If you’ve studied the history of trading as much of I have then there is one name that pops up quite often and that name is Dan Zanger. That’s because Dan Zanger is one bad ass retail trader, and his story is amazing.
Not only did he turn $10,000 into $42,000,000 in about 2 years, he did it using nothing more than chart patterns, price and volume — the same tools and information available to all of us.
So exactly how did he go about achieving those mind blowing returns? Well, lucky for us, Mr. Zanger has put up his trading rules on the web so we can see what some of his most important trading criteria are.
But first, let’s delve a little into Dan’s background…
Who is Dan Zanger?
If you’re new to trading — or have been living under a rock — here’s a few things you should about the Dan Zanger story.
- Dan Zanger used to build swimming pools
- Dan Zanger spent 10 years learning how to trade
- Dan Zanger blew up his trading account 3 times
- Dan Zanger turned $10,000.00 into $42,000,000.00
- The end
And yes, that’s 42 MILLION.
I mean, this guy is a self-taught retail trader if ever there was one and his story is legendary. Because he did the same things we all do. He fell in love with the stock market. He studied the heck out of it. He lost money. He saved up more money. He lost more money.
But he didn’t quit.
He stuck at it, learned what worked for him, studied the masters who came before him and then went balls to the wall big in 1-2 stocks at a time. And when the dust finally settled he was $42,000,000.00 richer. And if that story doesn’t inspire you to work hard, study hard and trade hard, then I don’t know what will.
So, without further delay, here they are…
Dan Zanger’s Top 10 Rules for Trading
1. Make sure the stock has a well formed base or pattern such as one described on this web site (Dan’s website is www.chartpattern.com).
2. Buy the stock as it moves over the trend line of that base or pattern and make sure that volume is above recent trend shortly after this “breakout” occurs. Never pay up by more than 5% above the trend line. You should also get to know your stock’s thirty day moving average volume.
3. Be very quick to sell your stock should it return back under the trend line or breakout point. Usually stops should be set about $1 below the breakout point. The more expensive the stock, the more leeway you can give it, but never have more than a $2 stop loss. Some people employ a 5% stop loss rule. This may mean selling a stock that just tried to breakout and fails in 20 minutes or 3 hours from the time it just broke out above your purchase price.
4. Sell 20 to 30% of your position as the stock moves up 15 to 20% from its breakout point.
5. Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly. Remember stocks are only good when they are moving up.
6. Identify and follow strong groups of stocks and try to keep your selections in these groups
7. After the market has moved for a substantial period of time, your stocks will become vulnerable to a sell off, which can happen so fast and hard you won’t believe it. Learn to set new higher trend lines and learn reversal patterns to help your exit of stocks.
8. Remember it takes volume to move stocks, so start getting to know your stock’s volume behavior and then how it reacts to spikes in volume. You can see these spikes on any chart. Volume is the key to your stock’s movement and success or failure.
9. Many stocks are mentioned in the newsletter with buy points. However just because it’s mentioned with a buy point does not mean it’s an outright buy when a buy point is touched. One must first see the action in the stock and combine it with its volume for the day.
10. Never go on margin until you have mastered the market, charts and your emotions. Margin can wipe you out.
Bam! How awesome is that? The personal rules of a master trader. Whether they work for you or not is up to you decide. A couple of my favorites?
#2 Don’t pay up over 5% after a breakout.
#3 Be quick to sell your stock if it slides back below the breakout zone.
#4 Hold your leaders and sell your laggards.
There you have them fellow Retail Traders — rules to live and trade by!
Can’t get enough Zanger? Me either! So here are some other cool Dan Zanger resources on the net. And let me know when you have achieved your 29,000% gain.
- A cool Dan Zanger Interview on YouTube.
- Dan Zanger on Wikipedia.
- Dan Zanger’s Twitter account — follow this dude — like yesterday!
- Dan Zanger’s Website.
- Dan Zanger Trader’s World Interview.
- Dan Zanger Stocks & Commodities Interview