Hello again, folks! Today we wrap up the story of a unique and growing investment education firm named MarketTamer.com, founded by Gareth Feighery and creatively led by Gareth and his very talented partner, Ron Haydt. In Parts I and II we covered each of these interesting gentleman’s professional development and their journey toward that which has become their consuming passion – helping investors learn how to not only protect their nest egg but grow it with strategies that help to manage risk and maximize “expectancy”.
Tom: Gareth, perhaps that would be a great place to start this final conversation. Can you explain the commonly misunderstood term “expectancy”, and how it fits into your trading philosophy?
Gareth: In probability theory, the expected value of a random variable (such as the price of a stock on any given day) is the weighted average of all possible values that this random variable can take on. That might sound complicated but it can be translated easily when investors forget the technicalities and instead think of risk and reward. To simplify the concept, I like to share the example of jumping out of an airplane with a parachute. While the probability of survival is high, the expectancy is negative because the magnitude of the risk is so high relative to the reward. Similarly, when trading a stock, if the upside reward is small but the downside risk is high, a trader might in fact want to avoid a bullish trade even if the probability is in their favor.
Tom: I’m guessing that your proprietary market direction indicator, the "Algorithm” (“Algo”) plays a significant role in increasing expectancy. When and how did you develop and test it?
Gareth: The Market Timer Algorithm was developed in the very early stages of MarketTamer’s existence. To be specific, we created the first architecture for in 2008 and it was completed during the Fall of 2009. It took an inordinate amount of time to both develop and test because we examined so many criteria for every stock and then tested each criteria across all stocks. Thankfully, the hard work paid off. In fact, most recently one of our students wrote to us having had a winning streak of 14 successful trades in a row.
The idea behind the Market Timer Algorithm was not in fact to release it as a product but to keep it strictly in-house as a tool to boost our own trading results. We quickly realized that a triple layer of protection was possible through trading the Algorithm. The first layer comprised the risk/reward criteria the algorithm demanded before identifying a stock. And combining those stock choices with strategies that have a high probability of success added a second layer of protection. Finally, the third layer of protection is the ability to adjust losing trades into winning trades -- which is a core competency at MarketTamer. At some point, as we combined all of these elements together, we realized we could create a product that had exceptional and unique value to others. Therefore, we decided to make it publicly available -- in alignment with our mission to do our best to empower traders to reach their personal investment objectives.
Tom: Very interesting. I recall that during the past year or so, you tinkered with “the Algo” a bit. Is that correct? If you did, did you complete that modification, or is it modified semi-regularly?
Gareth: Yes, Tom, we continue to work behind the scenes to augment the results, and we thought we had an even greater breakthrough about a year or so ago. Unfortunately, we ultimately were not comfortable releasing our findings; therefore, we decided it was better to continue testing the Algo than to release something with which we were not fully comfortable.
Tom: That in itself is a great demonstration of integrity. Good for you. With regard to education, I know you provide regular coaching for traders. How do you find your coaches?
Gareth: As much as possible, we like to foster growth in our community and we believe no greater advocate of our program exists than someone who has come through our program and has the expertise, confidence and “results” to train others in the same principles, strategies and systems. We’re very fortunate that our community often connects with us to share success stories; so from among those stories, we often identify great traders who are also mission-driven and want to help retail traders grow and succeed.
Ron: Yes, Gareth, I agree with those sentiments fully. There is no better testament to our efforts than having folks who we’ve helped become better traders help our own community. We truly believe in making a difference and helping people, so the more people we can help, the more our own community members can help others reach their financial goals.
Tom: Gentlemen, what is your “dream” regarding how MarketTamer.com will be different five years from now?
Gareth: We believe that the trading principles we teach are hugely valuable to retail traders and are critical to their long-term success. In our ideal world, five years from now we would share those principles with as many individuals as view some of the top trading sites in the world today. We believe if we continually increase the value proposition for our customers that they will ultimately want to share the message of what they have learned with others, who in turn can benefit.
Ron: Over the coming years our main goal is to help as many people as possible take control of their own financial goals and set them on path to realize them. As we touched on earlier, the more people we can help the more they will help others, and so our efforts are amplified. Making a tangible, positive difference to committed traders is what we stand for.
Tom: That is a time-tested strategy for extending the reach and richness of your work! Which figure within the investment world (besides each other, of course) would you identify as your favorite – and why?
Gareth: Warren Buffett is a person I admire because he best embodies the patience and discipline of decision-making needed to really succeed. I found it amusing that in 2007, when he was being attacked in the media for having lost his touch, he didn’t bow to the resulting pressure at all. Instead, he calmly allowed the attacks to continue until he found his opportunity in late 2008 to sweep in with major investments in Goldman Sachs and General Electric (among others). However, I must confess that I am a bit biased about Warren -- because I had the good fortune to meet him and chat with him in person. He was genuinely one of the most affable characters I have ever met within the financial world!
Ron: For the long haul, Warren Buffett is at the top of my list for all the reasons Gareth mentioned. My admiration also goes towards all the folks who are taking the steps to take control of their own financial future. This is a huge step to take, to trust yourself, to trust your abilities and keep trying until you succeed. In a way, it is like starting your own business, i.e. managing your own fund. The old saying goes… that no one will take better care of your money than… You! So for those folks, I appreciate and applaud their efforts.
Tom: I do understand. What do you do for relaxation or enjoyment?
Gareth: I am a huge sports fan, so I love watching almost any sport in the world, from Grand Slam tennis to Masters Golf, and everything in between! I also find the financial world fascinating. Therefore, even though it may sound like “work” to others, I find great pleasure and satisfaction in reading books about “trading maestros” of the past. One good example is Reminiscences of a Stock Operator. I enjoy a wide range of that type of reading
Ron: I’m also a huge sports fan and being from the Philly area, it is Go Flyers, Eagles and Phillies and I also like playing poker. When asked what I do and I respond with ‘stock market and poker’, well, I get a few more funny looks than normal! In all seriousness though, the stock market and poker have quite a bit in common and especially when it comes to Expectancy, which as mentioned earlier is a key focus for us.
Tom: Finally, what else would you like our readers to know?
Gareth: Most importantly, Tom, I think your readers should always spend more time preparing to make each trading decision, and place less attention and time on trading itself. It’s easy to become frenetic in a world full of sensational news stories, rapid quotes, and instant analysis – all readily accessible 24/7 through our smartphones! However, successful trading is primarily about good planning and preparation. That is why we are strong advocates of providing retail traders with the tools they need to consider the risks and rewards that best suit their personal risk tolerance, followed by the discipline of “virtual trading” (through a “paper account” instead of real money) until they have confidence they have fully grasped the techniques and strategies they have learned.
As much as anything, successful trading requires a disciplined trading plan and adhering to it faithfully and patiently, instead of falling into the very easy temptation of “over trading”. Yes, the excitement of trading can be an appealing emotional stimulant; but among the most important lessons we teach our students is “patience” and “discipline”! Borrowing from the thoughts of one of history’s “infamous traders”, Jesse Livermore (who is famous for having made and lost several multi-million fortunes): patience is key, for it leads to “the big money”. As Jesse would say, “the money is made in the sitting.”
Ron: I echo Gareth’s comments. One of the biggest mistakes traders make is starting with real money without conducting extensive ‘homework’. We are talking about your hard earned money throughout your life, your retirement, and your nest-egg . We empower traders to learn in a step-by-step system to understand trading and then ask questions as they progress. When a trader feels as if they understand the strategies, it is time to paper trade. Paper trading allows you simulate real money. Let’s get the mistakes out of the way first with paper money before we proceed to using hard earned (and maybe irreplaceable) capital. Once the paper trading is producing solid results, traders can consider in consultation with their financial advisors to transition into real money. If you start trading real money first, you can find yourself with a blown-up account in no time at all. I’ve been there and done that. We are in this together and we are here to help each trader achieve their goals.
Tom: That is most helpful, Gareth. In fact, I thought you were referring to my trading with some of your comments about how to avoid making common trading mistakes! I could use Mr. Livermore sitting behind me as I trade – calling me to task when I “over do”.
I want to thank you and Ron for taking time to share your story with our readers. I wish you both the best of luck as you carry MarketTamer.com through 2013 and beyond!
Ron: We want to thank you, Tom. It’s been great.
Gareth: Absolutely, thank you kindly Tom! It has been our pleasure.
Tom: Folks, if you want to find out more about sound, solid investment education, check out these gentlemen at http://www.markettamer.com/.