Trading ManualPeak elocity Trader

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THE CODE TO MAKING PEAK PROFITS:

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BASEBALL fans probably recognize the nearby picture of Babe Ruth, a player who revolutionized the game of baseball. The Babe was baseball’s first home-run hitter, and, according to legend, he could hit a baseball more than 600 feet.

The reason?Babe Ruth’s experience allowed him to assess if a pitch was worth hitting.

There were a number of other factors working for him too: the speed and angle of his swing, his strength, reflexes, etc.

Needless to say, Babe Ruth and other great baseball players are able to do this instinctively. It may be instinct honed by countless hours of training — but it’s an automatic response, nonetheless. One that allows them to process the precise steps for hitting a home run in a matter of seconds.

And it’s exactly that type of automatic analysis that I wanted to program into my trading systems. After all, the more immediate your response to a stock move (or pitch) — the better the ultimate outcome.

In Babe Ruth’s case, you get a home run.In an investor’s case, well, you can also get a home run. But instead of hitting a ball out of the park, you

can hit a trade out of the park by scoring double-, triple-, even quadruple-digit gains.With that in mind, I went to work designing a four-line code, which eventually became the backbone of

the Peak Velocity Trader strategy. See, I wanted a software that would scan the entire S&P 500 every single day, automatically assessing

stocks that met my trading parameters. Much like Babe Ruth was able to utilize his natural abilities and extensive training to make home runs, I wanted to encapsulate my decades of trading experience and knowledge in a system that would automatically select home-run-hitting plays.

And after 10 years and over $300,000 of my own money — I was able to do just that with my patent-pending four-line code.

In fact, since 2005, I’ve been using this system in my own account, continually improving it along the way, and it’s helped me rack up enough profits to live the retirement of my dreams.

Now I’m excited to share it with you, too.Fact is, during an exclusive beta test of this system, my beta testers had the chance to make gains of: • 50% on Campbell Soup.• 46% on Henry Schein.• 51% on Allstate.• 92% on Anthem.

The Code to Making Peak Profits:

The Peak Velocity Trader Trading Manual

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• 101% on Symantec.• 105% on Fastenal.• 109% on LyondellBasell.• 147% on Lennar.• And 465% on Hasbro.That’s a total gain of 1,191% on these winners! If a trader had placed $10,000 into each of these winning trades, he would have enjoyed a $119,100

windfall. What’s more, every single one of those gains came within a two-month window.Now you have the chance at those same types of quick gains.With that in mind, I’d like to introduce you further to what this system — and the service — is all

about, so you’re completely comfortable making our trade recommendations. I plan to explain a lot of the technical factors I’ve included in my code — and at times, it may feel like a lot of information.

But don’t feel overwhelmed. You don’t need to memorize everything I explain here. I simply want to lay out what our system takes into account so you can use it with confidence.

By the end of this report, you’ll know exactly why the Peak Velocity Trader system is able to find the right time to buy a stock — and how we’re set to profit from “peak velocity.”

So let’s get started…

My History With Precise Calculations

First and foremost, I’m a technical analysist — and you’ll notice that in my trade recommendations. I use a series of technical indicators to predict a stock’s momentum.

But before we jump into that, a little background on me….The financial markets are my second career. Before working in the markets, I spent 20 years in the U.S.

Air Force.In the military, following a disciplined process is important to success. I learned that after years of

working with nuclear missiles, the most destructive weapons in history.Missiles are intended to maintain peace by presenting an alternative too horrible to contemplate. In

order to meet their objective, they must be 100% reliable. After all, potential adversaries need to know the weapons can be launched on a moment’s notice and with complete accuracy under any conditions.

So my job included ensuring the missiles were programmed to hit their targets — 100% of the time.I won’t sugarcoat it; this is difficult. The missile’s path could be altered by wind, for example. So there

needs to be something built into the system to make sure that doesn’t happen. The programming required is actually boring, but I learned a great deal from that process.

Among the lessons I learned was to think of everything that could possibly go wrong — and prepare for it. There was simply no room for error. I also learned the principles of programming are the same, whether you are looking at missiles or stocks.

And so it was a natural progression for me to start designing trading systems.To do that, I turned to the study of technical analysis.I spent countless hours reading hundreds of books and articles to learn about how and why prices move.And in the end, it paid off. That’s why I was conferred the honor of Chartered Market Technician

(CMT) by the Market Technicians Association (MTA). And it’s why I earned positions such as chief market

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strategist for Dunn Warren Investment Advisors LLC and as the subadviser to the CIFG All Weather and Strategic Opportunities mutual funds family, where I managed more than $200 million.

Now I’m one of the leading researchers in the world in the field of “relative strength.” In fact, one of my original papers describing my trading philosophy has been auctioned online for as much as $2,130 … and my work has been cited by both the CFA (Chartered Financial Analysts) Institute and the vice president of technical trading at Fidelity.

I don’t say this to boast, but simply to let you know that technical analysis is my life’s work, and that I don’t take it lightly.

With all that in mind, let’s turn to the precise technical indicators I spent so much time studying, so that you have an idea of how they play into our trades…

Introduction to Technical AnalysisYou might not think about it like this, but stocks and companies are very different things. It’s possible to have a great stock associated with a lousy company. That’s actually a common occurrence

in the stock market, where a company with no earnings can trade at a high price for an extended period. The opposite conditions can also be found — where great companies are lousy stocks.

That’s why I enjoy the reliability of technical analysis: It focuses on the stock’s data and ignores the company.

Of course, there are other types of investing techniques. For example, value investors often target great companies and lousy stocks. A value investor analyzes a company’s financial statements and makes an estimate of a company’s future earnings.

Based on expected cash flows, the value investor develops an estimated target price for the stock. If the current stock price is below the target price, the stock is considered a buy because it’s undervalued. On the other hand, stocks trading above their target prices are considered overvalued.

Yes, value investing is appealing because it seems so precise.Financial statements include a great deal of data, and with

a process called “fundamental analysis,” investors can use that information to calculate a variety of ratios. Then it’s possible to proclaim exactly what the stock should be worth.

However … this process doesn’t really work. The reason? A company’s financial statements are often

incorrect. Researchers have shown that about 8% of companies revise their financials in any given year, changing previously released numbers. Because fundamental analysts generally use at least five years’ worth of data, there’s a significant chance that data has been restated since the original filing.

Analysis that uses incorrect data will, of course, be incorrect. To improve their forecasts, they’d need to work with data that can never be restated. And in the financial

world, the only data that can never be revised is the price history of a stock. In addition to always being accurate, a stock’s price is completely independent of the company. Management has no ability to alter it.

That’s where technical analysis comes in — and it’s what we’ll use in this service.Besides, since we’re buying and selling stocks, it makes sense that we should analyze the stock instead of

the company.

Using Apple (NYSE: AAPL) as an example, technical analysts would focus on the

stock itself, while fundamental analysts would study’s Apple’s operations.

Technical analystsstudy the stock.

AAPLFundamental analysts

study the company.

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Defining Technical AnalysisA formal definition of the field of study is:

Technical analysis is the extraction of information from market data into objective visualizations through the use of mathematics, with an emphasis on investor behavior and supply and demand to explain the current market and anticipate the future path of the financial markets.Less formally:

Technical analysis is the study of market data to forecast future trends in prices. Technical analysis, properly defined, is a dynamic field incorporating many of the most interesting ideas

in financial analysis. For example, behavioral economics and quantitative analysis are subsets of technical analysis.

Thus, there are some distinct advantages to this field. As noted earlier, prices are never restated, so the data is accurate and easily accessible. Perhaps more

importantly, technical analysis doesn’t require detailed knowledge of a company’s operations or an ability to understand financial statements.

In practice, a technical analyst can determine whether a stock is a buy or sell based solely on the chart. He doesn’t even need to know the name of the company being analyzed. Technical analysis can also be applied over any time frame, from intraday data (updated every nanosecond) to annual price histories dating back more than 100 years.

This makes technical analysis well-suited for short-term traders like us, but it’s also used by long-term investors looking for the right time to buy or sell.

Of course, while there are advantages, there are also many skeptics who view technical analysis unfavorably.

Some arguments are valid. Like any field of study, there are some aspects that just don’t work. There are also a number of “quacks” practicing technical analysis. Because the barriers to entering the field are low, anyone can claim to be a technical analyst.

But skilled practitioners ignore both the skeptics and the quacks. They apply sound principles that have withstood the test of time. It’s interesting to note that some of

the theories explained by Charles Dow, the developer of the Dow Jones Averages in the 1890s, can be quantitatively applied with computerized algorithms. In other words, what Dow observed in stock charts more than a century ago has been proven by skilled programmers studying his original writings.

Technical analysis also offers analysts a great deal of flexibility. It can even be combined with fundamental analysis. Those who combine the two fields often say, “Fundamentals tell me what to buy; technicals tell me when.” Essentially, these analysts try to get the best of both worlds.

This is something we may do from time to time in Peak Velocity Trader. But for the majority, we’ll stick to tried-and-true technical analysis.

Now Let’s Talk About ChartsThe cornerstone of technical analysis is the price chart. Charts provide information about past price

behavior and a way to infer future behavior. There are a number of different types of charts that are used to study the markets. • Line charts: Line charts are the simplest form. These charts plot closing prices on the vertical axis of a chart and the date in the horizontal axis. For example, here is a line chart of the Dow Jones Industrial Average using weekly data. Keep in mind that a chart can show any time frame. Weekly data just highlights the long-term trend.

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• Bar charts: Bar charts add another level of detail. In this type of chart, a vertical line is drawn from the highest price of a certain period to the lowest. A small horizontal line is added to the left of the vertical line to indicate the opening price. The closing price is represented by a small horizontal line to the right.

We now have four pieces of information for each bar, as you can see in the example.

• Candlestick charts: Another popular charting style represents each day as a candlestick. These charts show the difference between the open and close as a rectangle. The rectangle is filled in or colored red if the close is lower than the open. When the close is higher than the open, the rectangle is unfilled or colored green. Vertical lines are drawn from the top of the rectangle to the level of the day’s high. The day’s low is also marked by a vertical line extending below the rectangle.

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Each chart style shows the stock’s trend and price action. Any of these styles or another type can be used successfully. Moreover, chart patterns — such as a head-and-

shoulders or rectangle pattern — can be visible on these charts. However, while some analysts find these patterns useful, they are subjective. To minimize that problem,

many technical analysts — like me — rely on indicators.

A Look at Technical IndicatorsTraders rely on a variety of indicators to help them make trading decisions. But indicators are not unique

to technical analysis. Fundamental analysts also rely on them. The popular price-to-earnings (P/E) ratio is one example. It can be used to determine whether a stock should be bought.

Technical indicators are calculated from price data rather than financial statements — and many were developed to provide timing signals.

There are a number of technical indicators, but almost all of them rely on the same limited data set, which provides only five variables every day:

1. Opening price.2. Highest price.3. Lowest price.4. Closing price (the most popular).5. Trading volume.Given that all technical indicators rely on the same limited data set, it is not surprising to see that most offer

signals at about the same time. That’s why my system doesn’t look at just these common indicators. After all, they don’t truly work by

themselves — if working is defined as being more profitable and less risky than a buy-and-hold strategy.Now, there are two primary uses for technical indicators: 1. Some indicators identify the direction of the trend. 2. Other indicators define market extremes and try to identify when prices are overbought or oversold. Theoretically, when prices are overbought, traders should expect a downside reversal. And in oversold markets, traders should expect an upside reversal.Based on my experience, there are more indicators designed to identify market turns rather than trends —

probably because people dream of picking tops and bottoms. After all, many investors would rather be right about an annual top or bottom than spend time following a trend for the other 50 weeks of the year.

I’m not one of those traders. I prefer making money to being right. And I use indicators to meet that objective.

In the end, my goal is for us to make money while limiting risk — and following trends is the way to do that.

With all that mind, let’s dig into a few of the more basic indicators. That way, we have a solid foundation for understanding the more complex tools we’ll be using in Peak Velocity Trader.

These tools include: moving averages, the popular relative strength index (RSI) and the less widely followed concept of relative strength (RS). • Moving Averages (MA): The simplest technical indicator is the moving average. This is shown on many price charts as a solid line that follows the price action. MAs are used to define a trend’s direction. When prices are above the average, they are in an uptrend, and when prices are below it, they are it a downtrend.

This chart shows the Dow Jones Industrial Average with a 200-day MA.

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In general, an MA will help identify the big trends. The problem is that there will be a large number of small trends that might be missed. Another problem is that trading signals will come after a significant price move has already occurred.

This is because of the way the MA is calculated.A 200-day MA uses 200 closing prices in its calculation. With that much data, any single day will have

only a small impact on the MA. So, by design, it will always lag behind the market. There are a number of techniques to minimize this problem — and all have advantages and disadvantages.

In the end, just know that MAs are useful, but that they offer delayed signals. For example, when the market bottomed in March 2009, it took the 200-day MA three months to turn

bullish. By then, the Dow had already gained more than 30%. Most traders would have been frustrated with a delay like that. • Relative Strength Index (RSI): The RSI uses two moving averages to identify the price trend, combining them into a single line.

Simply put, it measures the momentum of a price move for an individual security. The RSI is not the same as relative strength (RS), which is widely used by professional investment managers. RS compares one security to another (and I’ll detail this later) while the RSI only uses the data from one security.

In its calculation, the RSI compares the strength of up moves to down moves over the past 14 days (14 days is the default value for the RSI, but any other time frame could be used). When the price changes are stronger for up days than down days, the RSI rises. And vice versa.

Now let’s get a little more technical…By default, the RSI uses exponential moving averages (EMAs). These MAs are more responsive than

simple MAs. In fact, they were brought to the stock market by rocket scientists. See, EMAs were originally designed to calibrate the trajectory of rockets. Then rocket scientists turned

their skills to the stock market in pursuit of profits — the same way I did. While EMAs are more responsive than simple MAs, both calculation methods have advantages and

disadvantages. Theoretically, the EMA is closer to the market action because the calculation weighs recent action more heavily than older data, reducing a signal’s delay. In reality, this does not always favor the EMA. When the market bottomed in 2009, for example, the simple 200-day MA actually signaled a buy six weeks before the EMA.

The problems of EMAs are then compounded in the RSI calculation, which uses two EMAs. Despite the problems, though, RSI is widely used to forecast potential turning points — essentially telling traders whether prices are too high or too low.

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The next chart includes arrows highlighting the sell signals from the RSI.

We can quickly see two problems in the chart. First is that the sell signals were actually buying opportunities. The second is that there were no buy signals. This is a typical chart for RSI: There are few signals, and the signals given are often wrong.

I’ve fixed both of those shortcomings in Peak Velocity Trader — which is part of why our system is so unique. But more on that later.• Relative Strength (RS): Relative strength may be the most important indicator to market pros, but it’s almost inaccessible to individual investors, since it requires extensive programming knowledge.

In 1967, RS was the subject of one of the first computerized studies on stock market prices ever published. The study showed that RS worked, and a number of other studies since then have demonstrated it works in

stock markets around the world. The idea of RS is embodied in the old Wall Street wisdom, “Let your winners run.”See, RS calculates the change of stock prices over a specific time (usually three to 12 months) and then

assigns each stock a percentile ranking based on the change. There are a number of ways to calculate the price change, ranging from simple percentage moves over the past six months (as was done in the 1967 study) to techniques involving multilinear regressions.

No matter which calculation is used, though, the conclusion always seems to be that RS identifies winning stocks.

To understand why RS works, we can think of the stock market as a marathon race where thousands of individual runners cover more than 26 miles. If you were asked to pick the likely winner 13 miles into the race, you would probably select one of the top 10 runners.

If you wanted a long shot, you might pick one of the more distant runners — but no one would expect the runner in last place at the halfway mark to win.

Marathon races are a test of the “relative strength” of the competitors. The strongest runners would be expected to lead throughout most of the race — and so the same idea works for the stock market.

The winner at the end of a six-month period is likely to be one of the stocks that had been leading over the previous six months. This is because trends tend to continue for a time in both price moves and business conditions. For example, a company with a great product is unlikely to be quickly dislodged in its market, and its stock should remain strong until a competitive threat arises.

In the end, our takeaway is this: Although there are a number of different ways to calculate RS, I have found that all of them work. And in the long term, an RS strategy typically outperforms a buy-and-hold strategy.

That’s why I’ve incorporated RS into the Peak Velocity Trader code.

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Our Peak Velocity IndicatorsThere are other popular technical tools, but I’ll be honest — they don’t work very well. This isn’t a secret.

If you think about it, the fact that they’re so readily available is proof that they don’t work.For example, moving averages and other well-known indicators are available for free on a number of

websites. If they worked well, it’s doubtful anyone would give them away. Moreover, everyone with access to these free sites would be able to beat the market.

If RSI worked as shown, investors could just follow the signals and make money. Obviously, financial markets don’t work this way. Beating the market is hard work — so using free sites with default indicators won’t do the trick.

But just because the popular indicators may not work as designed, that doesn’t mean there aren’t ways to extract useful information from them.

Let’s look at the RSI to see how we can make it useful for our strategy:• Fixing the RSI: One problem with the RSI is that it rarely offers signals. We can fix this by using fewer than 14 periods in its calculation. Very short-term traders may find using just two days of data makes the indicator more useful.

The next chart shows the RSI calculated with five days of data. As you can see, there are now a number of trade signals.

We still haven’t fixed the RSI’s inaccurate signals, though. But that’s easy to rectify. We can just use the RSI’s high values to indicate buy signals and low values to highlight sell signals.

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Now, you might be wondering how so many people could be wrong about the RSI. After all, it’s a popular indicator for many traders. Or you may be wondering why, somehow, I’m the only one who got it right.

Well, I read the book that originally introduced the concept — and I realized the formula was useful, but the thought process was a little off the beaten path.

The RSI was introduced to the world by J. Welles Wilder in his 1978 book, New Concepts in Technical Trading Systems.

He explained that the RSI was designed to track the ebb and flow of price changes in the commodity markets. These markets, Wilder believed, moved up and down in line with the phases of the moon.

Technical analysts often look for cycles in markets and then use a moving average equal to half the length of the cycle. Since the lunar cycle is about 28 days, Wilder used 14 days to calculate the RSI.

So … you might see the concern I had. I’m not convinced there’s a lunar cycle at work in the market, so the 14-day calculation had no significance

in my mind. Even if I wanted to believe the moon influenced prices in financial markets, Wilder seemed to confuse calendar days and trading days. Phases of the moon are measured in calendar days (aka every day, including weekends and holidays) — but trading only takes place five days a week.

With that in mind, a two-week cycle based on calendar days equates to a 10-day calculation when using trading days.

Despite my skepticism about the logic, though, the formula Wilder developed looked useful: RSI = 100 – (100 / (1 + RS)) where RS = average gain / average loss

The formula compares the strength of buyers (average gain) and sellers (average loss) over time, and it always sets an upper limit of 100 and a lower limit of 0 for the values.

This formula provides useful information as to whether buyers or sellers have the upper hand in the market. By limiting the range to a value between 0 and 100, the formula can compare any stock with any other stock. The formula is brilliant even though I don’t accept the logic behind the parameter selection.

So, what a rising RSI is really telling us is that buyers are stronger than sellers. When the indicator moves above 70, we know that buyers are significantly stronger than sellers. Wilder believed that extreme strength meant the market would soon run out of buyers. That’s why he said to watch for a reversal when the indicator moves above 70.

My research, on the other hand, shows that when buyers significantly outnumber sellers, the buyers are acting because they know something. They are buying because they are bullish and expect additional gains in the long run.

This idea, that buyers expect additional gains, is actually the basis of relative strength, which, as I mentioned before, is one of the strongest indicators.

So let’s take a deeper look at that now.• Understanding RS: In the 1960s, the idea of RS seemed impossible to researchers. The Efficient Market Hypothesis (EMH) stated that it was impossible to beat the market, and everyone in the academic community accepted the EMH. So a paper demonstrating the concept of RS published at that time was roundly criticized.

In fact, it took almost 30 years for RS to be widely accepted by the academic community. Once it was, analysts began searching for why it worked.

And the answer lies in a trader’s tendency to overreact.Stock market observers know that traders tend to overreact and create extreme scenarios: bubbles and

crashes. (This observation was actually proven by a group of researchers.) And it is this type of overreaction that explains why relative strength exists.

In behavioral finance terms, investors anchor their perceptions on old news.

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As an example, let’s consider a company that has reported weak earnings for the past few years. Then, one quarter, the company reports better-than-expected earnings. Investors might believe it is an aberration and the company will go back to reporting weak earnings next quarter.

If the company again surprises to the upside in the next quarter, investors might wait for one more quarter of solid earnings before they turn bullish. When there’s a third positive earnings surprise, investors may finally turn bullish. They’ll start buying, anchoring their expectations on the news from the past three quarters.

Even if the company misses expectations in the next quarter, the stock is likely to do well because investors are now bullish.

Anchoring explains why stock prices have a tendency to move in trends over the long term. Investors anchor their beliefs on the past and ignore new information that contradicts their beliefs.

These trends explain why RS persists. And the fact that it has held up for many years — and been found in U.S. stocks as well as other markets around the world — has led to additional research into RS.

A paper titled The 52-Week High and Momentum Investing by Thomas George and Chuan-Yang Hwang summarized the rationale behind RS with the following:

Existing theories of momentum posit that when information arrives, traders are reluctant or slow to revise their prior beliefs about the security’s value, and that when priors are revised, they overadjust…; or, alternatively, that traders overreact to news when subsequent news confirms it, which is corrected in the long run … The connection between the theories and [the proven existence of momentum] is that an extreme past return serves as an indicator that new information has arrived. The way in which beliefs are updated causes price momentum and reversals.That’s an academic way to say: “Prices keep going up for months and even years at a time before reversing.

Then they fall for months or years — all because investors buy stocks in bull markets and sell in bear markets.” This is important because it tells us we should be able to profit from stocks that are already in strong

uptrends. That paper also described a new way of measuring momentum. The authors compared the current price of stocks to their 52-week highs. They sorted these values from

high to low. A stock trading at its 52-week high would have a value of 1 and rank at the top. Stocks that are far from their 52-week highs would drop to the bottom.

The authors then assumed an investor bought the stocks in the top 30% of the list and shorted the bottom 30%. All positions were held for six months, and the process was repeated every six months.

Their results showed this calculation method outperformed the stock market and it also beat standard RS calculations.

This new way of calculating RS was both “dominant” and “robust,” which are academic terms to describe how the idea held up in testing.

Dominance of the 52-week-high momentum strategy is demonstrated by comparing the results to two widely accepted standards for momentum tests. The dominant one is the winner, like in a professional wrestling contest. In this contest, the undisputed champion of the world was the 52-week-high momentum strategy.

Robustness is demonstrated by comparing the 52-week-high strategy to variations using different parameters in the calculations. Again, this strategy came out on top. It worked for U.S. stocks, stocks in other countries, mutual funds and ETFs. It worked for holding periods of three months, six months, 12 months and other periods.

However, despite the effectiveness of this strategy, it’s not well-known. And it hasn’t been used by investors … until now.

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Trading the 52-Week Momentum Strategy

Individual investors can’t implement strategies the way they’re described in academic papers. In the above case, they would need to buy 30% of the stocks they are tracking and sell short another

30%. If we implemented this with the stocks in the S&P 500, we would buy 150 stocks and short 150 stocks.

This simply isn’t practical.So, to make the strategy tradable for us, I first looked at whether or not the strategy needed to sell stocks

short. The results were predictable — in bull markets, the long portion of the portfolio outperformed, and in bear markets, the short portion outperformed.

My conclusion was there is no need to maintain long and short positions all the time. In bull markets, we can be long, and in bear markets, we can add short positions.

And this is where our options trading strategy comes into play.Because of the risks involved in shorting stocks, I looked at using put options instead of actually selling

short. Puts worked better to control risks. With that in mind, I then looked at using call options instead of actually owning stocks.

Again, the results were better with options. That’s why, in Peak Velocity Trader, I will recommend call options to benefit from uptrends and put

options to benefit from downtrends. More information on options is on our Getting Started page here.After deciding what to trade, I still needed to develop quantitative rules for the 52-week momentum

strategy. I only trade quantitative systems because they are reproducible and unemotional. Reproducible systems can be tested, so we know what to expect in the future. The process of testing is complex, but it shows whether or not a strategy should be expected to do well

in the future. They also take all of the emotion out of the investment process, so we can avoid the mistakes associated with excessive fear and greed.

Quantifying the system involves creating an indicator and defining buy and sell rules.The formula for this indicator is straightforward: 52RS = 100 * (close / 52-week high).This calculates where the current price is relative to the 52-week high. For uptrends, I want the absolute

best performers. I want the indicator to be at least 99 so the closing price is within 1% of a new high.You might be uncomfortable with the idea of buying stocks priced near their 52-week highs. New highs

tend to make investors worry that the good times can’t last. However, successful traders need to ignore these feelings and look at the data. During the long bull

market that unfolded from 1990 to 2000, the Dow Jones Industrial Average ended the trading day within 1% of its all-time high 40.95% of the time.

This was the strongest bull market in history, and investors at the time were frequently nervous that the good times would end at any moment. But the investors who overcame their fear enjoyed gains of more than 400%.

To minimize the chance of buying the top, I also required the 52-week RS to be above its 26-week moving average. This indicates the long-term trend is up.

The buy signal comes when the five-day RSI breaks above 70, indicating the short-term trend has just turned up.

The next chart shows what this all looks like.

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Here, we have RSI in the middle and the RS with its MA at the bottom. I scan the S&P 500 stocks for these trades daily — and when the conditions are right, I’ll send you a trade

alert. I also watch for sell signals and use trade alerts to notify you of when positions should be closed. So don’t worry about doing the heavy lifting. That’s what I’m here for.

What All This Means for YouTo recap … you now have access to my four-line code, which uses a number of technical indicators to find

stocks on the verge of reaching peak velocity.A summary of the four rules is as follows:• Rule 1: For the first rule, I make sure the stock market is above its 200-day moving average. Fact is, it’s much easier to find stocks that are going up when the whole market is going up. (If the stock market falls below its 200-day moving average, we also have a way to profit from that by flipping our strategy and using put options.) Once we confirm that the overall market is in an uptrend, I use three additional rules to pinpoint the exact moment a stock is going to soar.• Rule 2: I want to make sure the stock is trading within 1% of its 52-week high. It’s a technical indicator that tells me the stock’s momentum is on our side. • Rule 3: Next, the “relative strength (RS)” of the stock must be above its 26-week average. This is one of my strongest indicators. It also shows me the momentum is getting stronger and the stock is about to hit peak velocity.• Rule 4: The last rule states that its five-day relative strength index (RSI) must be above 70. I use this as my timing indicator — it confirms the stock is reaching peak velocity right now.Now, once my code confirms a stock meets these parameters, I do my due diligence:• Safety Layer 1: I manually confirm the trade. I double-check to make sure that the stock is already in peak velocity. I then find out why the stock is entering peak velocity. Perhaps there was an adjustment to its expected earnings, a Wall Street firm upgraded it, a new product was released or something else. My point is, I want to make sure the move is substantial and not a fluke. • Safety Layer 2: I keep a tight stop-loss of 20% on the stock. In short, I want to make sure I let my winners ride and cut my losses fast. Options prices can be volatile, so our stop-loss will be determined by the underlying stock instead of the option’s price. Essentially, if a stock has declined 20% (or the stock is losing relative strength), we will exit. • Safety Layer 3: I sell half the position when we hit a 100% gain. This way, you can lock in profits every time there’s a big winner. Plus, once we hit 100%, I will raise my stop-loss to ensure we still make money on the second half of the trade.

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When I have confirmed the trade, I will send you a trade alert with explicit instructions on how to enter the trade with your broker. I will also send you weekly updates so that you’re always up-to-date on the market and our positions.

Holding period and allocation: The holding period for our trades will generally be less than two months — and we will likely only hold 10 positions at any one time. How you allocate your capital to these positions is up to you, but I would consider using 10% of your Peak Velocity Trader-dedicated capital for each trade.

Complimentary Text Alert Service: We also send text alerts when a trade is ready. You can sign up for the complimentary text service here. After signing up, simply follow the directions found in your first text message to confirm your subscription.

Getting Started: As you know, we will take advantage of a stock’s momentum by buying call options (when it’s a bullish move) and put options (when it’s a bearish move). If you’re unfamiliar with options terminology, simply visit our Getting Started page here to learn more. I’ll continue to add materials to this section to help you trade my recommendations, so be sure to check it from time to time.

For those who are new to options, the process is easy to set up your account. It simply requires that you fill out a one- or two-page form with your broker. You will likely need to ask for Level 2 options access on this form. (It may vary by broker, but Level 2 typically allows you to buy call and put options, which is what we’ll be doing in this service.)

If you’re looking for a broker, consider one listed below. As a side note: Interactive Brokers has the lowest costs, and low costs mean you keep more of your profits. Just keep in mind that they also have the lowest level of customer service.

So if you need help placing trades or processing other transactions, you may find one of the other brokers a better choice. And recent price cuts in the discount brokerage industry make any of these firms affordable.

Interactive Brokers www.interactivebrokers.com 1-844-4IB-BRKR

Options House www.optionshouse.com 1-877-653-2500

Fidelity www.fidelity.com 1-800-343-3548

E*Trade www.etrade.com 1-800-ETRADE-1

Options Xpress www.optionsxpress.com 1-888-280-8020

eOption www.eoption.com 1-888-793-5333

TradeKing www.tradeking.com 1-877-495-5464

Of course, if you ever have any questions, don’t hesitate to reach out to me at peakvelocity@banyanhill.com.While I may not be able to respond to every single email, I will always keep your feedback in mind — and

from time to time, I’ll send out a mailbag issue answering your most frequent inquiries.With that said, I’m excited for you to get started trading my system — one that’s set to deliver double-,

triple- and quadruple-digit gains every two months.With Peak Velocity Trader, we rely on indicators that no other group of traders is looking at — and that’s

what gives us our edge. History tells us these indicators work. All that’s left to do is follow them.Regards,

Michael CarrEditor, Peak Velocity Trader

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Email: http://banyanhill.com/contact-us

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