Yes, his system does work. How does Stan Weinstein’s system work compared to the index? I do not know as I have never measured it.
What is Weinstein’s system in a nutshell?
The trend is your friend
- Look at the market as a whole compared to the 200-day moving average. – All boats go up in a rising tide.
- Look at the sectors which are doing the best using the 200-day moving average.
- Find the stocks with the nicest charts and an upward moving average, as well as the price above the trend line.
- When it breaks the trend, sell the stock. The pattern or direction is defined as the 200-day simple moving average.
In the old days Stan used charts, not you can go to any financial website like money.msn.com or Yahoo Finance and find a trend line.
You never ever want to buy or own a stock trading above the moving average, no matter how tempting or juicy the story it. The reason is the “tape tells all.” In other words, expectations and rumors on the street are already factored into the price trend line.
Is Stan Weinstein rich?
Yes is retired living happily in Hollywood, Florida.
Is his system of stock trading full proof? No way. However, he has some excellent runs.
How do I use his system to make money in stocks?
I am not a Stan Weinstein purist. I look only at the market as a whole using his system. But if you had done this, you would have been out of the market like I was in the fall of 2007. For me, I would say Stan Weinstein’s system works well.
I use the 12 months moving average on the S&P 500 index. If market conditions are right, then I am in the market and invest.
I screen stocks that are 8, 9, or 10 on the StockScouter rating system on MSN. It’s free and based on a quantitative method. They rate stocks from 1 to 10. I do not know why people do not use these as a guide to reduce potential buys and sells. There are other quantitative shops out there like valuengine.com, but why pay when you do not have to? Use a free quantitative system and Stan Weinstein’s system. Everything you need to make money is on MSN. Remember the economist John Maynard Keynes made a fortune in currency trading simply reading the financial paper. Something having less information is better as eventually, financial news becomes white noise.
From there, I look at the stocks I like, which is with a high-profit margin and low debt, also looking at the forward P/E ratio. Once I buy the stock, I hold until it crosses the moving average.
I also sometimes invest in companies I like, I shop at and believe in. But even with these, I check the moving average. Stan would say this is OK, you can do this, but eventually, you will yield to the logic of his system and see that it is all built into the moving average.
What if the market going down?
You can make money in a bull or bear market; you make money with shorts or puts. I do not do this. I use asset allocation and dollar-cost averaging to hedge my investments. That is, I always have something in cash and shift the distribution based on how optimistic I feel.
I never put all my money in at once. I allocate it piece by piece in case I am wrong about the market. Even with a small sum of money, I do this. Below the chart is historic and outdated but look at the trend and how it fits perfectly into the model.
I recommend Stan Weinstein’s book and ask me if you have any questions.