This weekend I wanted to highlight a particularly important part of Roy Mattox’s Presentation at the TraderLion Conference.
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Roy is the Chief Market Strategist and Portfolio Manager at Integrated Financial Strategies, LLC and finished second in the 2021 US Investing Championship with a return of 214%
In his full presentation, Roy discussed how to find the next True Market Leaders. To close it out, he shared the 10 keys to achieving super-performance and triple digit returns.
The keys are as follows from Roy’s presentation:
1. Concentrate don’t diversify.
Five or six names are all you need in your portfolio to generate huge returns. ( Occasionally up to 10, but more than that will generally lead to lower returns and dilution). You can’t have life changing returns owning a hundred stocks. A good strategy is to start with 10 names and narrow them down to 5-6 of the best candidates.
With a small group of stocks in your portfolio, you can focus and be very disciplined in your methodology.
2. Turn over your portfolio.
You need to be able to take profits. Forgot about ego and do not worry about taxes. Do not employ a buy and hold mentality using a trading methodology.
3. Time your trades. Use Charts.
Time is money and timing your stock positions is everything.
4. Manage the risk reward relationship.
Don’t risk more than you expect to gain. Cut your losses promptly i.e. ( 5-8% generally). You can make big money being right only 60-70% of the time if you manage your losses accordingly. Approach every trade with a risk first mentality. Know where you are getting in and know where you are getting out. Write it down.
The failure to adhere to stops and cutting your losses quickly is the single most destructive mistake made by all investors.
5. Trade directionally.
Never average down in a losing position. On a pullback wait for stabilization and a turn before investing. The optimal trade is to immediately be profitable. The best stocks are the hardest to buy. They don’t seem to let you get in. It is important for the stock to go up for multiple up days on increased volume.
6. Build on Success.
Trade your largest when you are trading your best. Only get aggressive when everything is working. Let small wins finance larger risks. Build in a cushion. Don’t revenge trade.
7. When you get a profit, move the stop to breakeven.
Never let a decent gain turn into a loss. Backstop profit. Raise your stop loss as the stock continues to go up. Generally, take 20-25% profits.
8. Sell into strength.
Selling half is a win/win. Get out before the stock reverses down hard. Protect 75% of the gain when you are up 20%-25% using an automatic stop loss trigger.
9. Conduct post analysis regularly.
Results don’t lie. Improve your weaknesses. Trading successfully is all about confidence and psychology.
10. Avoid style drift. Define your trading style. Become a specialist.
There is no holy grail except managing your losses. Take responsibility. Rules are of no use unless you follow them.
I would highly recommend watching Roy discuss these keys in detail in the video below.
Roy is someone who I’ve learned quite a bit from over the past year or so and I highly recommend following him on twitter @roylmattox.
Answer this in the comments: Of the 10 keys, what do you believe is most important to achieve strong returns?
I hope you found this short article helpful! Look out for my stock market outlook post tomorrow.
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Have a great weekend!
Wow theae 10 rules will become my bible and ill post it in front of my desk to remind me everyday. In my opinion, al 10 are important but the first is definitely my favorite.
Thank you again
10 rules that are gold ..! Roy Mattox presentation was excellent..!
Thanks for this summary