They mentioned that it was a "solid trading system" and was "not a scam", but it appears that the reviewer was disappointed that my system was not more aggressive, and was not designed to short stocks or trade leveraged instruments like futures or currencies.
The reviewer did not think my system could give a great return, and he only gave my book one star (out of five). Well, at least it wasn't zero stars ;-)
I don't agree that my system does not give a good return. My real life trading results refute that.
But, I figured that my system would be controversial because most people either talk about buy and hold investing or aggressive trading. My system falls in between. In my opinion, it has the best risk / reward trade-off.
That is not just my opinion. I have several testimonials on the Stock Trading Riches website, and two people have included my book on their recommended lists at Amazon.com.
Anyway, I published my own review as a response. It is not up on Amazon.com yet. Here is what I wrote:
I wanted to respond to the above review.
I am pleased that the reviewer mentioned that my system is not a scam and is based on a solid principle. I am also glad that he or she mentioned that my system is intended for non-leveraged stocks, funds, and ETFs.
It seems that the reviewer is a more aggressive trader and looking for systems that can be used on leveraged futures and FX trading vehicles, as well as a system that can trade short and profit in bear markets.
My system does not use leverage, and does not go short. It "profits" from bear markets by taking profits in rising markets and then reinvesting at lower prices.
I disagree with the reviewer about my system having a lower level of return. He mentions that I admit my system does not have a high rate of return.
In my book, I actually said that "when I was younger, I would not have used it [my system], because I wanted to get rich quick - I wanted "action" and triple-digit returns. Now I understand that those kinds of systems are unsustainable."
In my book, I also say that "While I'm no financial genius like Warren Buffet, I have made a double-digit annual return for years now."
I am down 19% so far in 2008 but, from 2005-2007, I made 13%, 14%, and 22% a year, respectively.
If I finish 2008 at -19%, then I would have earned 6.22% per year from 2005-2008. So, I will no longer have an unbroken string of double digit annual returns, but I still beat the S&P500 and savings accounts for that period.
If the reviewer feels those are low returns, then I guess the reviewer is looking for triple digit returns and aggressive systems.
I really take issue with the idea that a bank account could earn more.
My book is recommended on two different Amazon lists:
Contrarian Stock Investing Systems
Alawys successful formula
The creator of the first list writes that he tested my system against buy and hold on the SPY (S&P500 ETF) from 2001-2008, and my system returned 2% while Buy/hold returned 1.7%.
So, yes, a bank could beat that return but that is because of market conditions. I beat the market.
Also, I wouldn't recommend using my system on a diversified index fund. It should be used on a portfolio of stocks or narrowly focused funds, because the formula is applied independently to each portfolio component. Then, we take advantage of volatility - while still having the overall diversification.
I made my double digit returns because I was trading each stock on its own. Trading a diversified portfolio as a single unit (like the SPY example) dampens out volatility.
0 comments:
Post a Comment