April 19, 2011
By Michael Markowski
Yesterday was a significant for both Surfs*Up and Newsgrade. Its because I was able to communicate the proprietary and exclusive information available to me which enabled some of our subscribers, some who are also shareholders, to generate returns which were in excess of 70% on one trade. Prior to yesterday, I was unaware of any of our subscribers who had been able to generate even 30% on one trade.
I was cool as a cucumber in relaying the information that enabled them to get on the top of the market’s downward roller coaster and get off at close to the bottom. It was a day in which most investors were losing their heads because of Standard & Poors downgrade of US debt. The Dow Industrials were down more than 200 points minutes after it opened and closed down more than 140 points for the day.
Yesterday’s success was attributable to the fact that with each passing day I am becoming better versed on how to use the exclusive information being produced by Newsgrade’s high powered computer systems and algorithms which can be used to increase the returns and the reduce risk for each and every one of our subscribers.
To get a complete picture on how I was able to provide this information to the subscribers of Surfs*Up yesterday morning one needs to understand that there were two distinct and separate computer systems that I relied on for the information:
1. Excalibvr is the computer system which issues Surfs*Up’s alerts. It mimics wave technology and has 37 separate algorithms which work in conjunction with each other to manufacture Surfs*Up’s alerts. It was designed to monitor and measure the pulse of a market. Its best used for trades that last less than 30 minutes.
2. Storm is a separate computer system which issues its own alerts. It mimics the Doppler radar technology and has 35 separate algorithms which work in conjunction with each other to manufacture its own alerts. It was designed to monitor and measure the trend of a market. Its best used for trades that last less than a half a day or a day.
The bottom line is that even though Excalibvr and Storm are both capable of monitoring and measuring 2,000,000 markets they each use completely separate technology to issue their respective alerts. Additionally, in conducting my research and back testing I have found that both have secondary algorithms which can also be used as primary indicators.
Yesterday morning began with Excalibvr issuing a short alert at 2286.25 at 9:05AM. Within minutes its secondary indicator went off at 2278.25. It’s the recently discovered signal that I recently wrote about that has a probability of more than 70% that it will generate a return of 5.0 points or at least 20% on the trade. As all this was happening I noticed that Storm was also indicating that the market was going to fall significantly after it opened. Based on all of these simultaneous convergences I also was fairly confident that the market would fall more than 10 points from 2278.25 which would be an equivalent return of 40%. Therefore, I was quite confident when I sent an alert to all of our subscribers to get at least one contract at the market and to put the second contract in at 2278.25 just prior to the market’s open.
On the opening the market was hit by constant waves of selling pressure. I was fascinated as I saw that each new low was followed a lower high until it hit bottom at about 2250.00. For me the experience was surreal. Its like nothing that I had ever encountered in my 30 plus years on Wall Street. After the market bottomed and started coming back up I saw that another secondary or the volatility indicator had gone to neutral. At approximately 10:30AM I sent an alert to all subscribers to cover at about 2258.00. This equated to a profit of more than 80% assuming that one sold a contract at 2278.25.
From my experience I have no doubt that Excalibvr and Storm can be used in conjunction to increase profits and reduce risk in extremely volatile market conditions. If the indicator had not gone neutral and had yesterday had become a full borne crash, I have no doubt that I could have quarterbacked all of our subscribers to stay in a ride that could have generated profits of a few hundred percent or more in one day.
As we move forward, I feel as though I am one of the Wright Brothers. To have the success that we are having in high frequency trading is unparalleled. I experienced nothing even close to it in my 30 years on Wall Street. We have achieved a lift off due to the information which is being produced by our computer systems and algorithms. We also have more than a dozen other algorithms and systems that we are testing and hope to have them available to trade stocks and everything else on the planet by the end of 2011.
The key now is to be able to efficiently deliver the information to our subscribers. That is dependent on the time that is required to organize and display the information and not on developing delivery technology. Our Knobias real time delivery platform that we currently providing to some of the world’s top traders in NYC is capable of delivering information much faster than it can be delivered by email, text or even by the web itself.
Note: For more information on Futures and why they represent a huge opportunity for Newsgrade and also for shareholders or investors who take the time to learn about them, I suggest that you read the memos that I have written about Surfs*Up since the beginning of 2001. The previous memos can be found at the following link:
http://www.onlinefinancialsector.com/SurfsUp_s/28.htm
To understand more about Surfs*Up and how it operates I suggest that you view the following videos:
· Surfs*Up introductory video: http://www.youtube.com/watch?v=T9LUpcyLyU0
· Profit From the Surge: http://www.youtube.com/watch?v=7vgTI-qKXsA&feature=related
There is no rest for the weary. The developer of the day trading algorithm that Newsgrade recently acquired which powers Surfs*up and I made a major discovery during the month of April. Since then we have been burning the midnight oil.
We discovered that one of the proprietary metrics or indicators which the complex algorithm uses to measure the acceleration and deceleration of investor sentiment within a market is also very accurate at identifying or screening for and issuing signals on those waves which can generate up to three times more profit than the average wave which Surfs*Up issues an alert. For example, we found that the total net profit that the recently discovered metric generated for one NASDAQ 100 emini Futures contract was $7,600 over a 36 day period or an average of $200.00 in net profit per each of the 38 alerts between March 1st and April 5th. The actual real (non compounded and non annualized) rate of return was more than 1,500% over the 36 days.
While a real return of 1,500% over 36 days would be considered by almost anyone to be obscene it is not the number that amazed me about this new discovery. What was amazing is that 29 of the 38 trades generated a profit of at least 5.0 points or 20% per trade. Half or 19 of the 38 signals generated a profit of more than 10.0 points or 40%. Because of these statistics a professional, or even an individual trader for that matter, could have employed a very simple strategy by putting in equal amount in each trade. Note: All of the 38 day tradable signals were generated in succession which means that a trader would have been out of each trade with either a profit or loss before entering into the next trade. With this simple strategy a trader could have entered each trade and set a limit order to take a profit at 5.0 points and simultaneously also place a stop loss order to protect against losses of greater than 5.0 points. Under the assumption that all of the nine trades out of 38 which did not generate a minimum profit incurred a loss of 5.0 points were subtracted from the 29 trades that did generate more than 5.0 points net number of trades over the 36 days that left a net 20 trades which each generated 5.0 points or a profit of 20%. In following a trading strategy which was based on statistics a trader could have generated a profit of $380,000 or $20,000 per each of the 19 trades over the 36 day period which began on March 1st and ended on April 5th.assuming an initial amount of $100,000 at risk. Note: For this set of 38 trades a trader would have generated 100% in profits by the seventh trade. After that the trader would have been playing with the house’s money.
We also did a preliminary check on how the metric performed in four different markets. The four included gold, the Nikkei, the S&P 500 and the NASDAQ 100. We were able to determine that the statistical data for the preliminary back tests was similar for all four markets over the same period of time. For example, we found that the return on gold was over 3,000% or more than double the NASDAQ 100 for the 36 days. Since the initial markets that we looked at were diverse in including gold, a global commodity and US and Japanese equities, my initial hunch is that this metric can be used for anything that trades and is liquid. That could potentially be as many as 2,000,000 financial instruments who reside on over 200 global exchanges.
While this discovery will significantly enhance the performance of Surfs*Up for our current individual subscribers that is not what excites me about it. I am very excited because I now believe that we have a product that is perfectly suited for hedge funds. Here are two reasons why:
The potential revenue with gross margins in excess of 95% that Newsgrade can generate by producing high performance buy and sell signals to statistically minded hedge funds is mind boggling. On or before June 30, 2011, Newsgrade expects to have real time and historical data feeds that will enable its newly discovered metric to monitor over 2,000,000 financial instruments including stocks, options, Futures, Commodities and currencies, etc. That would include everything that trades on over 200 global exchanges. To put this into perspective if one were to assume that Newsgrade were to offer hedge funds an exclusive on each of the 2,000,000 financial instruments at a rate of only $1,000 per month per each financial instrument its total revenue per annum would be $24 Billion. However, you can be assured that the rate that will be charged per financial instrument will be much more then and will be a multiple of $1,000 per month. What is much more likely to happen for a majority of the financial instruments is that Newsgrade will enter into partnerships with those hedge funds who are willing to share their spoils. Finally, in the not too distant future, Newsgrade will not make the information for some of the markets available at anyone at any price. Instead it will be use those signals internally to maximize its return on its cash.
Based on this new discovery Newsgrade’s top priority now is to enter into deals with hedge funds. That should not be difficult for several reasons. (1) I have many contacts with hedge funds as I spent over ten years on Wall Street, (2) Newsgrade has numerous shareholders in New York City area who are financial professionals, (3) we have several hundred professional investor clients who are users of our Knobias product in the NYC area and (4) we will soon be finalizing a selling agreement with one the world’s top institutional brokerage firms who wishes to sell our Knobias product to their global clients who include hedge funds.
Surfs*Up is Reliable and Durable
Wednesday March 30, 2011
Since I have not sent you anything over the last few weeks I wanted to give you an update on the status of Surfs*Up. It has proven itself to be both reliable and durable. The algorithm has been sending accurate short and long alerts since it began issuing them on the first day of January. It has remained steady throughout the Egyptian, Libyan and Japanese crises. For example, last Friday March 18, 2011, was one of Surfs*Up’s best short alerts for the year. The Dow had already opened and was up by over 130.0 points when it sent out the alert at 9:47AM to short the NASDAQ 100 @ 2239.25. Shortly thereafter, and as the Dow continued on its upward path, the NASDAQ did an about face and went into reverse and plummeted to as low as 2215.75. The subscribers to Surfs*Up who rode the four hour downward wave until it bottomed made 23.5 points per contract. That equates to a profit of $470.00 on each $500 contract.
Many who I have talked with and have received emails from are in disbelief about the types of returns that Surfs*Up’s signals are delivering. They think that because it sounds so good it must not be true. These types of returns are very real. The reason why there is doubt is because they do not understand the inherent leverage that can be utilized via the trading of the financial Index emini Futures such as the S&P 500 and the NASDAQ 100. The table below depicts the three different options which a trader could utilize to generate a profit based on a hypothetical one percent change or a 10.0 point increase in the S&P 500 index:
|
Actual profits and percentage (%) returns based on the entry of a
buy order, having $500 at risk and 1% increase in S&P 500*
from 1000.00 to 1010.00 |
|
S&P 500 vehicle |
Symbol |
Leverage |
Profit based on $500.00 at risk |
Return |
|
ETF |
SPY |
1 to 1 |
$10.00 |
2% |
|
ETF-Leveraged |
SSO |
2 to 1 |
$20.00 |
4% |
|
Futures |
ES |
50 to 1 |
$500.00 |
100% | |
Assuming the S&P 500 is at 1000.00, a one percent increase to 1010.00 would generate a profit of $10.00 or a 2.0% return on a $500 investment into the non leveraged SPY. The return would be 4.0 % or $20.00 assuming an investment of $500 into the SSO which provides leverage of 2 to 1. Finally, the purchase of a $500 Futures contract which provides leverage of 50 to 1, with a change or an increase from 1000.00 to 1010.00 would generate a return of 100% or $500.00.
Obviously, if one can get access to alerts which are accurate in signaling even a small change in investor sentiment for a market index such as the S&P 500 the percentage returns can be staggering when trading a Futures contract. Its very simple. When trading a Futures contract every 1.0 point increase (from 1000.00 to 1001.0) or decrease (from 1000.0 to 999.0) on the S&P 500 can equate to a 10% return on the amount invested before commissions and taxes. These numbers assume that one went long or purchased a contract for an anticipated increase or sold or went short a contract when anticipating a decrease. Speaking of taxes, the tax rate for gains or losses on Futures is 60% long term and 40% short term regardless of the time period of the investment. What that means is that if you make 10% on your money on any given day 60% of the gains will be taxed as a long term gain. The following is a link that better explain the leverage and taxation advantages that Futures provide.
http://www.rb-trading.com/begin2.html
What we are really now excited about is that based on the accuracy of Surfs*Up signals or alerts and the leverage that Futures can provide its very possible that someone who has $10,000 to invest can make a decent living trading Futures. We have found that trading Futures is not that complicated especially if one utilizes a practice Futures account to trade the signals before going live, understands Surfs*Up’s 98% probability statistics and follows our risk management procedures that we have been implementing over the last two months. Based on our statistical back testing on how Surfs*Up’s alerts performed during the three year period of 2008 to 2010 we believe that the average person who we train to use Surfs*Up’s signals and invests $10,000 can generate the following:
- $250 per day or more than $60,000 per year in net profits for the trader. This assumes losses that will be incurred from the 2% of the trades that will not work.
- $50.00 per day or about $12,000 per year in commissions for the Futures broker
- $50.00 per day or $12,000 per year in subscription revenue for Newsgrade.
The bottom line is that with Surfs*Up one can invest $10,000 and never leave their home and make a net profit of $36,000 per year or $150.00 per day after all expenses and before taxes. If one were to invest $20,000 their net profits would more than double because their subscription would remain static regardless of the amount that they trade. There is no other investment or business opportunity on the planet that I know of which can compete with Surfs*Up. Its only possible because of the leverage that only Futures and other financial instruments such as commodities and currencies can provide. Our understanding of these dynamics is why we raised the minimum price since the start of 2011 from $100 to $1,000 per month per each financial instrument.
For the month of March our primary goal or single purpose has been to get all of our initial subscribers trained so that they can be successful at using Surfs*Up’s signals to trade the NASDAQ 100 and the S&P 500 emini Futures. Even though we did not know a single thing about Futures or how to trade them until 90 days ago we have been very successful at training our first group of diverse subscribers. One of our very first subscribers, an 84 year old retiree, who started with $5,000 generated over $1,000 in profits during his first month after he turned off his practice account and went live. Even more importantly, he has had only one day in which he has had a loss. We have a dentist who is successfully trading in between seeing his patients. We have all types of individuals trading Surfs*Up’s signals. They include housewives, business persons, students, merchants, pilots, corporate executives and even some who are unemployed. Cannon Trading, the Beverly Hills Futures or commodities broker who has been in business for 20 years that we have been sending our subscribers to, recently told us that the clients that we have been referring to them are already among their best. That they are ideal because they enter into trades every day and that the value of their accounts increases consistently. Since we somehow stumbled upon lightning, or how to train a complete novice on how to successfully trade Futures, our quest is to now bottle it. We fully intend on leveraging the experience that we have gained in training our diverse group of subscribers. We have been busy working around the clock to develop a scalable training program which will enable us to rapidly scale our subscriber and revenue base immediately.
Many ask how we are going to sell and market Surfs*Up? Its going to be fairly easy for one simple reason. Those who use Surfs*Up’s signals while employing our trade risk management procedures are ideal clients for Futures brokers. A Futures broker would rather have clients who are using a system which manages risk and deters greed. They prefer to have clients who are willing to accept making a few hundred bucks every day and who generate consistent commissions instead of those who risk all of their money on one trade and then complain. Because of our success I believe that there will soon be many global Futures brokerage firms who will come out of the woodwork to refer their clients to us for training and to gain access to Surfs*Up’s signals. By referring their clients to us they will be helping themselves. Cannon Trading is the first. They have already offered to put a link from their web site to ours. I am going to Los Angeles on business in the next two weeks and I intend on collaborating with them on how we can both work together to maximize the revenue and profits for each of us.
From those who want to make a career in using Surfs*Up to trade Futures, commodities and currencies, etc., Newsgrade will have significant pricing power. This will result in “significant” profits which can be generated from an “insignificant” number of subscribers. The opportunity to generate much more than $1,000 per month per subscriber is incredible. I anticipate that by the end of the year that the average revenue per subscriber will be well above $1,000 per month and that there will be a multiple number of individual subscribers who will be paying at least $10,000 per month. If Newsgrade were to dedicate its marketing and selling activities to obtain 1,000 of these subscribers alone it would generate $10 million per month in revenue and its annualized pre tax profits would be north of $100 million. Since it already provides its Knobias platform to several hundred financial professionals and traders in the NYC area it already has inroads to finding those who are capable of paying $10,000 per month. The most important thing to know is that when you can sell a product that has entry price point of $1,000 per month it will not require a lot of subscribers in order to generate significant profits. Any traction whatsoever would enable Newsgrade to soon fetch a valuation of a few billion dollars. That is about 20 to 40 times what the shares were recently valued at.
There are four reasons why I am very confident about Newsgrade’s pricing power. The first is that there are 900,000 professional investors in the world and they pay an average of $20,000 per year for financial information. The second is that Surfs*Up only sends out a few alerts per day per financial instrument. The average alerts issued for the NASDAQ 100 each day are about three and for the S&P 500 it is less than two. The third is that the quality or the accuracy of its alerts is consistent. Our current first wave of subscribers have been successful at trading the alerts or signals that Surfs*Up has been issuing for both the NASDAQ 100 and S&P 500 emini Futures contracts. The same goes for the Nikkei and the Eurex 50. The final reason is that we have discovered that for most of the alerts or trades a trader will only be in the trade or at risk for about 10 minutes. For those trades which last longer a trader can set their platform or dome to enable an autopilot or a trailing stop mechanism to manage a trade’s risk and profit. Since traders who subscribe to Surfs*Up will have plenty of time on their hands they will naturally gravitate to wanting alerts on additional financial instruments. That will enable Newsgrade to sell them additional subscriptions for each additional financial instrument or market at monthly price of $1,000. This will especially be possible if they have success in trading Surfs*Up’s alerts which cover the first financial instrument that they trade.
Surfs*Up, is currently monitoring the trading markets for four financial instruments and expects to add between 50 and 100 additional financial instruments including gold, silver and oil, etc., by June 30th. Surfs*Up is going to be a billion dollar product because its capable of monitoring the trading markets for over 2,000,000 financial instruments which trade on over 200 global exchanges. To put this into perspective Newsgrade would generate over $1.2 Billion per year in annualized revenue if it was able to sell one $1,000 per annum subscription to 50% of all the financial instruments or markets that Surfs*Up is capable of monitoring.
Surfs*Up Confounds Again
Thursday February 10, 2011
I thought that I had finally found a flaw in our Surfs*Up algorithm when it issued an alert to buy the NASDAQ 100 at 4:02PM on Wednesday night which is after the stock market had closed. It issued the alert at about the same time that Cisco Systems (NASDAQ:CSCO) announced a disappointing earnings report. Since CSCO, who accounts for a high percentage of the NASDAQ 100 and is one of the 30 members of the Dow 30 Industrials I thought for sure that the algorithm had made a big mistake. There was no doubt in my mind that CSCO’s share price was going to drop significantly on its opening today and drag the rest of the NASDAQ 100 and Dow Jones indices down with it. There is not an analyst in the world who would have disagreed with me.
The market’s opening today was ugly with a lot of downside momentum. All of the major indices opened down significantly and were heading lower. Yet, within a few minutes Surfs*Up issued buy signals for both the NASDAQ 100 and the S&P 500. It did this even though CSCO’s shares had opened down by $2.00 from the previous day’s close. As CSCO’s shares continued to decline (CSCO closed at its low of the day) within minutes after Surfs*Up had issued the alert the NASDAQ 100 completely reversed from its downward direction. Those who had purchased one Futures contract for $500 a few minutes earlier made a profit of $200 in the next 10 minutes. Those who purchased the S&P contracts also made out like bandits. I was dumbfounded as even those who had purchased a contract the night before when CSCO made its announcement made a profit of $60.00 on a $500.00 contract.
Note: Michael will now be posting all of the new memos that he writes on Surfs*Up and all of the other new algorithms that are being tested on http://www.bearmarkettracker.com/and also on http://www.newsgrade.net/.
An Epiphany on Surfs*Up
Saturday February 5, 2011
Just when I had thought that the events that I told you about in my letter regarding Newsgrade last week could not be surpassed I was wrong. What happened with Surfs*Up, Newsgrade’s computerized day trading algorithm, which will soon be available for subscription, on Tuesday morning this week before the market opened was truly amazing.
Investors who watched the news early Tuesday morning saw rioting in the streets of Egypt. Many thought that the market was going to be in for a big dump, at least on the opening because (1) the riots in Egypt were the first since the prior Friday and (2) the market on Monday, the day before, had experienced a recovery rally off of Friday’s ugly losses.
In the face of what appeared to be seemingly wide spread negative investor sentiment Surfs*Up issued an alert to buy the NASDAQ e-mini and 9:29AM, before the stock markets opened. How it was able to accurately determine the direction of the market before it even opened is altogether a story for another day. Futures traders who followed the signal potentially could have made as much $645, a 129% gain on each $500 they had at risk.
Anyway, I was stunned by Surfs*Up issuing an alert to buy, especially before the market opened. After all, what human in their right mind would issue an alert to buy the market before the opening on a day in which the probability was high that the market would likely open down. After the market opened it took off like a scalded eagle and did not look back. The result is that the major indices on Tuesday closed at their highest levels since June of 2008. Those traders who sold short on the opening suffered heavy losses.
In watching this I had an epiphany. Could Surfs*Up be used to accurately gauge investor sentiment, especially on those days of market crashes or heightened market volatility that are caused by the media’s coverage of earth rattling events? There are several of those days or periods which occur over the course of a year and there were many which occurred in 2008. They are the most dangerous because investors and traders are prone to having their emotions influence their decisions. It is also on these days that the speculative fervor intensifies. Every red blooded investor or trader who is sitting with cash wants to jump in and buy at the bottom before prices reverse and go all the way back up. Since Surfs*Up constantly monitors and measures the waves of investor sentiment and only issues alerts when the intensity of the waves are increasing to a sufficient level and are also getting close to break or reverse to the opposite direction it’s the perfect I thought that it could be the solution for those who are interested in keeping their head about them and in making a when the crashes occur.
Remember that I told you last week that Surfs*Up is capable of monitoring and measuring the investor sentiment waves for every financial instrument which trades. There are over 2 million of them in the world and they include stocks, bonds, commodities, Futures and currencies, etc. Therefore it will eventually be able to generate alerts that will enable a subscriber to generate short term profits or buy their favorite stocks at bottom basement prices during a crash.
To test my theory that Surfs*Up would be very valuable to traders and investors during a market crash I decided to go back to the day of the flash crash which occurred in 2010. The date of the flash crash was May 6, 2010. According to its back tests Surfs*Up issued an alert to short the NASDAQ emini Futures contracts at 12:38PM. The price of the emini fell by 207 points meaning that each $500 at risk in a Futures contract netted a gain of as much as $4,140. While this is fantastic gain, few if any made anything close to that because no one could have foreseen the extent of the flash crash when the alert was issued. However, the buy signal or alert that Surfs*Up sent at 3:05PM, was the one that bargain hunters would have been prepared to trade resulted in a 17 point move or a profit of $350 on each $500 put at risk.
The ultimate question is did Surfs*Up issue any alerts on the day after the flash crash had occurred; alerts or signals that would have enabled one to find bargains and avoid being whipsawed? The days after a crash for an investor are fraught with angst and ripe for opportunity. The day following a crash is the one day that the surf is up for the weekend warrior who wants to be a part of the action. Those who were expecting a follow through on the volatility from the day before of the Flash crash were not disappointed. The NASDAQ 100 index had a 93 point and the Dow Jones, a 400 point trading range for the day. Surfs*Up rose to the occasion by giving the weekend warriors more alerts than it had ever previously given on any other prior day. Surfs*Up issued a record ten alerts, an equal number of both buys and sells on the day after the Flash crash. Those who had the stamina to trade the same $500 on all ten of them could have potentially made as much as $2600.
Its important that you understand that last weekend I could not sleep and decided to share my excitement with you because I realized that Surfs*Up had only realized last week that it had the potential to be a billion dollar product which addressed the fast growing and underpenetrated Futures industry.
At this weeks’ end I came to the realization that Surfs*Up can also be positioned to be sold as a staple for all those who invest in the stock market. Who would not want something that would enable them to make better decisions during extreme periods of angst and market volatility? What this means is that I came to the conclusion that Surfs*Up is also capable of becoming a billion dollar product for stock investors as well.
The outcome is that we are now moving to incorporate Surfs*Up’s alerts, which can be used to trade exchange traded funds or indices such as the SPY and the QQQQ into our lowest priced offer on http://www.gfnn.com/. We also will be adding them to our Knobias professional news delivery platform. Doing so will add significant value to our lowest priced product offerings and make them much easier to sell to over 200 million individual online stock investors and 900,000 financial professionals. Assuming that Newsgrade were able to penetrate only 1% of these markets at its lowest price point its annual revenue projections would increase by $2.4 billion as compared to what its projections were one week ago.
Not bad for a weeks’ worth of work and no development costs either.
Up All Night
Saturday, January 29, 2011
I worked all through Friday night and Saturday morning to write this letter so that I could memorialize the events which transpired for Newsgrade on Friday January 28th. What happened will have a significant impact on me and my family and on everyone else who is a shareholder of Newsgrade.
Before I tell you about it let give you some perspective and background so that you can understand why it has taken so long for Newsgrade to take off. First of all, I founded the company in 1997 and have bet everything on it including all of my wife’s and my retirement funds and even more importantly all of the most productive years of my life.
In 2002, I thought that the bet that I made would pay off when I was able to use Newsgrade’s technology to create a mathematical formula or an algorithm that enabled me to invent StockDiagnostics.com, a web site that issues alerts on companies which could possibly go bankrupt in the future. Even to this day StockDiagnostics.com is a viable product. I used it to predict in 2007 the calamity which occurred for the top five brokers including Lehman, Merrill Lynch and Bear Stearns a year later in 2008. My bet never paid off for one reason. I could not predict the transformation from investing to trading or to instant gratification. Who could have predicted that the average holding period to hold a stock would go from two years to two months between 2002 and 2010?
Luckily, I went with my instincts (a high quality and critically needed product to protect against losses with zero competition was not selling) instead of my intellect. Since 2003, my quest has been to develop a reliable algorithm which could be used to quench the thirst of the day traders who are in pursuit of accuracy and quick profits. Ironically, in my very efforts to seek capital to keep Newsgrade alive, a prospective investor who never pulled the trigger introduced me to his friend who was an engineering graduate from Israel’s equivalent of MIT who was a former rocket scientist. It was only because I was in need of capital that I placated the investor by agreeing to meet with his friend who had developed trading software or algorithms that could be used to day trade anything and everything. After meeting him and analyzing his software I was impressed. We hired him in March of 2010 even though we did not have it in the budget to pay him.
Since hiring him my brother David and I have been back testing three of his 15 trading algorithms that he has developed over the last 20 years. Please keep in mind that I am one of the few individuals on the planet who understands what an algorithm is or even how to back test one. I am also uniquely qualified because I am one of the few who has ever created an algorithm from scratch. Mine, which I created by analyzing three years (1999-2001) of back tested data, is the formula which has been used to power the StockDiagnostics.com OPS Rankings since 2002. Those who have used the OPS algorithm for stock selection and avoidance have significantly outperformed the S&P 500 and a majority of all mutual funds over the last 8 years.
Anyway, I became particularly intrigued by one of his algorithms that he had named “Excalibvr”. Over the last three months I put it through a rigorous analysis which included an examination of its back tested data between 2008 and 2010. I was flabbergasted by its predictive powers and also by its logic. Since it monitors and measures the constantly flowing waves of investor sentiment in a market I decided to rename it “Surfs*Up” because it only issues a buy or sell signal when the waves are big enough to trade. Its accuracy ratio is so far superior to my OPS algorithm that I had developed. Comparing the accuracy of Surfs*Up with StockDiagnostics.com would be like comparing a jet to a horse and buggy. After being a buy and hold stock guy for my entire career on Wall Street, I was more than willing and eager to give this high frequency day trading algorithm a test drive.
In my back testing of Surfs*Up I was able to create some parameters or my own set of rules that would enable me to test drive or trade it successfully. I began using the rules that I had developed to paper or test trade the Nasdaq emini Futures real time with a Futures broker about two weeks ago. FYI. I had never traded Futures in my life. After learning how to do it I will never trade a stock or an option again. My results were nothing short of spectacular. Even though I did not risk more than $1500 on any day over the two weeks I was able to consistently make between $100 and $150 per day by following both its short and long alerts. Over the period I entered an average of two trades per day and my average trade time lasted less than 30 minutes. Amazingly, my actual results exactly matched the results that I found in my back tested analysis. For one to have an opportunity to have $1,500 at risk to make $2,000 per month, a return which would require a certificate of deposit or bond in the amount of $1,000,000 is far beyond what I could have ever imagined in my 30 plus years on Wall Street. Also, to test its ease of use I recruited an 84 year old friend of mine who lives in a retirement community to trade it and found that his results were the same as mine.
Now to tell you about what has kept me up for all most 24 hours. Surfs*Up sent me two alerts to my cell phone yesterday on Friday morning just after the market opened. The two which occurred within 30 minutes of each other told me to short both the Nasdaq 100 and the S&P 500. It wound up being the worst day in the stock market in months. However, for those who shorted one Nasdaq emini contract when Surfs*Up issued the alert could have made as much as $1,200 on each $500 that they had at risk. Additionally, my brother has been tracking another of his algorithms which the guy calls “C67”. It has its own unique way of looking at market momentum. He told me that its software indicated early on Friday morning that “all hell was getting ready to break loose” to the downside. The market on Friday plummeted all day on Friday and made no attempt to rally whatsoever.
The bottom line is that I have done enough testing and research and have now seen enough to know that Surfs*Up could potentially generate a minimum of $50 to $100 million in profits for Newsgrade in 2011 and over one billion dollars in profits in 2012. I am confident in these numbers because the algorithm can be used to trade over 2,000,000 financial instruments including stocks, bonds, commodities, futures and currencies, etc. Also because the price points currently range from $200 to $1,000 per month it would take about 10,000 subscribers to get to $50 million annualized. With this one algorithm alone Newsgrade can quickly become the EBAY of proprietary financial information. Assuming that we could only sell one subscription to each of these instruments at a price of $1,000 per year our annual pretax profit would be just shy of $2 billion. At $10,000 per year that number is $20 billion.
Also, there will be no marketing dollars needed to get the momentum started. I have numerous contacts and a great deal of credibility with the media who covered the launch of StockDiagnostics.com. Last year I had two articles which were written about me on the Huffington Post. I have a great contact who is a regular member of the cast of Fox Business news. After I explain how it works there is no doubt that Fox will want us to alert them when Surfs*Up issues its Kahuna alerts. The Kahuna is an alert that is issued only when a Tsunami is readying to hit a market. Only 15 of these Kahuna alerts were issued in all of 2010. One of them was a buy alert which was issued at the bottom of the on the day of the Flash Crash.
You need to put Surfs*Up on the top of your radar screen. Given the power that this algorithm has and the fun that it can provide you need to learn how to trade it. Because of its accuracy you would be foolish to continue to have investments in the stock market without at least using it hedge your portfolio. Also, we are going to limit the number of individuals who are allowed to subscribe to each of the 2,000,000 financial instruments that its going to cover because we do not want to strangle or swamp the goose who is laying the golden eggs. Thus, the subscription price will increase over time and I predict that we will eventually have waiting lists for some of the more popular financial instruments.
