Your Questions Answered

Welcome back to your weekly Stock Trader Alert update! There are no new trades this week from our system, which should give you a bit of a breather after the improvements we made throughout January.

Today, I’m taking advantage of the break to highlight a couple of the more common questions I have received in the mailbag. But before we dive into your questions, here is the table of our existing positions and allocations:

Remember, this beta test is all about perfecting the Stock Trader Alert service. Ensuring you’re comfortable and confident trading the system is an integral part of that. So if you ever have any questions for me about a certain trade or the system itself, please don’t hesitate to send me a quick email at stocktrader@banyanhill.com.

With that said, let’s dig into today’s mailbag…

I have a question regarding the percentage allocation of each stock purchased. When a stock is sold, should the proceeds be added to the total portfolio value of stocks held, then the percent allocation calculated, or should one simply take the proceeds of a sale and use them to purchase new positions?

The Stock Trader Alert portfolio is designed to be fully invested at all times.

Half of the portfolio is designated to the focus ETF, currently the SPDR S&P 500 ETF (NYSE Arca: SPY), with the rest of the portfolio dedicated toward the recommended stocks at their recommended percentages.

In order for your portfolio to maintain a performance similar to the Stock Trader Alert portfolio, you would take the proceeds from any sold positions and use those to purchase any recommended new stock positions.

Are most of these stocks only going to be held for a week or two at most? Doesn’t seem to give much time for any real changes to take place. Also, I use an online service for trading. Is there an ideal time during normal trading hours to place the trades? 

Early in our beta testing, we had the same realization in regard to the high frequency of stocks moving in and out of the Stock Trader Alert portfolio.

So, at the beginning of the year, we made a tweak to the system to cut down on not only the constant position shuffling, but also significantly reduce the trading fees incurred by moving in and out of the same position.

In short, we implemented a time-out rule for high-frequency stocks — with no impact to the portfolio’s performance according to our backtesting data.

You should see this change reflected in future Stock Trader Alert portfolio recommendations.

As for an “ideal time” for entering weekly trade recommendations, there isn’t really a best time to enter new trades.

That said, we would suggest that you avoid trading near the market open due to the increased volatility from the processing of overnight trades.

The latest trades went very smoothly and these trades are my first with this system. I am a little curious about the specificity of the percentages that you use though. Do we have to be exactly on your percentages targets? Also, is there a buy-up-to limit or just buy these recommendations at any price they open at the next day?

I’m glad to hear that the system is moving along smoothly for you!

As for percentages, we don’t expect you to match the exact allocations in the weekly recommendations. Frequently, you’re going to find that the amount that you have to invest in a particular stock is not going to come up to a whole number. And since you can’t buy fractional shares of a stock, it’s best to round.

For example, if your calculations say that you should buy 11.65 shares, it’s best to round up to 12 shares. If it falls below 0.5, then you should round down. As a result, your allocations might be just slightly off from what we advise, but that should be fine for the purposes of achieving strong returns from this trading system.

Also, the Stock Trader Alert system doesn’t utilize buy or sell limit prices. The goal of the weekly recommendations is to enter the trades soon after they are placed, though, as I noted above, we recommend waiting until after the market opens due to increased volatility from the resolution of overnight trading.

I hope that clears up some of our more frequently asked questions, but if you still have more, you can always reach me at stocktrader@banyanhill.com.

Talk to you all next week.

Kind regards,

Ted Bauman
Editor, Stock Trader Alert