Thomas N. Bulkowski - Fundamental analysis and position trading: evolution of a trader

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Copyright 2013 by Thomas N. Bulkowski. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Bulkowski, Thomas N.,
Fundamental analysis and position trading : evolution of a trader / Thomas N. Bulkowski.
pages cm. (Wiley trading series)
Includes bibliographical references and index.
ISBN 978-1-118-46420-5 (cloth); ISBN 978-1-118-50874-9 (ebk); ISBN 978-1-118-50875-6 (ebk); ISBN 978-1-118-51695-9 (ebk)
1. StocksPrices. 2. Price-earnings ratio. 3. Dividends. I. Title.
HG4636.B85 2012
332.63'2042dc23
2012032676

Preface

Are you like John?

He learned early in life to save his money for a rainy day. Instead of putting it into the bank, he put it into the stock market. He bought Cisco Systems in mid-1999 at 35 and watched the stock soar to 82 in less than a year.

I'm looking for my first 10-bagger, he said, and held onto the stock.

In 2001, when the tech bubble burst, the Cisco balloon popped, too, and it plunged back to 35. He was at breakeven after seeing the stock more than double.

It'll recover, he said. It's a $200 stock. You'll see.

The stock tunneled through 35 then 30, then 20, and bottomed at 15, all in one month. When it hit 10, he sold it for a 70 percent loss.

I should have sold at the top. Buy-and-hold doesn't work. But it did work. Cisco more than doubled, but he held too long.

Next, he tried position trading to better time the exit and chose Eastman Chemical. He bought it in 2003 at 14, just pennies from the bear market bottom, and rode it up to 21 before selling. He made 50 percent in a year. Was he happy?

I sold too soon. The stock continued rising, hitting 30 in 2005. He disliked seeing profits mount after he sold, and wanted to profit from swings in both directions.

He switched to swing trading in 2005 and tried his old favorite: Cisco. The stock bounced from 17 to 20 to 17 to 22 over the next year, but he always bought too late and exited too early. He made money, but not enough.

He took a vacation from his day job and watched Applied Materials wave to him on the computer screen, inviting him to come day trade it. So he did. He made $400 in just 15 minutes. If I can make $400 a day for a year, I'll makehe grabbed his calculator and punched buttons$146,000! No, that's not right. How many trading days are there in a year?

He redid the math and discovered that he could make $100,000 a year by nibbling off just 40 cents a share on 1,000 shares every trading day. Wow. Count me in.

After paying $5,000 for a trading course and more for hardware, software, and data feeds, he took the plunge and started day trading full time.

It took a year to blow through his savings. Another three months took out his emergency fund. He moved back in with his parents while he looked for a real job.

Now, he is saving again and putting it to work in the market. After reading the manuscript for this book, he said, I found a trading style that works for me. I'm a swingera swing trader. And I'm making money, too. He handles not only his own money but his parents and siblings as well, providing them with extra income and building a nest egg for their retirement.

EVOLUTION OF A TRADER

John represents an amalgam of traders, a composite of those searching for a trading style that they can call their own. He suffered through many failed trades before finding a trading style that worked for him. I wrote the Evolution of a Trader series to help people like John.

Evolution of a Trader traces my journey from a buy-and-hold investor to position trader to swing trader to day trader as I searched for styles that worked best when markets evolved. However, these are not autobiographical. Rather, it is an exploration of what has worked, what is supposed to work but does not, and what may work in the future.

This series dissects the four trading styles and provides discoveries, trading tips, setups, and tactics to make each style a profitable endeavor. I have done the research so you do not have to. I show what is needed to make each style work.

CONTENT OVERVIEW

The three books in the Evolution of a Trader series provide numerous tips, trading ideas, and setups based on personal experience and that of others.

Easy to understand tests are used to confirm trading folklore and to illustrate ideas and setups, and yet the books are an entertaining read with an engaging style that appeals to the novice.