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The Value and Momentum Trader: Dynamic Stock Selection Models to Beat the Market

ISBN: 978-0-470-56186-7
320 pages
October 2009
The Value and Momentum Trader: Dynamic Stock Selection Models to Beat the Market  (0470561866) cover image
A winning approach to stock trading based on proprietary statistical research in Excel

In The Value and Momentum Trader, Grant Henning presents a comprehensive approach to stock trading, which centers around Excel-based research methods he has developed. In this book, Henning presents the trading tools he has used to become a successful trader, and discusses some of the greatest challenges facing active market participants. This reliable resource presents both winning trading systems and all the skills necessary to perform as a trader as market conditions change. It also demonstrates how you can turn the successes and failures of any trading system into an interactive feedback loop to discover one's true trading skills.

  • Provides a solid understanding of the author's statistical trading system
  • Explores how to execute optimal trades under different market conditions
  • Outlines a very affordable Excel-based stock analysis method that is easy to implement
  • Dr. Henning has proven to be a trusted author with other academic publications in the areas of measurement and statistics.

The Value and Momentum Trader is an essential guide to trading today's dynamic markets.

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Foreword.

Preface.

Acknowledgments.

List of Tables and Figures.

Chapter 1: A Philosophy of Trading.

Analogies.

Pragmatism.

Goal-Oriented Behavior.

Timing.

Stocks versus Commodities, Options, Mutual Funds, and Bonds.

Short Trading.

Use of Margin.

Trading and Gambling.

Bold Passion.

Summary.

Chapter 2: Tools of the Trade.

On-line Access.

A Reliable Brokerage Account.

Information.

Formal Study.

Analysis Software.

Protected Workspace.

Mathematical Trading Systems.

Market Timing Indicators.

Summary.

Chapter 3: Constructing Mathematical Models for Stock Selection.

Technical Approaches to Stock Selection.

Fundamental Approaches to Stock Selection.

Hybrid Approaches to Stock Selection.

The Nature of the Stock Selection Challenge.

Common Mistakes in System Design for Decision Making.

Early Beginning Approaches.

Advantages and Disadvantages of Mathematization.

Summary.

Chapter 4: Stock Selection: A Technical-Momentum System.

Qualifying Variables.

Sample Recommendation Summary Table.

Questions and Answers.

Summary.

Chapter 5: Stock Selection: A Fundamental-Value System.

Qualifying Variables.

Fundamental Variables.

Questions and Answers.

Summary.

Chapter 6: Stock Selection: A Technical-Fundamental Hybrid Approach.

Qualifying Variables.

Point-and-Figure Analysis.

Technical Ratings.

Other Technical Indicators.

Price-to-Earnings (PE) Ratio.

Book Value.

Earnings Growth.

EPS/PE Divergence.

Cash Flow and Free Cash Flow.

Other Fundamental Indicators.

Questions and Answers.

Summary.

Chapter 7: Buying Stocks.

Preparing the Slate of Candidates.

Gathering Intel.

Demanding Supply.

Cost Averaging.

Limit and Market Orders.

Avoiding Purchases with Unsettled Funds.

Summary.

Chapter 8: Selling Stocks.

Setting Targets.

Setting Partial Targets.

Using Stop-Loss Orders.

Culling out Losers.

Rank Indicators.

Holding Limits.

Breaking the 50-Day Moving Average.

Identifying Market Downturns.

Summary.

Chapter 9: Portfolio Management.

Diversifying Over Stocks.

Diversifying Over Sectors.

Record Keeping.

Proportionality over Portfolios.

Proportionality over Individual Stocks

Turnover Ratio.

Timing the Market.

Summary.

Chapter 10: Market Timing.

Mythological Indicators.

Quasi-Mythological Indicators.

Reliable Indicators.

Summary.

Chapter 11: A Performance Record.

Summary.

Chapter 12: A Typical Trading Day.

Before the Bell.

The First Half Hour.

Midday Monitoring.

After the Closing.

Weekends.

Summary.

Chapter 13: Threats to Success.

Actions of the Federal Reserve Board Open Markets Committee.

Analyst Downgrades.

“Pump-and-Dump” Ploys.

Message Board Panning.

Market Maker Meddling.

Negative News Events.

Large Position Dumping.

Overhead: Taxes, Commissions, Margin Interest, Spreads.

Summary.

Chapter 14: A Summary of Trading Principles.

Never Follow a Tip without Due Diligence.

Don't Get Grounded on Low Volume.

Never Buy at the High for the Day.

Never Sell at the Low for the Day.

Remember Why You Bought.

Don’t Get Too Attached to Any Stock.

Maintain Diversification.

Don't Overtrade.

Don't Hesitate to Reacquire a Winner.

Don't Get Your Guidance from Message Boards.

Maintain Your Own Trading Identity.

Read Widely.

Back off Periodically.

Seldom if Ever Buy with Unsettled Funds.

Look to Sell with the Same Level of Zeal That You Look to Buy.

Maintain a Trading Journal or Diary.

Gather Information on Your Holdings Daily.

Learn from Your Mistakes.

Don't Damage the Environment for Others.

Don't Let Yourself Become Discouraged.

Learn to Time General Market Trends.

Don't Begrudge the Paying of Dues.

Set Realistic, Measurable Goals for Trading Gains.

Don't Take Advice from Investment Professionals.

Avoid Buying a Stock Immediately After It Has Made a Huge Price Run Up.

Avoid Selling a Stock Immediately After It Has Had a Huge Loss.

Maintain Your Discipline.

Don't Hesitate to Sell Good Stocks When Macro Market Indicators Signal a Downturn.

It's Better to Avoid Great Losses Than to Make Great Gains.

Summary.

Chapter 15: Morality in the Marketplace.

Integrity Defined.

The Gravity of the Effects of Declining Integrity.

Conditions that Can Promote the Erosion of Integrity.

Possible Solutions to the Problems that Promote the Erosion of Integrity.

Summary.

Chapter 16: Random Walk or Rational Wager.

Predictability and Probability.

The Limits of Predictability.

Following the Numbers or Following the Gurus.

The Accuracy and Use of Mathematical Models.

Predictable Market Phenomena.

Summary.

Chapter 17: On the Nature of Risk.

The Risks of Risk Management Applied to Market Phenomena.

Risk and Variance.

Risk and Compassion.

Risk and Trust.

Risk and Wealth.

Summary.

Chapter 18: Trading in the Information Age.

The Economy of Abundance.

A Perspective on Abundance.

Taking Advantage of Information-Access Opportunities.

Summary.

Chapter 19: Using a Trading System with an Excel Spreadsheet.

Step 1: Loading the Excel Spreadsheet CD into Your Computer.

Step 2: Recognizing Information on the Spreadsheet.

Step 3: Updating Your Spreadsheet.

Step 4: Running the Analysis.

Step 5: Interpreting the Results.

Step 6: Maintaining the Spreadsheet

Cautionary Reminders.

Summary.

Chapter 20: Afterthoughts.

Timing.

Opportunities.

Market Trends.

Lessons from History.

Conclusion.

Bibliography.

About the Author.

About the CD-ROM.

Index.

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Grant Henning holds a PhD in educational psychology from UCLA, where he specialized in measurement statistics and applied linguistics.?He has subsequently served as professor at UCLA, Pennsylvania State University, and several universities in Egypt, Iran, and China.?For a number of years, Henning was engaged as senior research scientist at Educational Testing Service, where he conducted evaluative research on university entrance examinations. Henning has authored more than fifty articles, books, and commissioned reports, and has traveled to more than fifty countries over a thirty-year period. In June of 2000, he retired from university service to trade full-time.

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