{"id":758,"date":"2020-12-12T12:50:01","date_gmt":"2020-12-12T17:50:01","guid":{"rendered":"https:\/\/wordpress.zwart.tech\/?p=758"},"modified":"2026-05-05T04:46:27","modified_gmt":"2026-05-05T08:46:27","slug":"steves-stock-trading-method","status":"publish","type":"post","link":"https:\/\/wordpress.zwart.tech\/?p=758","title":{"rendered":"Steve’s Stock Trading Method"},"content":{"rendered":"\n

This is a method of value investing<\/strong>. It isn’t day trading, where one seeks to make a profit on price movements in a single day. Studies show that less than 10% of day traders are successful. I’m comfortable holding shares as long as they represent a solid investment.<\/p>\n\n\n\n

Overview<\/h4>\n\n\n\n
  1. Make these investments with pods of money you can afford to lose. In my case, I invest in single stocks $2,000 at a time in a brokerage account.<\/li>
  2. If you make frequent trades, you’ll have paperwork hassles at tax time unless you have automated import of brokerage transactions, which I use in TurboTax.<\/li>
  3. To identify stocks to purchase, run a screener based on modified stock purchase criteria from the American Association of Individual Investors Model Shadow Stock Portfolio User’s Guide.<\/li>
  4. If a stock makes the screener list, research the stock to make sure it’s viable. I don’t buy Chinese stocks and wish to buy in sectors that I feel are overlooked. Most days that I run the screener there is nothing worthwhile to buy.<\/li>
  5. Once the stock is purchased, immediately place a bracket order on the stock, which is a limit order to lock in a gain and a stop-loss order to prevent excessive loss. Most of the time, I will set the limit order at 15% to 20% gain and the stop loss at 10%. This frees you from monitoring the share price.<\/li>
  6. Monitor the pods at least every two weeks. If you’ve held a stock for two weeks and it has risen 13% you might want to cancel the bracket order and sell at the current market value.<\/li><\/ol>\n\n\n\n

    Criteria<\/h4>\n\n\n\n
    Measurement<\/strong><\/td>Rationale<\/strong><\/td><\/tr>
    Price\/Book ratio less than 1<\/td>This means that for every dollar of stock price there is at least one dollar of book value in the company.<\/td><\/tr>
    Market capitalization $20M to $750M<\/td>Smaller cap stocks are usually better for individual investors who aren’t competing in the market with institutional investors.<\/td><\/tr>
    Security price greater than $4 a share<\/td>Bad things can happen to a company when share prices drop below $4 a share.<\/td><\/tr>
    Price\/Sales ratio less than 1.2<\/td>Low Price\/Sales can indicate good value.<\/td><\/tr>
    Price\/Earnings ratio for next year less than 12<\/td>High Price\/Earnings indicates a company is overvalued.<\/td><\/tr>
    Equity Summary Score from StarMine greater than 4<\/td>Stocks are given a rating from independent research providers. Zero to 3 is bearish, 3 to 7 is neutral, 7 to 10 is bullish. This measurement is available from Fidelity Investments.<\/td><\/tr>
    Profit Margin from trailing 12 months greater than 2%<\/td>Shows consistency in generating some profit.<\/td><\/tr>
    Profit Margin in the most recent quarter greater than 2%<\/td>Shows profitability recently.<\/td><\/tr><\/tbody><\/table>
    Stock Screener Criteria<\/figcaption><\/figure>\n\n\n\n

    Example<\/h2>\n\n\n\n
    \"\"<\/figure>\n\n\n\n

    On 12\/12\/2020, 11 stocks met the whole set of criteria. To this set, I added Facebook, Exxon, and Apple to show how these popular stocks measure up to the screener. The report:<\/p>\n\n\n\n

    \"\"<\/figure>\n\n\n\n

    Apple’s Price\/Book ratio is 31 and Price\/Earnings is 28. It is not a good value investment at all. Based on the report, I’d take a closer look at CUBI and COWN. DAC shot up 9.45% the prior day. If I’d run the screener the day before, I might have bought DAC then.<\/p>\n\n\n\n

    Placing a Bracket Order<\/h4>\n\n\n\n

    Here is an example of creating a bracket order for Kroger stock, with a limit gain of 15% from today’s price and a stop-loss of 10%. Select “Set Exit Plan” and then select the Bracket Order button to create the two linked orders.<\/p>\n\n\n\n

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    Many factors influence share prices and there are no guarantees of gains. However, using this approach based on measurements can yield good returns.<\/p>\n\n\n\n


    The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice<\/em>.<\/p>\n