Page 927 - How to Make Money in Stocks Trilogy

176 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

“If you enjoy studying the market and past winning stocks, eventually
you’ll find a perfect precedent for a current time period. In early 2003, I
realized that a chart of the Dow from 1929 to 1932 looked just like a chart
of the 2000 to 2002 period on the Nasdaq; in fact, they were almost identi-
cal. I also found a precedent from the bull market that started in March of
1933, in which the Dow looked just like the Nasdaq in March of 2003. So I
used that precedent as a roadmap to trade aggressively during that time
frame. That is why Bill has us studying past stocks and markets because
nothing ever changes.”

Creating Highly Useful Investment Tools
Over the years, Mike has created many products used for the company. His
first was Stock Checkup for Investors.com. He also created the IBD
Composite Rating because Bill wanted a way for investors to quickly evalu-
ate the overall strength of a stock fundamentally. The Composite Rating
combines key characteristics like earnings growth, profit margins, the level
of institutional buying over the last 12 weeks, and other fundamental data
designed to help investors find the best stocks faster. Stocks are given a
numerical rating from 1 to 99, with 99 being the best.
Mike also helped develop the MarketSmith 250 Growth Screen. He
admits to being a “screen junkie,” so this product was created to save people
time with just one comprehensive list of stocks worth researching rather than
building countless screens. This list has over 30 different themed screens
that are combined into one list that filters for technical and fundamental
stock data like price performance, earnings, liquidity, return on equity, and
pre-tax margins, among other criteria. Mike says, “Learning how to screen
properly takes years, and we wanted to speed up everyone’s learning curve.
The product was really created to save people time. I use it every week.”
Pattern Recognition, another product that Mike helped develop for
MarketSmith, uses algorithms to create chart base patterns and to identify
buy points. Through a lot of hard work, Mike was able to get the computer
to identify and draw the base. If an investor is newer to chart reading, this
helps locate the stocks that are consolidating and getting ready to break out.
For the more seasoned trader who already knows how to read charts, it’s a
time saver: “Having the percent from the pivot, depth, and stage of the base
is great—it’s like using a calculator instead of doing the math by hand.”
Market School is a new seminar that Mike teaches with Charles Harris.
Mike says, “Charles and I worked with Justin Nielsen to come up with sev-