One-on-One with Steven Primo
Today, we sat down with Director of Education Steven Primo to discuss
PowerRatings (for Traders). After nearly 2 years of teaching and trading
PowerRatings (for Traders), Mr. Primo is in a perfect position to help beginners
learn the basics, and to help advanced traders maximize their edge. Steve traded
on the floor of the Pacific Stock Exchange for 16 years.
TradingMarkets Editorial (TM): Steve, thanks for taking part in
this interview today. We know you have a busy schedule, so we’ll keep this short
and sweet. Let’s get down to business.
Steve Primo: No problem, let’s do it.
TM: In your opinion, what is the single-most important thing to
keep in mind when trading with PowerRatings (for Traders)? Out of all the rules
and guidelines you have studied and implemented in your PowerRatings trading,
what is one thing that traders should never forget?
Primo: This is as an easy one that I emphasize in all of my classes.
The one thing you should always keep in mind when trading PowerRatings (for
Traders) is to use them as a confirmation tool. So many traders new to
PowerRatings just go into the site, click on the “9’s and 10’s” list, and buy
the top ten stocks on the list. DON’T DO IT! As a trader, you should always
start your day with a plan, one that you have developed and tested yourself. If
you don’t believe in your own trading system, then you will ultimately end up
blindly following other people’s trading advice and recommendations.
PowerRatings (for Traders) work the best when you have your own strategy, and
then use PowerRatings to confirm your trade.
Many people will ask, “What kind of strategy should I start with?” This one
is simple, too. Use pullback strategies to maximize your PowerRatings edge.
PowerRatings (for Traders) provides you with a short-term edge, that exists only
for 5 days. All of our research indicates that short-term edges lie in
mean-reversion, which occurs when stocks snap back to “normal” conditions. So
for example, gear your strategy towards finding strong stocks in a long-term
uptrend that have recently pulled back to oversold conditions. Our data points
to a historical edge during these situations. PowerRatings (for Traders) will
help you to confirm the strength, or level, of the pullback.
TM: What is your favorite PowerRatings (for Traders) strategy to
trade stocks?
Primo: You’re giving me softballs here. The most simple and effective
way to trade PowerRatings (for Traders) is outlined in Larry and Ashton’s
article
2 Simple Rules to Trade PowerRatings. Basically, what you are trying to do
is only focus on stocks with high PowerRatings. Don’t trade anything that has a
PowerRating below 7. After you have a focus list of stocks, wait for a stock to
fall below a certain level from the previous day’s close before buying. After
the stock falls 5% intraday, for example, then you would make your move and buy.
Once you are in the stock, just exit when price rallies to close above the
stock’s 5-day Moving Average. The article highlights all the numbers and edges
in detail, but the concept remains the same. Focus on the strong stocks, wait
for an extended pullback, and then exit once the stock rallies into short-term
overbought range.
TM: After 2 years of watching, teaching and trading PowerRatings,
what is one thing that you feel that you have learned, in an underlying sense,
about trading stocks for short-term gains? Be as general or as specific as
possible.
Primo: I think the thing that really sticks out in my mind, after all
this time following PowerRatings, is “buy on weakness, sell on strength.” We
kind of play it out a little too much here, but in reality, that is where the
edge lies for the short-term trader. There’s no use buying on new highs for a
short-term edge, because our historical data proves that buying on new highs
usually does not produce positive results. Markets move from overbought to
oversold, and the initial “snap back” is what we are trying to exploit.
Obviously, the “2 Simple Rules” is geared directly around this concept, of
buying on major weakness, and then selling once the stock has exerted its
underlying strength. Pullbacks work.
TM: Yes, I know you always emphasize the pullback and buying on
weakness. It makes sense, given that strong stocks that are in the midst of a
pullback usually have the best PowerRatings.
Just one last question for you: For a beginner trader, what advice can you
recommend to help get through the hard times? Despite trading with an edge
behind you, it’s a guarantee that you will have some bad days, and even some
horrible days. What can you say to that?
Primo: Well, it’s just important to start slow, and not overextend
yourself too early. Throughout my trading career, I hear people all the time complain
about losing $200k in a few months, and, to me, that just points to
inexperience. If you are making huge bets, and you keep losing consistently,
it’s not a good idea to keep making those bets. There are too many people in
this business who are working around the clock, for a beginner to feel like he
or she can just waltz in without experience and start making the big bucks. It
takes years and years to learn the skills to become a doctor or lawyer, so why
do people think that trading will be any different? It takes time and experience
before you have the knowledge and confidence to consistently make money trading.
Don’t try to skip it, just do your homework.
Here are a couple of quick guidelines. Start slow by doing research and paper
trading. It is foolish to throw your money behind a system that you don’t
understand and have not validated. Set specific portfolio parameters, like only
allotting 2% of your portfolio to any one position. You might miss out on the
“big one,” but that also means you have a better chance of not getting wiped out
on one lousy trade.
TM: Thanks a lot for your time, Steven. I think you’ve helped to
explain some of the major thoughts and concerns for any new TradingMarkets
visitors who are curious about what they can do to gain an edge today.
Primo: It was great to talk about PowerRatings (for Traders) again.
I’ve got a class coming up, my fans are waiting!
Click here to sign up for one of Steven’s PowerRatings (for Traders)
classes.
Click here to
sign up for a free trial to PowerRatings (for Traders).