses both discretionary aspects as well as systematic aspects. The discretionary side of trading is most often used when we are deciding on which stocks to trade, when to enter the trade, or which stocks to add to the watchlist based on our screens. The systematic aspect is brought into play based on our position sizing and exit rules. If you study many of the best traders, you'll quickly learn that some are more rules based while others are more discretionary. There is no right or wrong, if the end result that they are seeking to achieve is met. Remember trading is not a perfect science, but with study, time, and practice you can develop a trading methodology that has a positive expectancy.
How do you screen and find potential trades?
Trading setups are brought forward using a fundamental and technical screen. The screen looks to identify possible candidates based upon key historical markers that were present in past big winning stocks. This initial screen scrubs stocks down to a manageable list that can then be searched visually for constructive trading patterns. The purpose of our screen is to have a pool of stocks with a high concentration of potential big winning trade candidates. The screen won't capture all of them but has historically brought forth a large quantity. A key point to remember is that these setups are purely discretionary, but have a complimentary systematic framework built around them.
Is the portfolio always 100% invested?
Absolutely not. The model portfolio will range from 100% cash to 100% invested. The amount invested is just a byproduct of current conditions. When trends are strong the portfolio will be more heavily invested, and when trends are weak the portfolio will be less invested.
If the portfolio is 100% long do you still post trade ideas from the watchlist?
Yes, trade ideas which can not be added to the portfolio are still emailed and posted in Trader's Corner each day by 8 pm CST. Their performance is also tracked on the portfolio page. Many times some of the best trade ideas will be those from the watchlist which is why you should pay attention to all trade ideas posted.
Does Trade Anatomy invest money based on the trade ideas posted?
Yes, my portfolio invests in ideas given on our website. One variable to consider is the trade's position size. As an example I might choose to invest 8% of my capital in one position where you might only feel comfortable with 4%. Every trader has a level of comfort with regards to risk that varies. As a trader you should always try and stay inside the level which allows you to execute your trading system time and time again. It's important to remember that the Trade Anatomy portfolio is simply a guide to help you understand the importance of position sizing, risk management, and having a trading process that you can trust.
How do I cancel my subscription?
If for some reason you decide that Trade Anatomy is not for you, please log in to your Paypal account and cancel the service. For more information about cancelling your subscription, please review Membership Policies.
What if I have other questions then the ones listed here?
Please use the contact us page and I will try to answer all your questions.