Millionaire Traders

Millionaire Traders

to achieve these incredible results by always buying value. Using
John Templeton’s maxim that investors get the best bargains when
the world seems to be coming to an end, Dana has been able to pick
up bargains at severely distressed levels more than once during his
trading career. In fact, using the same method that Templeton
employed half a century before him, Dana bought as many$ 1
stocks on the NYSE and Nasdaq as he could find, following the 2001
market crash—a strategy that proved to be extremely profitable in
the ensuing market recovery. One critical rule that Dana always
follows is to only buy securities of companies that have no debt.
This is a very wise approach because debt-ridden companies can
collapse even if their underlying business remains relatively sound
especially if they are forced to divert their cash flow to service debt.

Stocks Have an Upside Bias

Over the past two centuries, stocks in the United States have re-
turned an average of 7 percent. Massive stock corrections notwith-
standing, equities are the only financial asset that show an un-
equivocal uptrend on a longer timeframe. Therefore, selling rallies
works less well in the stock market than buying dips. Stocks have a
natural upside bias as they to tend appreciate with the expanding
economy. Many market analysts refer to this phenomenon as the
upward drift. Certainly stocks can fall mercilessly for days, weeks,
and even years on end. Over the long term, however, they tend to
rise rather than fall. As a wise man once said, the race does not
always go to the strongest and the swiftest, but that is the way to
bet. And that is the way that Dana Allen generally bets preferring
to buy crashes rather than sell manias.

Stops Should Use Time as Well as Price

One very interesting part of Dana’s methodology is the use of a
time stop as well as price stop. After all, trades travel through both
time and price, yet traders only focus on the price part of the
risk. Dana uses a simple end-of-the-day stop on his crash-buying
system. If the price hasn’t reached his objective by end of the day,
he terminates the trade even if it remains above his stop. The basic