Simple Stock Trading Strategies

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In this review we look at the book The Lunchtime Trader.

The author, Marcus De Maria gained popularity when he was host and expert on the TV programme Stock Market Secrets. A well-respected financial educator who wrote the book for individuals looking to create financial freedom through the stock market.

The book offers another rag to riches tale in which Marcus started with £150,000 worth of debt and later became a millionaire. He used a few specific trading strategies which he refers to as the Buffalo strategy and the VCA strategy, both of which we review in this video. Let’s take a look.

After a few failed ventures Marcus found himself saddled with debt and sleeping on his brother’s floor. Fast forward several years and he now teaches people the methods he used to become financially free.

Before teaching specific trading strategies, Marcus first emphasises the importance of calculating what he refers to as your Critical Net Worth. He says:-

“Your Critical Net Worth is the only financial goal you will ever need”

The Critical Net Worth is calculated by using two factors; Your expected trading returns and your desired annual income which would cover all your living costs.

Marcus believes that by determining these two factors you can calculate the figure of your Critical Net Worth, and once achieved you can then consider yourself financially independent.

As an example, and to keep the numbers simple, let us assume your minimum living costs equate to 20,000 per year, and you find a strategy which generates 20% returns per year. Your critical net worth figure would therefore need to be 100,000.

100,000 multiplied by 20% equals your 20,000 living costs.

Remember however, the critical net worth is only a target to achieve and not a starting trading account.

We can see here a quick reference point.

On the left we have our expected trading return percentage. On the top, the required critical net worth amounts, and in the middle, the desired annual income.

If the desired annual income is for example 30,000, we can calculate the required critical net worth against each expected trading return.

Marcus’s Buffalo strategy (which we look at shortly) targets more than a 30% return per year, in which case, to achieve our desired income of 30,000 we need a critical net worth (or trading capital) of 100,000.

Next, we look at Marcus’s strategies to help us achieve our desired trading capital.

Marcus starts by saying: -

“We’ve been teaching people for ten years how to make 3% a month (not a year), that’s 36% a year on their savings, by spending as little as 20 minutes a day either in the morning, lunchtime or evening”.

To put this into context, if we started with an account balance of 10,000 and compounded a 3% monthly return, over a 5-year period the account would increase to almost 60,000.

Over a 10-year period this would increase to over 347,000.

Clearly, achieving such returns with a modest starting balance, could see you get to your critical net worth in a relatively short period.

Marcus adds to the importance of compounding returns by asking the question: -

“if you had a penny and you were able to double it each day, how many days do you think it would take to get to over one million pound?”