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David Shvartsman started investing in 1998, “right as the dot-com bubble was about to shift into overdrive.”

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Investor’s trades guided by market psychology and trends

Larry MacDonald

Published Friday, Jun. 02, 2017 05:24PM EDT

Last updated Friday, Jun. 02, 2017 05:25PM EDT

David Shvartsman

Occupation

Investment editor and trader

The portfolio

Current trades include VanEck Vectors Semiconductor ETF and shares in Brooks Automation Inc.

The investor

David Shvartsman started investing in 1998, “right as the dot-com bubble was about to shift into overdrive.” He rode some of the Internet rockets upward and came away with the view that market psychology can be more important than detailed analyses of companies. He currently is the editor of Finance Trends.

How he invests

“As a trader, I look to buy strong stocks in uptrends while avoiding weak stocks in downtrends,” Mr. Shvartsman says. Trading ideas come from daily scans of stock charts and reading up on emerging trends in areas such as technology, cannabis and health care.

Risk management consists of cutting losses early by using stop-loss orders (orders left with a broker to sell a stock at a price below the market price by a certain amount, such as 15 per cent). As for his winners, he likes to let them ride.

The basic idea is to “limit your risk and maximize your reward,” he explains. Over time, “your profitable trades can more than pay for your losing trades.”

Mr. Shvartsman has recently been riding upward momentum in technology and semiconductor stocks. Over the past six months, the VanEck Vector Semiconductor ETF is up 20 per cent, while Brooks Automation stock is up nearly 70 per cent.

He had good results purchasing Canadian cannabis stocks in 2014 and 2016 and U.S. cannabis stocks in 2016. Moves to legalize marijuana produced stock gains for him, from 10 per cent to 200 per cent.

Best move

Mr. Shvartsman reports that his first “ten-bagger” (a stock up more than tenfold) was an Internet search-engine stock, Wordcruncher Internet Technologies (now defunct), bought on the over-the-counter market at $3 and later sold above $30 at the height of the Internet bubble in early 2000.

Worst move

He didn’t set a stop-loss order for Chesapeake Energy Corp., thinking it was a “great company.” Then the financial crisis of 2008 hit and knocked the stock down, which was sold at a loss of 75 per cent.

Advice

Mr. Shvartsman believes it is important to understand market psychology “and trading in sync with the market’s primary trends.” Risk management is also important. Specifically, stop-loss orders can be useful in limiting losses. So is having the discipline to stick with a trading system.

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com.