17. Methodology Statement (Plain-Language Summary)
A systematic stock-investing method that replaces emotion and tips with research-backed rules.
The Research Foundation¶
Two findings drive the design:
Barber & Odean (1999): individual investors underperform primarily because they overtrade on emotion. → The system uses rules to remove emotional decisions.
Bessembinder (2018): over 1926-2016, only 4.3% of stocks created all net market wealth; 86 stocks created half. → The objective is to find the rare winners early and HOLD them, while cutting losers fast.
The Method¶
Built on the CAN SLIM framework (O’Neil), the system identifies established market leaders: strong earnings, strong relative-strength price momentum, and institutional accumulation. Before any purchase, a one-sentence falsifiable thesis is written. Entry occurs only at a proper technical pivot on volume confirmation — not on impulse. An automatic 8% stop-loss caps every position, preventing the large losses that drive most retail underperformance.
The Three-Account Structure¶
Retirement (IRA): lower-beta leaders, capital protected
Long-term (Brokerage): quality held for years (long-term gains)
Aggressive: higher-risk ideas, paper-traded until proven, including an Anomaly sub-strategy for structural-macro outliers
The Infrastructure¶
Custom software scans the market weekly, scores every stock on the criteria, and sends alerts when buy or sell rules trigger — so emotion never makes the decision. All metrics (beta, relative strength, pivot, accumulation/distribution proxy) are computed from public price data with proprietary formulas, removing dependence on licensed data and making the method independently replicable.
The Discipline¶
Most weeks, the correct action is no action. The method is primarily about NOT buying — waiting for the rare setup that meets every rule — and about holding winners through volatility while cutting losers automatically. Patience is a position.
Path to Validation¶
The aggressive account paper-trades with documented entry/exit criteria and a formal go-live gate (minimum completed trades, positive expectancy, a completed anomaly trade, and survival of a market pullback) before any real capital is deployed. This creates an auditable performance record suitable for peer review.
Verbal Summary (≈2 min)¶
"I built a systematic stock-investing method instead of trading on tips or gut feeling. It’s grounded in two pieces of research: one showing everyday investors lose mainly because they overtrade on emotion, and another showing that over 90 years just 4% of stocks created all the market’s wealth — so the whole game is finding those rare winners early and actually holding them.
I use a checklist from the CAN SLIM method to find stocks that are already market leaders: strong earnings, strong price momentum, big institutional buying. Before I buy, I write a one-sentence thesis on why it’ll win, and I only buy at the right moment, not whenever I feel like it. If a stock drops 8%, I sell automatically — no arguing with myself. That one rule prevents the big losses that wreck most people.
I run three accounts with different rules: retirement holds safer lower-volatility leaders; a long-term account buys quality and holds for years; and an aggressive account where I test riskier ideas — but only on paper until I’ve proven the system works. I built software that scans the whole market weekly, scores every stock, and emails me when something hits a buy or sell rule, so emotion never makes the call.
The honest part: most weeks I do nothing. The discipline is mostly about not buying — waiting for the rare setup that meets every rule. Right now I’m up big on one position because I followed the rules to buy it and then just held it. That’s the whole strategy: find the rare winners by the rules, hold them through the noise, and cut the losers fast."
End of Technical Guide