The “Kindergarten Cop” method for finding winning trades

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The “Kindergarten Cop” method for finding winning trades

In 1990, action superstar Arnold Schwarzenegger decided to roll the dice…

…he would play the lead role as an undercover detective. His assignment? Teach kindergarten to catch a murderous drug kingpin.

By all accounts, the movie should have been a flop.

The #1 rule in Hollywood — don't work with kids.

Yet it went on to gross $200 million worldwide – on a $15 million budget.

Not a bad return.

The movie sprouted numerous one-liners…“It’s not a tu-ma!”  helped Arnold bank a cool $12 million in pay for his troubles.

Sometimes you just have to say “what the hell” and take a risk.

But his decision wasn’t a total gamble. Director Ivan Reitman had plenty of hits under his belt – including Animal House and Ghost Busters…and recently Twins starring Arnold and Danny DeVito.

If Ivan backs a project, his track record has proven that he’s worth following.

Over the years, I’ve scoured the globe in search of the best traders – I listen to interviews, read books, whitepapers, masters thesis, blog posts – all in the attempt to find new ideas to beat the markets.

Most of my success has come from listening to those with proven track records – those who really trade.

It’ll take awhile, but eventually you’ll start to understand what the greats are doing behind the scenes.

Then you’ll start to build upon their ideas.

You’ll borrow one idea here, one there, then combine them like an alchemist trying to transmute lead into gold.

For example, I bought STM a few weeks ago (among others).

Here’s how those stocks are performing (not hypothetical):

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I caught some flack for buying it. “It’s too expensive!”

 

Yet here it is hitting new highs. I believe I learned about buying “expensive” stocks from superstar Peter Lynch back in the 90’s.

 

In all honesty, CANSLIM is a primitive trading strategy that has some glaring flaws when exposed to bear markets…but it’s on the right track by buying stocks that are going up.

 

There is also short-term mispricing in stocks since the advent of index futures in 1982.

 

I discovered this when testing index futures trading strategies about a decade ago.

 

The edge translated nicely to individual stocks.

 

When combined, the returns nearly DOUBLE.

 

Add another arrow to the quiver.

 

And how do you know which stocks to buy? At any one time, there could be hundreds of stocks hitting new highs.

 

How do you separate the wheat from the chaff?

 

That question led to another breakthrough.

 

I would rank an entire portfolio of hundreds of stocks by certain characteristics, and then buy the top 10.

 

You’re more likely to win by placing your bets on proven winners like Michael Phelps vs. Habte from Ethiopia (who came in 59th place in the freestyle race).

 

I would have never thought this Swiss company STM would double in a few short months.

 

It was trading below book value not long ago.

 

But the proven ‘DB Transaction’ trading strategy flagged it as a top 10 pick.

 

Proven winners are your ticket to discovering ‘Kindergarten Cop’ successes.

 

You'll get a lot of flack from arm-chair quarterbacks that have an opinion on everything yet know nothing.

 

But you my friend will have the last laugh as your account grows by leaps and bounds.

 

Trade smart,

 

Dan “Prince of Proof” Murphy

 

PS. By the way, our office will be closed for the next week for Thanksgiving vacation.

I'll still be monitoring the markets, but my staff is away from the support desk.

 

Trade smart,
Dan