In March 2014, then New York Attorney General Eric Schneiderman gave a speech called ‘Insider Trading 2.0’.
In it he railed against algorithm-driven trading on the stock market. And how fortunes are being made from it...at the expense of everyone else.
Schneiderman said (emphasis added):
‘Unlike the rest of us who invest in the markets...some high-frequency traders appear to trade with virtually no risk...
‘Last week, a large high-frequency trading shop disclosed that it made money on every trading day over the course of four years...
‘I do not begrudge anyone their right to make money, but if something seems to be too good to be true, it usually is. And we question whether there are some traders that are just so smart that they never, ever lose money without some special advantage.’
Those traders Eric Schneiderman refers to are quantitative analysts.
‘Quants’ for short.
They build the algorithms that drive high-frequency trading systems.
Schneiderman is wrong that quants ‘never, ever lose money’.
And that they trade with ‘virtually no risk’.
All quants know risk. They STUDY risk. They’re mathematicians.
In reality, you’re going to lose regularly when you trade, no matter how good your computers are.
Schneiderman’s a politician. This is his crusade for votes.
But he’s right on one thing…
Traders who use the right algorithm DO have a massive statistical advantage over practically everyone else who trades the markets.
Schneiderman called it Insider Trading 2.0.
And — to people looking from the outside at least — that may seem like a good description.
But the truth is there’s nothing unethical, illegal or, indeed, indecent about using algorithms to trade the markets.
There’s also nothing magical about making trades solely based on instructions generated by quantitative algorithms.
You program these algorithms. Feed historical data into them. And your computer spits out buy and sell signals.
That’s what drives what I want to talk to you about today: ‘The Big 10’.
In this letter I’m going to show you this trading system.
It generates entry and exit signals, not just on stocks, but on indices and commodities too.
It’s been backtested with close to 25 years’ worth of market data.
It was developed by a former Wall Street ‘quant’ called Tom Meyer.
Tom — a Texan — worked the trading desk at Morgan Stanley for 25 years.
Since he left Morgan Stanley, Tom has spent most of his time building algorithms to trade stocks.
Earlier this year, we did a deal with Tom to construct a trading algorithm specifically for the Australian market.
In other words:
We’ve brought Eric Scheiderman’s Insider Trading 2.0 Down Under.
Tom’s proprietary algorithm generates weekly signals on 10 key high-volume markets.
They include six of Australia’s biggest stocks — BHP Group Ltd [ASX:BHP], Commonwealth Bank [ASX:CBA], Telstra Corp Ltd [ASX:TLS], Qantas Airways Ltd [ASX:QAN], CSL Ltd [ASX:CSL] and Woolworths Group Ltd [ASX:WOW] — and also the gold market, the ASX 200 and two US markets, the NASDAQ and S&P 500.
We call them:
Depending on your circumstances, these could be the only 10 trades you ever need to make.
And, if you follow the algorithm’s signals, you only need to trade them a maximum of once a week:
Every Monday morning…BEFORE the market opens.
And the performance of this algorithm?
Well…you need to see it for yourself.
In fact, once I’ve shown this to you, I’m sure you’re going to be eager to have a go yourself.
I want to start by showing you something you’ll be familiar with.
This is a 10-year stock chart of BHP Group.
Check out the black line. That’s BHP’s stock price. I’ll tell you about the yellow band in a moment.
I consider BHP as a proxy for the Australian economy over the last 10 years.
You’ve got the huge run up in the stock price in the wake of the 2008 financial crisis. This was when Australia was flying. We were exporting tens of billions of dollars’ worth of iron ore to China every year at this point.
Then you’ve got that horrible looking slump from 2011 onwards — when the mining boom started running out of steam...
…Followed by a pick-up in the stock price again, post-2016.
This — well, see for yourself — it’s a horrible looking chart for buy-and-hold investors!
Imagine how they must have felt, seeing all of those juicy post-2008 gains handed back to the market.
And then imagine if they’d sold all their shares at the end of 2015…when everyone was screaming to get out of mining stocks…only to see the price start going up again!
So how DID you feel?
Because, let’s face it, if you’re a trader, there’s a good chance you own BHP stock. Or have owned it at some stage over the last 10 years.
It’s fair to suggest that there’s a fair chance that we all have. It’s currently the biggest traded stock by value in Australia.
And it’s tracked by a bunch of institutional analysts, all trying to figure out where BHP’s stock price is headed next.
I’m sure all these people are super smart.
They’re certainly well paid.
But I’ve come to realise: they might as well be trying to predict the second coming of Jesus.
Let me show you why…
Here’s another chart. Or more accurately, another version of the same BHP chart…
See the green line?
See how it starts off by roughly tracking BHP’s stock price?
Now look at 2011…at the beginning of that big downturn.
BANG! The green line takes off like a rocket — and keeps going up.
It’s like a BHP trade from an alternate universe — the kind that exists in your trading dreams!
That — specifically, HOW IT DOES THAT — is the reason I’m talking to you today.
I have the answer and I’ll share it with you over the next few minutes.
But first let me ask you something:
That ‘alternate BHP’ trade.
Let me show you what it could mean, with the help of a few scribbles…
Over the last 10 years — taking all the ups and downs into consideration — the backtesting shows the algorithm outperformed BHP’s stock by 137%…
Just imagine if that green line was your trading performance in BHP.
You could have beaten BHP’s gains by almost 70 TIMES over the last 10 years.
Now of course, I’m not saying this, or any kind of backtesting, guarantees future performance of this algorithm.
Not in the slightest.
What I AM saying is that the backtesting is compelling and requires your attention.
I mean, it’s a good-looking chart, isn’t it?
And I know it begs a lot of questions. But essentially, that outperformance is down to being in the right trend in BHP at the right time.
That’s what an algorithm is capable of.
Just to be clear, this difference doesn’t include trading fees, taxes, and dividends — either for the buy-and-hold position, or the trading position.
But imagine applying this algorithmically-driven approach to your trading...
If you’re interested in taking a systematic, automated approach to gain a real trading edge in 2020, you need to read on.
But first, please understand this…
The trading systems used by quant funds and high-frequency trading firms make money in a very simple way: as I said above, RIGHT trend, RIGHT time.
Now that sounds like common sense.
That’s what all traders want to do, right?
Well, yes. But most fail.
Because most traders are human. And they make human errors.
Humans have a finite mental bandwidth. That means you can only track a limited number of potential trades at one time…rather than the hundreds that can be tracked by algorithms.
Humans are also at the mercy of emotions and competitive instinct. That can lead to the mindset that EVERY trade needs to be a win. So you ride every losing trade right to the bottom.
Quants don’t make these mistakes.
They build systems SPECIFICALLY TO COUNTER these mistakes — using complex mathematical code and sophisticated backtesting strategies.
All with one simple goal:
Easier said than done.
But how do you achieve this?
Not through endless hours of balance sheet analysis…
This system, that I’m showing you today, is not the work of some institutional ‘brainbox’ who figured out how to find ‘hidden value’ in ASX-listed stocks…
And it’s not the output of some ‘black box’ software. The kind that uses technical indicators to predict where the stock might be heading next.
It’s none of those things.
In fact, it’s not a PREDICTION tool at all.
It’s a MEASUREMENT tool.
Instead of telling you where the stock price could be headed next, it tells you what the prevailing trend of the stock is right now.
THAT’S what you trade.
And, as I said at the start, it does this with the help of a sophisticated computer algorithm.
Six years on from Schneiderman’s comments on the high frequency trading systems developed by quants, algorithms are everywhere in financial markets in 2019.
In fact, according to JP Morgan, 60% of all trading activity worldwide is now done via algorithms.
We are talking about state-of-the-art Wall St-tech. Some of the biggest investment funds, banks and institutions in the world trade stocks using algorithms these days.
You could certainly call it an ‘edge’.
It’s how I suspect they’re able to post billions of dollars in profits every year… while many of the rest of us grab a few percent here and there doing things ‘the old way’.
Well, maybe not any more.
See, a few months ago, a friend put me in touch with this former Wall Street quant, Tom Meyer.
My friend, an old mate from London who runs a big financial research business over there, told me he’d asked Tom if he could build a trading algorithm that could be applied to the UK FTSE 100 index.
‘No problem’, said Tom, and set to it.
Once he built the algorithm, he backtested it with 28 years of UK market data.
Now that may seem excessive to you. But he wanted to see how the computer program would have performed during things like the run-up after the ‘87 crash…the dotcom crash…the 2008 financial crisis…and subsequent bull market.
Here’s the result of that backtest…
So that you’re clear about what you’re seeing here: the UK stock market is the black line at the bottom.
Tom Meyer’s algorithm is the green line — the one going parabolic!
The green line shows what could have happened, had you followed the algorithm’s weekly market signals (not including, fees, taxes or dividends).
And I’m sure you can read; if you’d have been in a position to place those trades at the time, you could have beaten the UK index by 690%.
That doesn’t seem possible, does it?
But I assure you, that’s precisely what you’re looking at.
Again, I repeat: I am NOT saying that these backtesting results guarantee future performance. It simply indicates what is possible.
Remember, the algorithm doesn’t predict where the market is headed. It simply calculates what the market trend is right now.
And there are only three possible options:
If the current trend is bullish — well, it would suggest to me that you should buy the market — ie: go LONG.
If the trend comes up as bearish, you’d probably want to SELL the market or go SHORT.
You can do this in the UK simply by buying what’s called an ‘inverse ETF’ — an ETF that goes up when the market it tracks goes down (there are many of these here in Australia, too).
If the trend shows as being ‘in transition’, that means it’s moving from a bullish to a bearish condition, or vice versa. But it hasn’t broken out either way yet.
Because no firm trend has been established, you’d probably want to move out of whatever position you were in, and into cash, while you wait for a new trend to establish itself.
Check out the chart again…
The green line here is basically what would have happened, if you’d been able to interpret those signals as I just described at the time.
And by the way, the outperformance you see on this chart was NOT obtained by using any leverage.
And of course, there are no guarantees! This is — essentially — just what Tom’s backtesting suggests you’d get from following the algorithm’s signals…and staying the right side of the trend.
But while you’re looking at this chart, let me just tell you about the yellow band you can see that sort of tracks the market — the thing that looks like a highlighter pen.
That’s the ‘secret sauce’ that drives the algorithm.
Tom calls it the ‘Transition Zone’.
I see it as a visual representation of the algorithm itself.
I’ll get into how it works shortly.
But essentially, at any given point, if the market — represented by the black line — is above the Transition Zone — represented by the yellow band, the trend is considered bullish.
If the market is below that yellow band, the trend is considered bearish.
If the market is anywhere within that yellow band, the trend is transitioning from bullish to bearish or vice versa.
You take your trading cues from wherever the market is in relation to that yellow band: the Transition Zone.
What would I do?
Does that make sense?
Don’t worry — it will.
You can also see a red line on the chart. That’s interesting, too.
Tom put that on there to show what would have happened if you DIDN’T short the market in response to a bearish signal.
Instead, you sold out of your ETF and waited in cash for another bullish signal to emerge.
If you’d done this, you’d STILL have beaten the market by 316% over that period — hypothetically speaking, of course, based on our rigorous backtesting.
So basically, if you’re not comfortable short selling — if it seems too complicated or risky for you — you can use the bearish signals to exit a falling position and move into cash.
In other words, to sum all this up for you:
As far as I’m aware, there are few algorithmic trading services like this aimed at retail investors like you.
This kind of thing is, pretty much, only for the big boys.
Imagine using cutting edge Wall St-style technology to guide your trading decisions!
Think about it.
This is something that could eliminate snap decision making based on your emotions or your gut feeling about a trade…
It could help remove not all — but a LOT — of the stresses associated with trading markets that move up and down every day…
Most importantly: it could conceivably keep you the right side of a trend in a market — until that trend changes…
Imagine the impact that could have on your trading account!
Well…the whole point of computer-driven quant trading is to give you an algorithmic ‘edge’. To skew the odds in your favour over time..
It is this ‘algorithmic edge’ that has completely altered the investing landscape over the last 15 years. The hunt to gain this edge is the reason why quant funds surpassed the $1 trillion mark in January 2019.
That was the month I finally reached out to Tom.
I explained that our mutual friend had given me his number. I told him about our research and publishing business here in Australia, and what we try to do for our readers.
And I asked if he’d be willing to do a deal, with me, to build an algorithm that generates trading signals for the Australian market.
Over the course of the next few weeks — including flying half way around the world to meet Tom personally — we realised…
We could go one better.
In fact, we realised we could go NINE better.
See, this algorithm Tom’s built; it doesn’t just work on stock indices.
It works on almost everything.
Every stock you can think of. Every commodity market. Every global index.
The only thing it needs is volume.
As long as there’s plenty of traded volume in the stock, you can apply Tom’s algorithm to it, and it will do its thing.
So, I got to thinking…
We’re a relatively small market down here. Most of the daily traded volume in Australia is in roughly 20 stocks.
Now it varies a little depending on the market conditions, but generally speaking, we’re talking about four or five banks. Two-to-three big miners. A telco. A retailer. And a couple of airline stocks.
In other words, you can essentially ‘trade Australia’, just by buying — and occasionally selling — these 20 stocks.
That fits in with this algorithm perfectly because its sole purpose is to find big trends.
And to get big, established trends, you typically need a good amount of traded volume.
So, here’s what we’ve done.
We worked with Tom to develop a trading service.
It uses his proprietary algorithm to generate weekly signals on 10 high-volume markets that all trade on the ASX.
They include: four of our biggest stocks: BHP Group, Commonwealth Bank, Telstra and Qantas; and also the gold market and the ASX 200 itself.
Like I said, we call them:
Today I’m going to show you how you can start getting these 10 trading signals, every Monday morning.
Follow the advice in the weekly email I’ll send you and you need only trade once a week: BEFORE the market opens on a Monday.
That’s it. 10 trades a week.
The following Monday, you get a new set of signals — one for each of the ‘Big 10’ markets — all generated by Tom’s algorithm.
I’ll tell you in detail how our new service will work in a few moments.
But before I get into the nuts and bolts of that, let me just show you what we’ve been doing, with Tom’s help, behind the scenes here in Albert Park. And how it really could hand you a ‘Wall St-edge’ in your trading…
Let me show you a few examples of how the algorithm could have traded our 10 flagship markets over the last decade.
Starting with the stock market itself — the ASX 200…
I’m going to throw the 10-year chart up for you here. Remember; this is the result of our backtesting, which does not guarantee future results, so these are hypothetical returns…
Now first things first: the Aussie stock market (the black line) has been in a bullish condition for most of the last 10 years.
So, had you just bought the market and held on — well, you can see from this chart, you could have made a 43% return on your investment.
Which is perfectly fine.
Remember, the algorithm is designed to find and track trends.
So, as you can see here, the computer (the green line) called it virtually spot-on throughout the backtesting.
In fact, when you look at our test, it’s hard to see where it put a foot wrong over the last decade…which is pretty amazing, if you ask me.
But where the algorithm is truly impressive — especially for traders — is where it switches to a bearish signal at the three major points where the ASX 200 falls sharply:
In mid-2011...again, in early 2015...and again, at the end point of 2018.
At these points, investors who owned index tracker funds — and didn’t sell out in time — would likely have seen the value of their investment fall.
But had you traded according to the signals generated by Tom’s algorithm in backtesting, you wouldn’t. That’s because the trend changed. And the algorithm was smart enough to change with it.
Here — I’ve ringed those ‘divergence’ points in blue on the chart for you.
Let me show you what that looks like with a recent ASX 200 downturn — at the back end of 2018…
Now okay, you couldn’t go out and buy a Porsche based on this outperformance (unless you’d leveraged up).
But just look at what’s happening here.
Look at how the algorithm — the green line — splits off from what the market’s doing, at the crucial point, to keep you in the right trend.
It’s like the perfect mirror image…or that ‘alternate universe’ trade I mentioned earlier!
The market, during this two-month period, dropped 9% (I’ve circled that in red on the chart). That’s a pretty significant fall. You’d definitely have felt the burn if you’d had a lot of money tied up in stocks.
But the algorithm — as you can see from the green line here — switched strategies at the point the trend changed.
It generated a bearish signal.
Hypothetically speaking: had you got this signal you could have done one of two things:
Look, we’re only talking two months here. And remember, these are backtested results. It does not guarantee future results (and we don’t pretend it does).
What they DO show, to me, is the potency of this trading system.
What if you’d had this kind of guidance in October 2018?
And what if the market crashes again? Only this time, by 30 or even 40%?
I’m not saying the algorithm gets it right every time.
But, based on back-testing, it did here.
And at a time where investors were panicking, not really knowing what was going on, wondering whether the sky was falling in, and not knowing what to do for the best…
…This system shows it could have picked the right side of the trend, at the right time.
How would this change your investing life?
Think about that while I show you how the algorithm would have traded the second of our Big 10 Aussie markets — BHP Group.
Now I know I’ve already shown you this chart.
But I’m going to stick it up again, because, frankly, it’s great to look at.
Check it out.
To quickly remind you, this is a 10-year chart, showing the performance of BHP’s stock. Basically, it’s what could have happened if you’d bought and held shares over the past decade.
That’s the black line.
The yellow band — remember — is what we call the Transition Zone (but it’s basically a visual representation of the algorithm).
Then there’s the green line. That’s the backtested hypothetical performance of the algorithm. In other words, it’s what you could have achieved, if you’d followed:
Now again: this is backtested performance. I must keep stressing that.
But the bedrock of quantitative trading doesn’t lie in the present or future…but in the past.
Vast amounts of historical market data (including actual BHP weekly closing prices from the last 10 years) are embedded in Tom’s system.
And you can see: had you followed the algorithm’s signals; you could have outperformed BHP by 137%.
That result comes through backtesting.
Now there are some serious misconceptions among many traders and economics professors about backtesting.
That it doesn’t work to predict the future…that it’s too random…that it’s backward-looking when the markets are inherently forward-looking…that you can manipulate backtesting to get any desired result.
The experienced quant knows differently…
We know while past performance should never be taken as a guaranteed depiction of the future…past performance can, nevertheless, be a vital tool. Provided it’s wielded correctly.
Without backtesting, you’d have no way to see how your algorithm combinations performed in the past.
You see what would have hypothetically happened following a set of algorithmic rules.
You make tweaks to those rules to improve performance.
And then you unleash your system on the market in real-time in the hope that it replicates that performance in the future.
And in THIS case, you could have theoretically made nearly 70 TIMES more gains using these signals to trade BHP over simply ‘buying and holding’.
Of course, as I keep saying, that doesn’t factor in fees, taxes, or dividends for either investing strategy.
But this is achieved — albeit hypothetically — with no guesswork. No forecasting. No hunches. No ‘gut feeling’.
The algorithm, remember, does not try to predict the market.
It simply measures the ‘mood’ of the stock on a weekly basis — in real time – and spits out one of three signals:
You use that signal to inform the position you take in the stock (or out of it, as the case may be).
While we’re on the subject of BHP let me show you something really cool.
Check this out…
Yes, this is still BHP.
But I’ve zoomed in to a specific period to show you, again, where this algorithmic system really earns its stripes.
So, this chart shows BHP’s stock performance from roughly the beginning of 2011 to roughly the end of 2015.
You can see here — I’ve circled it for you — the stock fell by 65% over this time frame.
Cast your mind back. The mining boom was slowing down. Commodity prices were falling.
In August 2012, Resources Minister Martin Ferguson went on ABC’s AM program and said:
‘You’ve got to understand; the resources boom is over.’
You might recall that caused a bit of a stir at the time.
But look at how the conditions are reflected in BHP’s share price.
He had a point.
Now okay, that’s all in the past. But what I want to show you here is that green line again. See how, as BHP’s share price tanked, the performance of the algorithm did the opposite…it went up!
Again, this is a hypothetical result.
But it basically shows that the algorithm could have:
Had you been in a position to respond by selling the stock short…and then followed every subsequent signal…you could hypothetically have made 63% gains during that period.
Compare that to LOSING 65% by ‘buy-and-holding’…
Friend…This is what’s possible when you get on the right side of a trend.
Like I say, I’m pretty sure many of us have owned BHP stock at some stage or other over the past 10 years.
But why did we buy it?
Not according to ‘blind faith’ or gut feeling. Not driven by emotion. Not constantly needing to check itself or seek counsel from others. And not according to any of the pre-existing biases we all tend to have.
Interesting, isn’t it?
Let me show you four of the other investments our new algorithm generates weekly signals for, every Monday…
Starting with Commonwealth Bank.
Here’s the 10-year chart for CBA…
Remember, this is backtested data. The returns are hypothetical.
But this is a great example. Because it shows you two important things:
If the market trends up for months or years at a time — like CBA did up to 2015 — and you’re following the signals, you’re basically going to be long the stock — which is the same as buying and holding it.
Other weeks, the system makes the wrong call.
Don’t be surprised! That’s trading.
No system is ever 100% accurate.
Any experienced quant will tell you this style of trading isn’t about being right all the time…it’s about making money.
What you’ll be doing is letting algorithms guide your trading for you. Your job is to follow the system and try not to second guess it!
Look, we don’t have a crystal ball. Only a sophisticated algorithm. But even that can’t see into the future. It only finds and follows trends. And tells you the mood of the market at that time. You can act on that signal if you want to.
Case in point. Look at the CBA chart again.
See where the stock takes a big dive at the mid-point of 2015?
At this point, the trend changes and the algorithm switches strategy.
Here, I’ve zeroed into that bit of the chart for you…
Commonwealth stock dropped by 21% over this two-year period.
But look at the algorithm — the green line.
It’s like another ‘mirror image’…another trade from that alternate universe!
The algorithm detected that the trend in CBA was bearish.
Had you acted on that signal; it’s unlikely you’d have lost money. Depending on any fees, taxes, and dividends paid or received.
And had you decided to short the stock; you could have made a 5% gain…which doesn’t sound like much.
But it’s an aggregate outperformance of 26% — which is unbelievably impressive.
In any case, this shows you what could be possible when you happen to be on the right side of a trend in a stock…
…versus what happens to buy and hold investors who are stuck on the wrong side of that trend.
Do you like the sound of that?
Remember I asked you:
Well, that’s the goal of the trading service I run with the help of Tom Meyer’s algorithm, called Algo Trend Trader.
The aim is to make Wall St-like technology available to regular Australian investors.
It’s the future…and now it’s within your reach!
If you want to try out this breakthrough algorithmic trading service, here’s what will happen, starting right away…
You will get an email every Monday morning, before the market opens.
That email will contain 10 signals. One for each of these markets:
Each algorithmically-generated signal will tell you whether the current trend in that particular market appears to be:
Then it’s over to you.
I’ll give you some suggestions about how you could execute these weekly signals in a few moments.
But the decision — and the action to take — is yours.
Suffice it to say: if you haven’t traded in and out of stocks before this won’t be for you.
You should be at a level of investing where you don’t need us to hold your hand.
In that sense, this service is not for beginners.
In fact, it’s the opposite.
Now, I’m not going to be disingenuous about this.
There are certain advantages that quants have over ordinary traders that are non-transferable. Even if you’re following a system like Algo Trend Trader.
Often quants work for investment banks; so, they’re not gouged by commissions with each trade.
They have multi-million-dollar supercomputers at their disposal. Often these supercomputers are situated, at great expense, literally NEXT-DOOR to the securities exchange in order to get an edge of a few milliseconds.
Professional quants have massive resources that can track capital flows in the market in a way most at home traders can only dream of.
I’m not suggesting you’ll be bestowed with these superpowers if you give Algo Trend Trader a try.
But here’s what I DO promise:
You will have full use of a genuine quantitative, algorithmic trading system built by an ex-Wall Street quant.
This is absolutely the closest you may ever come to trading like the ‘Rocket Scientists of Wall Street’.
I hope you’ll give it a try. This really is cutting edge stuff and the potential for this computer-coded tech is completely off the charts.
If you’d like to take part, I’ll explain exactly what you need to do in a moment (don’t stress: you can trial Algo Trend Trader before you commit to a one-year membership. Details coming up).
And yes, I know you’ll have questions. I’ve anticipated a lot of the questions this kind of proposition will throw up.
I promise I’ll address them in this presentation.
Listen, don’t make any decision yet. There’s still lots to show you.
Let’s move onto the next of our Big 10 markets — and let me show you how Tom’s algorithm traded it in backtesting and up to now.
I’m talking about Telstra.
Okay — we all know Telstra has had its ups and downs over the past 10 years…
I mean, literally! Its share price chart looks like a snapshot of the Swiss Alps!
Check it out — look at the black line on this chart. That’s Telstra.
I wanted to ask you to imagine holding this stock while it does an impression of a broken cable car…
But the truth is, there’s a good chance you DID own Telstra stock while this was all going on.
I’m talking about all the hoo-ha over selling its copper network to the NBN…then you’ve had a bunch of new entrants coming into the mobile phone market…and the threat of tens of thousands of customers ‘cutting the cord’ and using the internet to make phone calls instead.
Telstra shareholders have had some BIG challenges in the recent past.
And I’ve no doubt plenty of them bit down hard, scrunched their eyes shut and held on for that horrible death slide, from 2015 onwards.
Our backtesting shows a different picture.
First; it shows, overall, that the signals generated by the algorithm could have led you to an aggregate 206% outperformance over the stock during the last decade.
Looked at another way, you could have made up to 35 times the gains, had you traded according to the algorithm’s signals, instead of simply holding the stock over that time.
But even better than that…
Look at how the system could have performed as Telstra’s stock started to slide at the beginning of 2015…
Here you go. This is the point at which the trend turned bearish…and the algorithm switched strategies (in backtesting, remember).
In other words: in this hypothetical scenario, had you followed the signals generated, you could have remained on the right side of the trend…and potentially made a 72% GAIN while Telstra’s stock FELL by 38%.
In other words, based on back-testing, you’d have outperformed Telstra by 111%.
I mean, genuinely?
It appears that what we’re looking at here is a system that can potentially:
It’s next-level stuff. No wonder so many of the big institutions are going this way with algorithmic trading.
But it presents something of a conundrum to you…am I right?
Because once you see this, you can’t UNSEE it!
A pro-trader friend of mine once told me that when you trade algorithmically for the first time, it’s like being handed the keys to a Ferrari — after you’ve driven around for years in a Ford Fiesta…
Or it’s like getting an unexpected upgrade to Business Class when you always fly Economy.
Point being, once you’ve done it, you never want to go back to the old way of doing things…it’s such a quantum leap forward!
I mean…would you choose to watch a VHS tape if you had the same movie on a Blu-ray disc?
Would you ditch your iPhone for one of those old ‘brick’ cell phones from the 1990s?
And yet — we’re seemingly happy to use 100-year-old methodologies when we invest.
We pour over balance sheets, financial statements and company announcements looking for ‘hidden value’ the market may have missed.
We obsess over ‘owning’ stocks.
And we’re always hunting for explanations for everything. Why stocks move...what could make them move…how a deeper understanding could help us predict the market. And how all that validates our own biases and desires to be ‘right’ about the world.
Don’t get me wrong. I’m not saying this approach is fruitless.
In fact, helping readers to understand how the financial world really works is one of the most valuable parts of what we do here at Fat Tail Media And I don’t just mean ‘valuable’ in the monetary sense.
But when you think about it, if you just want to make money from your stocks, that’s a whole load of mental effort, isn’t it?
While I’m on the subject, let me quickly tell you something fascinating about trends…
In February 2019, Bloomberg reported the results of a study carried out by a group of quants (algorithmic traders) at the Dutch investment house, Robeco Group.
This is one of the biggest studies of its kind ever undertaken.
It analysed the performance of global stocks, bonds, currencies and commodities going back to the year 1800.
That’s 219 years’ worth of market data!
Want to know what they found?
Here’s the direct quote from Bloomberg (emphasis mine):
‘Over the two centuries, trend-following worked better and more reliably than any other factor, with a strong and consistent risk-adjusted return. Further, the trend factor tends to subsume the ‘momentum’ factor, which involves looking for stocks that perform well relative to others.’
In other words, according to this study:
And I think — albeit on a much smaller scale — what I’ve shown you so far appears to bear that out.
Think of it like a powerful current in a river.
If you try and swim against it, you’ll just tire yourself out. You’ll go nowhere. You’ll run out of energy. And the chances of getting to where you need to be diminish greatly, the more you struggle against it.
But if you swim WITH the current, you have to do less work. You are benefiting from a powerful natural force. And it’s taking you exactly where you need to be.
Let me show you what I mean — with the fifth of our Big 10 Aussie markets: Qantas. Let’s pull up the 10-year chart…
Okay, Qantas stock has doubled over the last 10 years, as you can see here. If you’d just held the stock, I’m sure you’d be pretty pleased.
But then again, buy-and-holders weren’t on the right side of the trend in Qantas at every point during the last decade…
But the algorithm seemingly was. In backtesting, at least.
Hypothetically speaking, had you followed its signals to the letter ie:
You could have outperformed buy and hold investors by an almost crazy 155%...on your way to a 271% overall gain.
That’s almost three times the return…simply by being in the right trend at the right time.
Check out what happened to buy and hold investors who got stuck in the WRONG trend in Qantas, between 2010 and 2013…
See — the stock fell by 64%...I circled it here on the chart for you.
Qantas had a rough time of it towards the end of 2010. An engine exploded on one of its A380s…which led the airline to ground its entire superjumbo fleet.
Then a Boeing 747 bound for Sydney had to turn back to Singapore because of an engine problem.
Airline investors, it seems, don’t like safety concerns.
They ditched the stock, as you can see. 2011 was an absolute nightmare year for Qantas’s share price.
But look at the algorithm…
In backtesting, it detected the trend change in mid-2010.
It didn’t panic. It simply generated a bearish signal.
And look what happened…
While the stock tanked by 64%...if you had been in the position to do so, you could have made a 50% gain — yes, a gain in Qantas…
…leading to an aggregate outperformance of 114% (hypothetically speaking, of course).
Again, this superb outperformance is the theoretical result of being on the right trend in Qantas at the right time.
In backtesting, across each of the Big 10 markets we analysed, Tom’s algorithm showed itself to be more than capable of doing that — consistently.
I’m not saying it’s right every single time. But as you can see here, it shows what is possible.
In any case…
Tom will put his algorithm to work on Friday evening, after market close.
It will crunch the week’s traded volume data for these 10 markets:
The algorithm will apply its unique mathematical code to the previous five days of price action.
Overnight on Sunday, Tom will give me access to the 10 new signals.
I will email these signals to you every Monday morning — before our market opens — so that you can place your trades for the week.
I will also suggest a stop-loss level to you for each potential trade. This may help you if the trend changes unexpectedly, and the market gaps up or down.
Once a week.
If you can see the benefit to following trends…
…and you agree that it’s easier to establish trends in markets that trade in high volume…
…These may be the only 10 markets you ever need to trade.
Hold that thought while I quickly show you how the algorithm tested against another of our Aussie Big 10 markets: gold.
Now you know we love gold here at Fat Tail Media.
We love it for many reasons.
But as a trade, it hasn’t always worked out that well for investors.
Okay, it’s come back roaring in the last six months, but between 2012 and the start of this year it basically did nothing.
You can see what I mean by the black line here…
Now look at what our backtesting shows…
Around the same time as the gold price started to seriously tank — right at the beginning of 2013 — the algorithm (green line, remember) shoots off…in the OPPOSITE direction.
It detected the bearish trend in backtesting, switched strategies, and could have helped you avoid a big loss.
So, to be clear, hypothetically speaking…
And by the way, that theoretical outperformance of 136% was NOT achieved using leverage.
But here’s what you COULD do…
Week 1 — let’s say the signal is bullish
Week 2 — let’s say the signal is still bullish
OR — let’s say the signal has switched from bullish to bearish
OR — let’s say the signal has switched from bullish to in transition
Provided the signals are correct and consistent…
And I’ve show you over the last several minutes what that could mean for your trading account…
Now a couple of important points that I shouldn’t have to make. But I want to be completely up front about this, and clear with you before you commit any of your money to this trading strategy.
There is no escaping this, I’m afraid.
Brokerages are businesses. And they charge you every time they execute a trade on your behalf. I know you know that. But sometimes people get so caught up in the excitement of trying out a new system, they forget about the costs of trading. Please keep that in mind!
Again, you should already know this. If there was such a thing as a trading crystal ball, I wouldn’t be running a publishing business. I’d be the world’s richest stock trader!
And to be clear; we’re not pitching this as any kind of ‘crystal ball’.
It’s not a predictive tool...
It’s a measurement tool; a mathematical calculation, driven by extremely sophisticated computer code.
It calculates the mood of the market at the point the signal is generated.
In other words, the algorithm is completely ‘market agnostic’.
It doesn’t care about being ‘right’. It doesn’t have a ‘view’ on any asset or security. Its function is not to predict price action. If you follow its signals, you are essentially surrendering to the price action. Like a powerful current, remember?
As I keep saying, it’s Wall St-style tech, available right here in Australia, to private investors.
You, if you want it.
I keep calling it ‘next level’ trading. That’s because this algorithmic system really does have the potential to elevate your investing to new heights.
Now, granted, I don’t know you personally.
But now that I’ve shown you what appears to be a genuine advantage in the Australian market, I just have a hunch you won’t want to trade stocks the old way anymore.
You’ve seen it now.
And you can’t UN-see it!
I’ve shown you graphs for six of the Big 10 tickers, BHP, CBA, ASX/200, TLS, QAN and Gold...
But also, there’s the remaining four. Over the last decade, the algorithm...
And these are the 10 stocks I currently issue signals for every Monday.
So once again, I need to be clear that all the results I’ve shown you are based on backtesting results, which do not guarantee future performance. But they sure can give you an indication of what’s possible.
So, there’s really only one question left…
I’m biased, obviously. But since you’ve come this far, I really hope you take the next step and choose to put this breakthrough algorithm to the test in your trading.
Here’s how we can make this happen…
Today I am opening the doors to the trading service we call Algo Trend Trader.
This is your invitation to join.
I’ll go through how to accept my invitation in just a second.
But to quickly recap:
Join today, and every Monday morning before the market opens, you will get a private email from me, with 10 signals. One for each of these markets:
The signals will indicate the current trend in each market. Each signal will say one of these three things:
In each Monday’s email, I will give you my interpretation of these 10 signals. In other words, I’ll tell you what I believe the signals mean. But, essentially, you can execute them in any of the ways I just described.
These markets are among the most popular and frequently traded in the country. They can all be bought and sold through your regular broker.
If you want to use leverage, you shouldn’t have an issue trading through any Australian CFD provider.
You will hear from me once a week — like I say, every Monday morning, before the market opens — with the weekly trading signals.
Remember — this service is market agnostic.
There’s no additional market commentary. No long-term editorial ‘theme’ to provide context to your trades. No stocks on a watchlist. No portfolio to maintain.
The only time you’ll hear from me between Monday emails is if the trend in any of our 10 markets changes sharply from a bullish to a bearish condition. Then you’ll get a new signal.
But bear in mind that if you set a stop-loss — and I will suggest those levels to you every week — that should take you out of your position before you sustain a big hit (although I obviously can’t make any guarantees when it comes to this).
Still with me?
Well, it was hard for me to know exactly where to pitch it. There are very few algorithmic, or ‘quant’ funds available in Australia to private investors.
It took a bit of digging, but I found one.
It requires a minimum $500,000 investment, before they’ll accept you. (See — I told you this was high-end stuff!)
On top of that — it carries an annual fee of 6.4%.
So basically, out of that half-million bucks, you’re already handing them back $32,700 — just in year one.
With that in mind, Algo Trend Trader could EASILY be a $10,000-a-year service.
But it isn’t.
It’s not even a $7,000-a-year service...or even $5,000...
The cost to join is just $2,999 a year.
That gets you 12 months’ worth of access to the weekly signals generated by the algorithm.
If your initial reaction is: ‘that’s too expensive’ — you’ve basically just wasted half an hour of your life.
If you’re seriously baulking at three grand for access to a Wall St-style algorithmic trading service, you may need to re-evaluate your expectations somewhat!
But if this isn’t an issue for you — congratulations!
You are about to do something very few Australian private investors will get the chance to do.
Let me see if I can take any remaining issues off the table for you right now…
What if I told you that, as a new member of Algo Trend Trader, I don’t even want three thousand bucks off you today?
Well, I don’t.
That means all you’ll pay today…for access to the Algo Trend Trader Big 10 signals for the next 12 months…is just $2,199.
That’s more than 25% off.
But this deal is ONLY available through THIS invitation, right now.
Why am I discounting the ticket price?
Because this is not your regular stock trading advisory.
It’s not a stock picking service in the traditional sense. It’s not a speculative ‘micro-cap’ trading service. And it’s not a black box technical trading service.
What’s more, machine-based trend trading is probably new to a lot of people. Especially private investors.
I want to reflect that by giving you a great financial incentive to try it out. And while we’re on that subject…when you join today…
Again, we don’t normally do this.
Then again, we don’t offer algorithmic trading systems every day!
Point is, this is a TREND FOLLOWING service.
For stocks to get established in a strong trend, you need time.
This is not something you can make your mind up about in 30 days — which is our standard refund period.
Even 60 days is pushing it.
So, I’m extending our guarantee period out to 90 days. That’s effectively three months where you can test these signals with no obligation.
If you’re interested in joining Algo Trend Trader, click on the link below where it says, ‘Join Now’.
You will begin receiving the Big 10 signals from next Monday.
If you’re wary…or unsure…don’t place any trades.
You’ve got plenty of time to feel your way through this. Just get the signals, see what it’s like to follow my recommendations…see how this could fit in to the rest of your investing.
You can evaluate this new service however you like, over the next 90 days.
If, at any time within this period, you get cold feet. Or you decide it isn’t your thing. Or you can’t see yourself making money. Or something doesn’t feel right — call our member services team. Cancel your trial membership.
If you do this within 90 days from today, I will promptly refund you the discounted $2,199 membership fee. No questions asked. No one will give you a hard time or try to sell you something else.
Then click below — right away — where it says, ‘Join Now’ and let me fix you up so you can get ready to receive your first batch of weekly trading signals.
When I get your details, I’ll also send you a selection of bonus reports to help bring you up to speed with the service.
Then go ahead and click below where it says Join Now.
Remember, if you join through this invitation, you save $800.
This is the lowest price I can offer for a year’s access to this breakthrough trading service.
So, what are you waiting for?
Look, I’m sure you can probably think of a million and one things to do with your time and your money...
Trouble is, you have to choose between those things.
You can’t do everything.
The best advice I can give you?
Algorithmic trading isn’t the future anymore.
It’s the here and now.
If you can see an edge in what I’ve shown you today, you can bet your life others will have too.
And that means it won’t be an edge for long!
Click below where it says Join Now and let’s get started…
Editor & Publisher, Algo Trend Trader
If you’re new to trading (or even if you aren’t) I expect you have questions. I’ve tried to answer some of these below, but don’t worry; everything is explained fully in the welcome guide and reports you receive when you join Algo Trend Trader today.
A: Algo Trend Trader is not an ‘entry level’ trading service. So, it’s for beginner investors. It assumes you have some knowledge and are fully aware of the risks of investing.
But, perhaps you are a first-time trader. If so, your lack of trading experience might actually be to your advantage. You’ll have no preconceived ideas…and you may not be so driven by your emotions.
We found that simply trusting the system during backtesting would have yielded the best results!
A: NO! This service is for busy investors who are simply looking for a new way to trade some of the biggest markets in Australia. We will give you a selection of introductory guides — to show you how to action the weekly signals, and how they’re derived.
But if you just want guidance on entry and exit points into some of the biggest markets in Australia, this service is for you.
A: You need a trading account with a broker — you can trade over the phone with them, or online.
If you want to use leverage when you trade any of the signals, you will most likely need a CFD account. You’ll be aware that CFDs are highly risky.
You don’t have to have a CFD account to use Algo Trend Trader. Some of the Big 10 tickers have inverse ETFs against them, which means you can act on the short signal with using CFDs. Or you can simply trade the long signals and stay out of the short signals.
It’s entirely up to you — what you’re comfortable with and what your risk tolerance is.
However you decide to you the signals, once you get the hang of placing your weekly trade, you should find that it doesn’t take up too much of your time every Monday morning.
A: None at all. Tom’s system does all the analysis for you. It calculates the mood of the market each Monday morning, telling you whether the market looks ‘bullish’, ‘bearish’, or in transition.
You then decide whether to use these signals to inform your trading decisions for that week. You don’t have to do any maths at all — just interpret the signal accordingly, and trade if you want to.
A: Our trade alert emails are short and to the point. Each Monday morning, you will receive a brief explanation of the previous week’s market action.
Then you will see our Big 10 charts, along with our summary of what the system shows: the market is either bullish, bearish or in transition. It’s always up to you if you want to trade.
The email takes 2–3 minutes to read. Then you go online or call your broker and place the trade — which shouldn’t take longer than another couple of minutes.
A: No. You will get one email a week, every Monday morning, before the market opens. It will contain 10 trading signals — one for each of our Big 10 Australian markets.
The analysis is good for that week.
Most often, you won’t hear from us again until the following Monday. The only time we’ll send you a midweek alert will be if the trend in that market changes sharply and suddenly. Then we’ll issue a new signal.
But if you have placed a stop-loss at the level we recommend, that should be sufficient to take you out of the position without sustaining a heavy loss (although we can’t guarantee that).
If you want to join this service, you have to put a little trust in the system that produced such stunning results in backtesting.
A: With trading there’s always the potential to lose money. Remember, there’s no such thing as a crystal ball for the markets, and no sure-fire system that calls the market right 100% of the time.
Our aim with this service is to use state-of-the-art Wall St technology to minimise your risk as much as possible. We can never eliminate it completely. The system will be wrong from time to time, so never risk more in any trade than you could comfortably afford to lose.
And remember — if you use leverage in the form of CFDs, and a trade goes against you, you could lose more than your initial stake. CFDs are only for people experienced in using them. You need to understand — and accept — all of this before you join our new service today.
A: That’s completely up to you. Leverage is highly risky and not recommended for beginners. You can use the signals to buy into and sell out of these markets as you see fit.
If you’re a little more advanced, you can use leverage in the form of CFDs. But please see my note above about risk!
A: First — don’t panic. Second, as an Algo Trend Trader member you’ll have direct phone access to our customer services team. They can’t give you personal trading advice, but they can help you if you’re unclear about any of the signals.
Bottom line: I want you to make money from this exciting new service, and I want the service to be easy for you to follow, so that it doesn’t take up too much of your time — or fill your head with stress — every time you trade.