Click here for Adam's original blog article on this technique. Do click here for his excellent write-up in April, as well as expanding the original EPG from Zacks to include Dow stocks reporting Earnings on an Uptrend.
More than just an Entry Method
IMHO, these 2 trading systems are complete, with long term positive expectancies.
A complete Trading System with Entry, Exit and Position Size Rules
Over the years, I've seen many so called "trading systems" over the Internet, but they are really just "entry methods" or "indicators" - e.g. "Buy the Dip", or "1-2-3 Change in Trend" or "RSI2 indicator". But EPG is more than just an Entry Method - it is a complete trading system that covers very specific Entry Rules, Exit Rules (on Stops and Profit Takes) and the Position Sizing rules. It doesn't get better than this! Make sure you fully understand what he has taught on these 3 rules first.
Positive Expectancy Systems
Without even looking at the results that Adam showed, just based on his trade criteria, we should be able to see that the system have positive expectancy. We only go long on an uptrend which other things equal, typically improves our win rate to above 50%. We consistently cut our losses to 1R, and let our winners to 2R or more, which ensures that our Win/Lose Size Ratio (WLSR) is greater than 1. Furthermore, we tilt the win rate to our favour further, by employing Zacks Buy Rank and Zacks positive earnings surprise (ESP) with 70% Zacks claimed accuracy. With a higher win rate and an RRR (Reward to Risk Ratio or WLSR) greater than 1, we can only have a positive expectancy system. The Dow system may have a slightly lower win rate as it hasn't got the Zacks edge (but should still be positive expectancy).
Positive Long Term Results
IMHO, the key to get consistently positive trading results over the long term is to make sure that you adhere to these 4 things:
1. Always follow the Position Sizing rules - never deviate. Decide in advance how much you want to risk per trade (whether 1% capital or 2% capital), and consistently apply this, even when you feel afraid or uncertain. For example, if you are unsure, then, start smaller than normal, perhaps with 0.5% capital for every trade (if you previously traded 1% capital), regardless of trade outcome. Do this consistently for every trade. Only then, will you have the chance to get consistent results. If not, you guarantee inconsistent results over the long term. Worse, you might get unlucky to lose big when you decide to bet big, but win small when you decide to bet small.
2. Always follow the Entry rules - never deviate. In particular always look for the Uptrend in the list of stocks given. Only enter within 24 hours (nearer safer) of Earnings announcement and not prior, otherwise, your 1 ATR stop may be triggered unnecessarily - for "morning" announcements, enter the prior day, and for "afternoon" announcements, enter on the same day.
3. Always follow the Exit rules - never deviate. Key in both Stop Loss and Profit Take orders. Keep losses to 1R, Take Profits at 2R, and consider the 2-day Time Stop to free up capital for other trades.
4. Take as many valid trades as possible - don't stop with just 3 or 5 trades, aim for 100 trades.
Note that these 4 principles are the same exact success principles that TOMIC and TOMC adheres to constantly every day.
Don't give up too soon, commit to making 30, 40 or even 100 trades!
There is no positive long term results for you, if you don't take action and commit to making many trades like 30, 40 or even 100 trades. I understand there may be some of you who have tried EPG before, but stopped.
As Adam explained in the April article, we cannot predict whether losses or profits will occur first. In the example given, depending on when you start the EPG system, you might be lucky and experience winning streaks first. Conversely, you might be unlucky and suffer a series of losses first.
If the latter applied to you, then, don't give up, but commit to make 100 trades for as long as it takes. If you toss a loaded coin long enough, the positive bias will eventually come through.
Don't be greedy!
WHEN you experience winning streaks (not if - since if you trade long enough, you WILL experience winning streaks), don't be greedy and increase the % risk per trade. If you do this, you guarantee yourself to get inconsistent results, as the law of averages kicks in and revert your 100% win rate back to 55%-60% say, by hitting you with losses when you start to bet bigger. Always keep your % risk per trade constant. If you haven't experienced a 55% win rate with a RRR > 1 over 100 trades before, start small and commit to get that experience, even if it takes a couple of years. Once you have personally experienced this over a long period of time, you will have found for yourself the Holy Grail to trading.
Don't be fearful!
WHEN you experience losing streaks, don't stop and don't reduce the % risk per trade. Instead, commit to make 100 trades for as long as it takes.
Don't judge by outcome, but by how well you followed the process
Until you get 30, 40 or 100 trades, don't judge the system by the outcome/equity results. Instead, judge yourself by these 4 criteria:
1. Position Sizing rules - have you followed the rules?
2. Entry rules - have you followed the rules?
3. Exit rules - have you followed the rules?
4. Take as many trades as possible - have you done this?
If you have taken 100 trades, and every one of the 100 trades checked Yes, Yes, and Yes to Questions 1, 2, and 3, then, give yourself Top Marks - you are the True Trader and after 100 trades, it will be virtually impossible for you to lose money - you might surprise yourself by making quite a lot of money instead!
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