The trading world is full of gurus. You really have to be careful who you follow. Some gurus will send you money and big profits as if it were easy to find. Others will notify you of stock ideas just to sell you their shares when you (their followers) drive up the stock price.
However, there are some guru strategies worth learning. We regularly try to profile quality educators and gurus on our podcast, the SimCast.
As with any new hobby or job, you should take what you can from whoever you can. Discard the bad things and keep what works for you.
HOW TO USE GURU STRATEGIES?
The best way to use guru strategies is to test them first. If you have a guru promoting a certain strategy, enter the simulator and trade that strategy for a large subset of trades first. Determine your outcome criteria and then you will know how well it works or not.
You may also find that many guru strategies are just renamed. Many gurus want to coin their own strategies for marketing purposes, but in reality they are just old, tried and tested techniques under a new name. For this reason, we suggest starting with classic technical analysis strategies and trading models before spending a lot of money on gurus.
Finally, we would just like to emphasize that you need to develop your own strategies to succeed. The best traders are good observers and reviewers. They observe patterns over time through implicit learning and remember them. This is the key to understanding the dynamics of the market. Relying too much on a guru will only hinder your performance over time.
OUR TWO FAVORITE GURU STRATEGIES
If we had to pick our two best guru strategies for beginners, we would go with one long strategy and two that can go either way. That way, if you’re in any type of market, you can have a strategy to adapt to that market.
The Minervini volatility contraction model
The volatility contraction model, or VCP, as it became known, was popularized by Mark Minervini in his books Think and Trade Like a Champion and Trade Like a Stock Market Wizard. Despite the success of the swing trading model, it can also be very useful in day trading.
The VCP, which goes back to Richard D. Wyckoff’s “wave pattern” results in a high success rate if executed correctly. It essentially looks like a bullish flag.
Many successful traders may refer to the model simply as a “narrow high flag”. However, such a model implies some criteria that may not fit the VCP. You can see from the image above that it helps traders define their risks by offering exponential returns.
VWAP Boulevard’s commercial strategy
VWAP Boulevard was started by Twitter personality @team3dstocks. Since sharing the strategy with the community, thousands of day traders are now implementing this strategy to trade momentum stocks.
Here are the basics of what to look for with the VWAP Avenue strategy:
- Find VWAP from high volume days on a chart
- Identify their daily VWAP levels on those days
- Draw a line on your chart
And that’s pretty much the essence. Of course, there’s more, and we cover it in our definitive guide to VWAP Avenue. But, for all intents and purposes, this level can become a key level of support or resistance for your current trading day. This allows you to go long or short depending on the price action at that level.
