About

Ivaylo Ivanhoff has been trading equities and options for almost ten years. He is the founder of Ivanhoff Capital, where he manages mainly his own and some clients’ money.

He is the editor of Ivanhoff.com and StockTwits50.com blogs, where he shares daily market commentary, analysis and ideas. He also tweets from the handle @ivanhoff.

Mr. Ivanhoff co-authored “The StockTwits Edge – 40 Actionable Setups from Real Market Pros” (Wiley, 2011) and “Finding the Next Apple” (coming in 2014).

Mr. Ivanhoff developed the algorithm behind the ST50 list, which selects and ranks stocks in the early stages of their price growth cycle.

Ivanhoff’s work is regularly featured in WSJ, Reuters, CNN Money, UT San Diego, Traders Magazine, Abnormal Returns, Real Clear Markets

He earned his MBA and MS Finance from Webster University in Saint Louis, Missouri.

HOW I THINK ABOUT THE STOCK MARKET

There are two major cornerstones to my market approach – simple is good and “the glass half full” attitude.

The most important thing to remember is that stock market is an opportunity machine. Times change, gas prices change, fashion changes, regulations change, but there are always companies that find a way to monetize on an undergoing social and business trend and make their investors rich. The only things that change on Wall Street are the names of the winning and losing stocks.

There is always a silver lining. One company’s rising costs are another company’s rising revenues and the market usually does a pretty good job of identifying the winners and the losers. Money never sleeps.

Albert Einstein liked to say that “Any fool can make things bigger, more complex, and more violent. It takes a touch of genius-and a lot of courage-to move in the opposite direction”. No truer words have ever been said when it comes to investing. You could make your investing life as complicated as you want it to be, but the degree of complexity is not positively correlated with market returns.

Most people put the odds against themselves as they fish for stocks in the wrong pond. Guess what? 1 out of 3 publicly traded stocks lose 75% of tgeir IPO price. All of them come from the 52-week low list.

All major stock market winners come from the 52-week high list and better yet – the all-time high list; hence we focus our equity selection efforts there.

Market is a discounting mechanism that looks 6 to 12 months ahead into the future. This is why prices will often change before fundamentals change. By no means, I try to convey the message that the market is always flawless. It is not and there are short periods of time when it acts like a bipolar schizophrenic, but for the most part it is a leading indicator and I want to put the odds in my favor by paying attention to price action.

Prices don’t change when fundamentals change. Prices change when expectations and perceptions change and they could change for various reasons. From a trend follower’s perspective, the main indicator that signals change in expectations is price.

Anybody could buy a stock as the ETrade baby commercials has long tried to convince us. Most people’s investing problems come from not being able to sit on their hands when they are right. Very few hold their winners long enough to make a difference in their returns.

Price action is not the only reason to buy an asset, but price action should be the only reason to sell. It is good to have conviction in your picks, but discipline should always prevail. Sooner or later, all trends end and when they do, it is not pretty. I have accepted that I won’t be right every time and I have learned to live with it. Being wrong is not a choice. Staying wrong is.

There should be very clear distinction between trading and investing. Long-term investing is essentially a bet on how other people’s perceptions will change over time. It is about answering the question What are the catalysts that will change market’s expectations? Trading is about capturing real time changes in sentiment and benefiting from the sweet spot of a major repricing process. You have to define yourself – are you an investor or a trader? – because the path you choose to take will impact everything you do.