Where Wealth Begins

Where Wealth Begins
Learn to Build a Portfolio
PRESENTED BY: DENNIS W. WILBORN
Disclaimer
U.S. GOVERNMENT REQUIRED DISCLAIMER COMMODITY FUTURES TRADING COMMISSION
FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALS O LARGE POTENTIAL
RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT TH EM IN ORDER TO INVEST
IN THE FUTURES AND OPTIONS MARKETS.
DONT TRADE WITH MONEY YOU CANT AFFORD TO LOSE. THIS IS NEITHER A SOLICITATION NOR AN
OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR T O THOSE DISCUSSED IN
THIS TRAINING. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR MET HODOLOGY IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS H AVE CERTAIN
LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESU LTS DO NOT
REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN E XECUTED, THE
RESULTS MAY HAVE UNDER -OR-OVER COMPENSATED FOR THE IMPACT, IF AN Y, OF CERTAIN
MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PRO GRAMS IN
GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY
TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
ALL MATERIALS PRESENTED ARE FOR TRAINING PURPOSES ONLY . TRADER S SHOULD PAPER
TRADE ANY NEW METHOD PRIOR TO RISK OF PERSONAL CAPITAL.
Where Wealth Begins

Last month Lee Tanner presented his Model Portfolio based on
trading IBD Quality Stocks from the IBD 50, Leaderboard,
Sector Leaders
Points Lee Made that Resonated:
1. Stay Fully Invested100% Margin
2.
Trade a Solid System that will take you in and out off the market at
the Right Time
3.
True Wealth is generated by working a Portfolio Building Plan

Strategy I, and doing it again and again and again!
4.
Patience, Persistence, Discipline, Confidence, Compounding
5.
Some Stocks Work, Some DontFire the ones that dont
Copyright ATTS 2007-2015
Where Wealth Begins

I was convinced that one of my weak spots was the ability to stay with
a winner and build a portfolio!
I had the tools but had not spent the time to develop my wisdom in
this area!
I wanted to know:
o
o
o
o
What would be required to build a portfolio

What should I expect
What about the rules
How can I simplify & clarify
What if I applied Lees concepts to trading my system on a smaller

account? How would it have done in 2015?
The following is what I learned in back testing and applying what was
learned.
Where Wealth Begins

Conditions
1.
2.
3.
4.
5.
Define Trading Capital

What Stocks
Define Rules
Test
Analyze & Refine
Where Wealth Begins

Conditions
1. Define Trading Capital~Bill ONeil Challenge: $5000 Marginable
In the mid-60s Mr. ONeil started with $5000 of saved and borrowed money
at the beginning of a Bull Market and turned it into over $200K in a year.
Can this be duplicated? It provides an good starting point.
Where Wealth Begins

Conditions
2. What Stocks~~IBD 50: First list of 2015
Ive been studying the 1st IBD 50 (100) list of the year since 2007.
Each year it has outperformed the Indexes by a significant
percentage.
Its where the Big Fish Swim!
What about 2015?
Where Wealth Begins

Conditions
Preliminary analysis of the first list of 2015 again shows the IBD 50 was the place to
be to find great stock! First two data points.
Guidelines for Picking Stocks

A Start
Start Picking from the IBD 50, Sector Leaders, or custom MarketSmith screen.
Annual Earnings Growth +25%,
Quarterly Earnings Growth +25%, +50% if better, +75% is better, ..
Quarterly Sales Growth +20%
Accelerating Earnings and Sales Growth ( Very Attractive)
Something NEW
Do and Grade a Stock Checkup, Pick Grade B or better
Full and Proper Base, describe the base.
A/D Rating C or Better
EPS Rating 95
RS Rating 95
RS Line headed up and making a new high.
Composite Rating 95
U/D Volume Ration 0.9
ROE 17%
PTM 18%
ROE + PTM 30%, 40% or even 50%
Read IBD articles, particularly New America.
Visit the company website
Concisely state the company business and what is new that is driving growth
Lee Tanner Presentation to BAMM Nov 2015

9
Where Wealth Begins

Conditions
By limiting candidates to only the 1st IBD 50 of the year, it

also limited some of the other big winners that showed up
on Leaderboard, MarketSmith or Sector Leaders.
But this limitation also helped to reduce the potential of
Cherry Picking great stocks after the fact!
Where Wealth Begins

Conditions
3. Define Rules~~Both Trading and Stock Picking to assure no cherry
picking!
Rules covered three areas:
1. What to Buy Candidates from the 1st IBD 50 of 2015
2. How much to BuyDetermined by $5000 Account
3. When and how to BuyATTS Rules
4. When to SellLees rules with some modifications
Where Wealth Begins

ConditionsDefining Rules
2. How much to BuyDetermined by $5000 Account
Where Wealth Begins

3. When and how to BuyATTS Rules
Trigger: Close above 8 day EMA
Entry: Pullback Approaching the 8 day EMA within 0.25-0.50 cents
Buy position of full margin rounded down to full position ending with zero or
fivePreferably ending in zero makes the math easier!
Add 2/3 of remaining shares when up 2.5% from Entry Price

Add last 1/3 of remaining shares when up 4.5% from Entry Price
Do Not Buy and Hold the Week Before Earnings!
Where Wealth Begins

ConditionsWhen to Enter Examples
1/8/15: Close above 8 day EMA
SWKS
2014
2015
1/9/15: Pullback intraday approaching 8

day EMA: Enter at 72.74 with a
conditional order
1/9/15: Adds Start at 74.55
Where Wealth Begins

Questions?
Where Wealth Begins

4. When to SellLees rules with some modifications
Sell Rules fell into three categories
a. Hard Sell Rules to Protect Capital

b. Hard Sell Rules to Protect Profit
c. Guidelines and Rules of Thumb
Where Wealth Begins

ConditionsDefining Rules: When to Sell
Protective Sell Rules:
Sell -4% below entry price. Why not 7-8%?
If -4% failure three times stop buying and study.
If portfolio is down 4% for the week (no margin) to 8% (full margin), sell weak stocks
to reduce exposure. Generally sell at least one full position to cut risk.
Sell if a breakout did not happen or stalled out, but mostly dont use this rule unless
you are sure. (Failed Breakout Sell Rules)
Where Wealth Begins

Profit Protection Sell Rules
Take gains +20% to +25% above buy point, unless within the first 8 weeks. (Profit Goal Sell Rule.)
Stocks surging up past the sell goal may be held using the 8-day or 8-week EMA as a selling guide.
(Short tern gain extension)
When profitable 6%-11% use 10%-12% cushion. Adjustable Trailing Stop (Decline from the peak
sell rule)
Sell on Close below the 8 week EMA
Sell if it plunges below the 50-day on huge volume.
Sell if it gaps down on huge volume. (Big Gap Down on Huge Volume)
Where Wealth Begins

Guideline and Clarification
Sell only if written sell rule is triggered.
Select a few stocks to hold for longer term, larger gains
Keep a 3 to 1 profit to loss plan. (Profit-to-Loss Ratio Rule)
If up 20% in 3 weeks hold 8 full weeks. (Certain-teed hold rule)
Dont sell for profit taking for the first 8 weeks. During this time sell only if a protective sell rule is
triggered. This is like the 25% profit goal, #2. Hold until you reach 8 weeks, and +25%. In a few
cases you might hold a stock for 13 weeks before concluding it is not going to perform. (Time Goal
Sell Rule)
If closes a week up 60% from IP then use big cushion sell rules. (Big cushion sell rules)
Probably sell if a breakout on good volume stalls and goes negative within a day or two. (Failing
Breakout sell rule.)
Where Wealth Begins

Guideline and Clarification
Assess risk and sell if needed before earnings, but hold if possible for the earnings report.
(Earnings Release Hold Rule)
Generally hold stocks that are going sideways for 13 weeks (one quarter) before dumping it, but
the least performers may be sold to feed winners or buy new opportunities.
If market corrects you may sell lagging positions to reduce exposure.
May sell is if a stock is persistently weak after owning it for eight week.
Plunged significantly (4%-5%) on huge volume (+100% or more).
Sell all of a stock in a climax top. If in doubt you can scale-out.
Usually sell all of a stock that has a takeover offer.
Sell all or part of stock if afraid or confused.

Where Wealth Begins
Break Back in 15 Minutes
Where Wealth Begins

Conditions 4. Back Testing
Process of picking stocks
Start 1st week in January

Go stock by stock and pick the first stock that provides a valid entry
When the number of stocks are full, stop searching and manage each week
Use Sell Rules & Guidelines
Where Wealth Begins

ConditionsTesting Criteria & ToolsWeek 1
Where Wealth Begins

Where Wealth Begins

BITA
1/2/15: Close above 8 day EMA
1/9
1/6/15: Pullback intraday

approaching 8 day EMA
1/12
1/9/15: Spikes up over 20%

1/12: Falls > 12% from high
Important to note: Must do home
work daily/nightly to reset
tracking spread sheet
1/6
Where Wealth Begins

ConditionsDefining Rules: End of Jan
Where Wealth Begins

ConditionsDefining Rules: End of Feb
Where Wealth Begins

ConditionsDefining Rules: End of March
Where Wealth Begins

ConditionsDefining Rules: End of April
Where Wealth Begins

ConditionsDefining Rules: End of May
Where Wealth Begins

ConditionsDefining Rules: End of June
Where Wealth Begins

ConditionsDefining Rules: End of July
Where Wealth Begins

ConditionsDefining Rules: End of Aug
Where Wealth Begins

ConditionsDefining Rules: What Happened in August
8/21
100% Out of the Market!
Where Wealth Begins

ConditionsDefining Rules: End of Sept
Where Wealth Begins

ConditionsDefining Rules: End of Oct
Where Wealth Begins

ConditionsDefining Rules: End of Nov
Where Wealth Begins

ConditionsTotal Gained from $5000 Start
Where Wealth Begins

Conditions% Invested
Where Wealth Begins

Conditions S&P Correlation
Where Wealth Begins

ConditionsAnalysis & Refinements
Total Stocks Traded in 11 months = 11 (BITA, SWKS, NXPI x 2, AFSI x 2, NOAH, AMBA,
FB, ADS, TSM x 2, AKRX, WAL)
Average Hold Period = 49 Days
Average Return on Sold Positions = 14.3%
Highest Return = 46.3% AMBA
Lowest Return = -6.8% WAL
Portfolio up 327.8% by end of November
This exercise is a Model PortfolioReturns simulate perfect trading conditions. This is not a
promise of similar returns. The market has a mind of its own!
Summary
Challenge: After getting up to $10K much harder to stay fully invested
Go to next higher level of stock the week after new $ Thresholds are achieved
Surprises: How well system sized portfolio to match market conditions almost
automatically. The Rules automatically sold at the right time so capital was
available for the next upswing
Managing even a small number of stocks requires diligence, patience,

discipline & desire!
The IBD Stock Lists are a great place to start the search
Staying fully invested when its appropriate works!
Focus for ATTS Strategy 1 going forward
Where Wealth Begins
Questions?

Where Wealth Begins

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Where Wealth Begins

Learn to Build a Portfolio

PRESENTED BY: DENNIS W. WILBORN