Seeing as there's a lot of talk about the Dan Zanger method of trading lately, and because Apsll asked if i might do something similar to what I'm doing on another message board here -- why don't we create an exercise that will be a real education on how to trade and small portfolio of stocks real time?

The reason being three-fold:

1.  You will hopefully get a lot out of it.  Posting real trades on a message board in real time at the time of your entry and exit is an amazing learning experience.  For me it's almost harder to be transparent about what I'm trading than it is to risk money.

2.  Managing 2-4 stocks is a lot more realistic than throwing out 10 buy suggestions every day.  Managing a portfolio requires money management, trade selection, trade management, rule definition and focus.  After all, when your capital is tied up it's tied up and your stocks are either performing or they aren't. 

3.  It's increadibly helpful to newer traders to see the whole selection/management process in full swing.

So here's what I propose:

1.  We start out with a hypothetical Dan Zanger portfolio of $10,000.00 (that's what he started with in 1998) with another $10,000.00 in available margin and we can only hold a MAXIMUM of 4 stocks.  You decide the capital allocation to each trade.

2.  Your entries (accompanied by charts if you would like - not necessary) must be posted here with 5 minutes of your entry.  This will help keep us honest.  No waiting until the end of the day and then posting that you entered that day's star stock early in the morning and grabbed a 1 day 150% gain!  :)

3.  That you provide a weekly update of your portfolio and positions (open and closed) so we can all keep on track.

4.  The Dan Zanger Baz-illion Dollar Challenge isn't about offering unsolicited advice regarding someone else's picks, it isn't about questioning someone else's method, it isn't about poking fun at someone's level of skill or knowledge and it isn't about bragging rights -- it's about improving as traders -- sharpening our games -- and having fun!

5.  Your trades don't have to be momentum trades like Zanger -- they can be any method you like -- now's the time to try all of those crazy ideas you've been thinking about.  Oh, and you can trade long and short -- your choice.

6.  When it comes to the picks you can trade them live if you want to or you can simply keep track of your hypothetical portfolio.

7.  None of the trades methtioned here -- mine or anyone elses -- are recommendations to buy or sell any particular security and should not be considered investment advice at all. 

8.  You can join the challenge at any time.  Just grab your 10k -- and start picking!

9.  This challenge will run for 1 year (can we focus our attention for that long?).  In that time Zanger earned a 29,000% return and became the world record holder for a single year's gains.

10.  So I'm not stuck in this challenge all by myself the challenge will not begin until there are 4 willing participants.  As Apsll asked me to start something like this we will right off the bat consider him in.  So that makes me and Apsll. 

I hope a lot of traders here decide to join in.  I know it's difficult putting out picks and managing those picks for all to see -- but there is a benefit!   Even if picking only 4 stocks from the thousands out there forces you to really narrow down toward what you are really looking for -- then the excersise is worth it.

Besides, Zanger blew up 3 accounts before he got going on the path to 18 million!  If your account goes to $0.00 just say "I learned it from watching Dan!".  

Anyway, to end this post here are Zanger's own rules he trades by.  I'm not saying they're good or bad -- just that they're his:

1. Make sure the stock has a well formed base or pattern such as one described on this web site and can be found on the tab "Understanding Chart Patterns" on the home page, before considering purchase. Dan highlights stocks with these patterns in his newsletter.

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, which you can find on most stock quote pages such as eSignal's quote page.

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 the 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. Some of you may benefit from reading a book on Candlesticks or reading Encyclopedia of Chart Patterns, by Bulkowski.

8. Remember it takes volume to move stocks, so start getting to know your stock's volume behavior and the 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 at the time that buy point is hit and take keen notice of the overall market environment before considering purchases.

10. Never go on margin until you have mastered the market, charts and your emotions. Margin can wipe you out. 

Good luck all!

As David has mentioned I am in.

Two more to go. Ben I was not sure if your above post was an in or not for you. I do not want to be presumptuous. I hope that you will be in of course and I would love to see Tobydad as well I hope that he is not to busy to join us.

Yes I almost forgot that we need to share what we look for in our choices.
 
I noticed David that you are looking for these bottom break-outs. I have to learn to stay in them longer once I jump on board. I do not follow statistics as closely as you do, I really should. I have always been a mess that way. Reading your dialog with Diceman just makes me realize how un-disciplined I am. I will buy a stock based on recognition of pattern, like I have seen this before, and I know what to expect. I will then sell at say 10% or 15% profit a few days to a week latter.

A stock that I like for tomorrow is S. Someone mentioned it here on this forum a while ago and I have been watching it ever since. Sailnadream has been reminding me a lot of some training that I did years ago (I guess that she just finished up with it) "Techni Trader". They discuss Worden indicators like TSV & BOP. The more time that has passed the less I have used these indicators but I am starting to take a fresh look at the way I was taught to use them. Take a look at this chart for Sprint Nextel Corp. If you apply the sub indicator "ROC" to TSV then it reveals some powerful information. Rate of Change when used on TSV can expose smart money intervention. As TSV is rising it will not only cross the zero line but it will also cross up over ROC. The sign for large lot investors will come when ROC will cross down bellow a rising TSV.  A sign for the Swing trading Institutional traders is when Rock is moving fast and creating peaks and spikes near a trend reversal. You might want to slap a slow stochastic in the bottom window and a TSV with ROC in the middle then you can watch for these signals and do some awesome Bottom formation Swing trades. At some point though price will start to be less volatile and you will see it start to set up to move out of its bottom and then you will see TSV and ROC act a little different. When you get the positive divergence between TSV and ROC you will see ROC go down and TSV will go up. They will diverge from each other in more of a smooth pattern as apposed to the peaks and spikes. I believe that S is there and we will see the break out any day now. 

Here is the chart that shows all that I have discussed. I will discuss BOP on my next stock.

Sorry to hear that tobydad.
My prayers are with you and your family.

Thanks
diceman