by Phillip McGregor

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- Member of the mentoring style

'Investing & Online Trading' Stock Market Newsletter

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I have been lucky enough to spend a career in medium/large companies at middle and senior management levels. With a degree majoring in Economics & Accounting, plus sub majors in Quantitative methods and IT plus a long career with a focus on preparing / implementing business plans – you’d think I had the perfect background for share trading.

But I’ve found the concepts that are fundamental in share trading - risk/reward, expectancy etc - are counter intuitive to the basic thrust of business – which tends to be about “winning” i.e. high success rate, and then converting small clients into larger, more profitable ones. The type of focus and planning are quite different.

At least I realized quite early that there was a difference – and commenced the journey to find what it was.

I started investing in the stock market in May 1992, which was well before Jim released his book “The Share Trader’s Handbook” in 2002.

Where were you guys in 1992 when I really needed you?!

I had to work most of it out myself, or pick things up from various books and piece it together. Still – I have had so much enjoyment in arriving at this point (actually there were some really, really painful learning experiences – usually two or three times a year, when I learned first hand about “drawdowns” – back when I only knew it as – “Oh cr*p – what’s happened – the portfolio just lost 10+%!”)

But now you have trading plan templates, a full weekly newsletter, and example after example after example from Jim and John of how it should all work.

Over those fifteen years I’ve spent more on charting software packages, data subscriptions and newsletters than most new investors would allocate to their initial trading capital. And I have never regretted a moment of it. I am living proof that someone can start with a little, and with application and willingness to learn (and after making almost every mistake you can) still make money from investing in shares.

It also means that I recognise outstanding value for money when I see it.

In 2002 I started implementing Jim’s strategies – and have retained his basic entry/exit processes from then on.

That’s why I thought, after 10 years of going it alone and 5 years of Jim’s wisdom behind me, I’d give you the full tour of my impressions of Jim Berg’s trading system, this newsletter and Jim’s new JB Charting/Data/Home Study/Support Combo, and why I had no hesitation in ordering it last month.

Trading and trading systems is my ‘hobby’ – as well as how I am gradually moving into semi-retirement – at least from ‘normal’ work – trading/investing is still work – and not some sort of game that pays well as so many ‘newbies’ seem to think.

In assessing a system I look for:

a) Simplicity of concept - if you cannot express the basis approach in a few sentences – then it’s likely to be too specialized – or “curve fitted” or “data-mined” – and it will likely have a short life.

b) A ‘simple’ system is also likely to have few standard indicators – not the new “magic” indicator with an amazing 80% success rate – as again it’s probably only applicable to the test data set.

c) It should be universal. I’ve seen a few that is only applied to certain shares – or small groups of shares / indices. Again – it’s probably a “data-mine”. Once the conditions change – who knows what can happen.

d) While every system will inevitably have a bad period – we do have bear markets – and even minor / large market corrections can be quite savage – the system should exit quickly enough that you are protected from the serious downside (plus there are always a few shares that hardly blip).

e) It should also “recover” relatively quickly. So a bad year should be followed by one or two really good years within one or two years of the “bad” result.

Jim Berg’s trading system gets big ticks on all fronts.

Its simplicity is quite elegant, and it takes someone of rare ability to identify the few variables / indicators that really matter – that give a high probability of yielding a system with an above average positive expectancy.

One of the key reasons I love the current approach of the newsletter – i.e. repeat of the approach to various lists - is that I am a recovering “tink”………..

…………. a person addicted to “tinkering” – varying the rules “just this once”.

After all – I used to think they’re really guidelines – not actual life or death RULES.

Like doing 63 in a 60 speed zone. It’s tasting the forbidden fruit. You know you shouldn’t – but when you get it “right” – it feels so good…………..

But we know it’s a slippery slide to nowhere. It’s not getting it “right”. Getting it “right” was following the system. We got it “wrong”.

And if it resulted in a better result – then we gambled and we got lucky. And like all gambling – the odds are against you.

I’ve been through it. Even had to stop trading a few times. Not long – just close out positions and start again. I have it under control most of the time. Usually those deep market retracements – like May 2006 and this Feb/Mar 2007 – or the 2002/2003 bear – that start the old craving.

Back testing and generating results for “how it would have gone” is fine. You graph the equity curve – you can see the draw-downs (maybe 10%, 15% or even 20+%), and subsequent “new highs” – usually some months later.

These are just numbers. Months on the graph are just tick marks.

But when you have a real portfolio of say, $500,000 or $600,000 (or more!) actually invested in the market – then that 15% drop equates to a $90,000 fall on a $600,000 portfolio.

When you see $90,000 actually wiped off your assets base – you feel Sick.

You panic. (John – I know you’ve lived through far worse – but even knowing that doesn’t help when it happens again & again!)

And even though you’ve been through it before (15 years for me) – you still feel Sick. And how long to recovery?? One month, two months?....... More? ……. Is it another 2002/2003 bear?!

And sure enough – two, or three or six months later (or more in some extreme cases) a new high arrives; and you realize (again!) that the drawdown was just another “blip” – and “so silly to be so worried”.

So I look forward to my weekly “Stick-To-The-Plan” reinforcement in the newsletter e.g “ Let’s apply the plan to the 2005 picks, the 2006 picks, the monopolies list…” and so on.

Jim’s Boot Camp, newsletter and other training are like ‘preventative rehab’.

I read and re-read Jim’s book and e-book (the book is smaller and easier to take with me when I travel).

I read over the “and this is what happened to the list stories”. I like to test out the method during one of the “bad periods” – see how soon before the absolute high you might have got an entry – and then how soon you got out.

Quite often it’s not that bad. So I sleep better. Keep the craving under control. The system is strong – but I am weak. But I keep working on it. I stay in therapy => preventative rehab.

I’ve found Jim Berg’s new ‘JB Charting/Data/Home Study/Support Combo’ to be outstanding value for money.

The charting package contains enough indicators to the do the job – why confuse yourself with more (you’ll only be tempted to fiddle – and lose time and money doing it – I did!). The charts are clear and uncluttered.

But in the five years since I discovered Jim’s methodology – I can say with some authority, I expected it to be of a high quality. And he exceeded my expectations.

The JB Premium Data Combo package is without doubt the best I have ever encountered – and I have tried a number of them. It’s quick – it’s easy – and has an impressive array of data sorting – sectors, industry groups…

Jim’s support notes are impressive as always. I started with the original Metastock Home Study Course. Not much has changed from the original book from 2002. I still have it. I still read it. Trading is about repetition. I need a constant reminder to resist the temptation to fiddle. I love to tinker…….. to improve……… I think I have finally overcome it!

Now I stick to the same old same old. It’s boring – but it works.

The strategy that came with the Combo is still the same – just lots more examples – especially the tricky parts, such as change in trends. And the short-term strategy has been a welcome addition; as have been all the extra notes.

It’s easy to spot a strong weekly uptrend when it has become established. Identifying a high probability change in trend near the beginning is much harder. So Jim and John have the newsletter to keep showing example after example of trends and entries and exits. Many of these examples have been taken from the newsletter and grouped in the extra notes.

After fifteen years I can guarantee you will feel elation as your portfolio climbs in value, and you will feel exceedingly upset when it falls (real investors say “in drawdown”).

I think despair is probably a more apt description of how you actually feel when in “drawdown”.

I know – I have been through quite a number of market corrections. However, Jim’s basic methodology has remained unchanged. It has been expanded to include more examples for a clearer understanding, but the basic methodology is the same.

It’s simple. It’s logical. It makes sense even if you have never traded before. I find that very re-assuring – and so should you.

The other thing I can say with considerable authority is that trading (especially using Jim’s method) is exceedingly boring. Jim’s not boring – far from it.

Many attendees from Jim’s Boot Camp and other speaking engagements are “regulars”. And they certainly do not keep coming back because the system is difficult to understand, or it’s been updated to the new and improved version – because it has not changed. They come back because its fun.

It’s nice to meet people with similar interests. And John (who does all the behind the scenes co-ordination) manages to inject something a little different – making each one a unique experience.

However, whenever I find investing boring, I am happy. Boring is good.

Boring means everything is going to plan. I look forward to receiving my weekly newsletter, read through the new articles, and recap the investment strategy as each trade or series of trades is reviewed. It’s the “same old, same old”. No change. Boring. But I sleep well.

Jim’s new Combo is the cheapest good night’s sleep you’ll ever find.

If you’ve been trading for a while, and experienced market corrections and bear markets (I remember 2002/2003 bear market well – it was also when I discovered Jim’s book) – you’ll understand the importance of having a trading plan:

Þ Of knowing when to sell

Þ Having a system that tends to keep you out

Þ But will still keep you in the odd share that bucks the trend – and even I had some in 2002.

Once you have been through “drawdown”, you’ll understand what I mean about Jim’s Combo being the cheapest good night’s sleep you’ll ever find.

The reason I got into investing? Or should that be five reasons?

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Five children - two daughters. Eighteenth birthdays, twenty-first birthdays, engagement parties, weddings – grandchildren.

I was staring at financial ruin!!! How quickly they multiply. Extra daughters and sons (you seem to gain them when your children marry) – and then along come the next generation. It never ends!

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This last year has been exceedingly difficult – as you can see from the photo above and the

attachment – an extract from our life (my wife Susan and I) – in pictures. This a fairly typical extract - I seem to lurch from one party or special event to another.

But before you get too excited and think being a stock trader is all play and no work – believe me it isn’t. You’re constantly fighting against the toughest opponent in the world. Yourself. Your own fear. Your elation when your portfolio surges ahead – tempting you to try a little side trade outside the trading plan. It’s only small. It won’t hurt. Yeah – right!

It only takes one bad trade to start you on the road to addiction. A bad trade is one not according to your plan – it has nothing to do with how the trade turned out. And the addiction is unbelievably difficult to conquer. I know. I am a “tink” addict. I tinker with the system. Fudge the rules. I’m in remission now. But I know I’m only one bad trade away from that slippery slide to uncontrolled discretionary rule breaking.

Please John and Jim. Keep me safe from myself. Help me stick to my trading plan. Send me another newsletter showing just how robust Jim’s methodology is. It’s almost become like a dare.

Give Jim a list of shares – any list. And he’ll show how much better it could have been had you followed these simple rules. I love it! I cannot get enough of it! Thanks.

So “Trade with the weight-of-evidence”. Where have I heard that before?

Phillip McGregor, May 2007.

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Phillip McGregor’s pictorial attachment “My Life As A Stock Trader” is now available - showing some snapshots of how Phil has managed to survive the roller coaster of the market in the last year ………..

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