Strategy Overview

The strategy that I will be employing will be centered around a mix of Fundamental and Technical analysis of stocks.

Stocks of companies I will be selecting to trade and invest in will be leaders in their fields. These companies will be experiencing strong quarterly and annual Earnings per Share (EPS) and sales growth, and will be members of top performing industry groups. Their stocks' price performance will already be outperforming at least 70% of all other stocks' performance. These stocks will also be experiencing increased accumulation by large mutual funds and hedge funds (institutional buyers).

From this pool of eligible stocks, I will be determining entry points based on break-out and trend continuation chart patterns.

My method draws heavily on the teachings of William O'Neil of Investors Business Daily as well as Richard Dennis and William Eckhardt of "Turtle Trader" fame in the commodities arena.

I will not invest more than 10% of total investible cash in any one company and will seek to limit my portfolio to no more than 20 companies at any one time (utilizing leverage where necessary).

During periods when the broad markets are in correction (as they are currently), I will attempt to take profits on the way up sticking to a 3:1 profit target. This means I will attempt to take profits three times what I am risking upon initiation of the position. For example, If I purchase XYZ stock at $100 and my stop-loss is $90, I will exit my position for a profit at $130.

During confirmed rally periods for the general market, I will give winning positions more room to grow. While maintaining a strict stop-loss, I will let violations of 50-day trendlines be my signals to exit positions.

As Jesse Livermore, one of the greatest Traders of all time has been known to repeat (in paraphrase): "The best money is made in the sitting and the waiting". When general markets are in confirmed rallies, I will attempt to do just that.

Without giving away the farm, this is a broad overview of how I will build my investment portfolio. If my hypothesis is correct, and I execute according to this strategy, it is my belief that I can target annual returns in the neighborhood of 100%. While this number is certain to cause investment professionals from all corners of the globe to scoff at my assertion, I believe it is absolutely within the realm of possibility. It is my intention to find out.

Wish me luck.

Sean McLaughlin
Chicago, IL