Updated: May 25, 2021

World Record Trading Returns!



Today we take a look at the world record holding trader, Dan Zanger.

Although not an author, Dan is very highly regarded and has appeared in numerous literatures, he also produces the Zanger report on the website; chart pattern dot com. Dan however gained notoriety for record holding returns when he turned just over 10,000 dollars into 18 million dollars in under two years. His returns hit the media spotlight soon after the performance was audited and proven through his IRS records.

Let’s take a look at how Dan achieved such gains and learn from the method which he continues to use to this day.

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Dan was raised in the San Fernando Valley of Los Angeles. He later began college but dropped out to eventually become an independent contractor, building swimming pools throughout California.

In 1997 Dan sold his car for $11,000, with the sole goal of using the capital to become a full-time stock trader. He soon created millions from his investment and left contracting behind for good.

In the years prior to making his fortune, Dan studied the works of William O’Niel, cementing a bias towards specific chart patterns accompanied by increases in volume. Dan himself said, -

“Over the last twenty-five years, I've spent over 30,000 hours studying every type of chart pattern formation imaginable. From Cup and Handle patterns to Falling Wedges, Ascending Triangles, Bull and Bear Flags and too many others to list here now, and lucky for us these patterns repeat over and over and over again!”.

Recognised primarily as a momentum trader, Dan applied his strategy during the Tech bubble era, whilst applying considerable leverage.

The results he achieved were audited by a company called Effron. We can see here a letter Dan received from Effron confirming his results, the audit confirmed an astonishing return of 29,223%. This dwarfed the S&P 500 index return of just 23% over the same period.

Clearly, returns of this magnitude do not come without significant risk, but just how much risk did Dan take? How close was he to blowing up his trading account?

When asked about risk, Dan is quite vague. Although in October 2000 his account dropped by as much as 32% in one day, and at one point during a bear market his portfolio had a drawdown of 75%. To say he is more of an offensive rather than defensive trader is probably accurate.

Although when asked about managing risk, Dan said: -

“If a stock doesn’t accelerate quickly out of a basing area, then I’ll sell the stock promptly during that first day. I’ll do this even if I’ve been in the stock for only 20 minutes, regardless of profit or loss at that time. If a stock isn’t moving up sharply right away, then the trade must be wrong.”

Additionally, when asked about selling a more mature position, Dan said: -

“I never use trailing stops, but I will sell a position of strong stocks moving up quickly or for long periods of time”.

This would imply the use of mental stops as opposed to entering a firm stop loss order into the market. In essence, Dan relies heavily on discretionary decisions when it comes to managing positional risk. Such an approach requires immense discipline.

Let’s move on to the specific chart patterns Dan uses to find what he calls explosive stocks.

This first chart is from the company; Internet Capital Group and shows the trades made by Dan during his world record return.

The patterns he often looks for and recognised in this example were areas of consolidation.

The stock was an Initial Public Offering back in August 1999, trading at $30 per share. A couple of weeks passed, and Dan noticed a small descending trendline forming, the price soon broke above, and he quickly took a position.

Dan sold his position as soon as the stock lost its upward trajectory.

Several weeks later the stock formed a horizontal trendline, and once again Dan entered at the break.