let's start the video with a very simple question how on Earth did Dan zanger momentum swing Trader turn 10 grand into $46 million in 23 months how did he do it that question fascinated me I've studied Dan I've studied his methodology extensively and there are three main parts I would like you to take away from this video part number one is understanding the type of stocks and the chart patterns that Dan is looking to trade number two to who is Dan zanga understanding his mentality his thought process his mindset is going to be a real key at this video then number three is how do you go about screening for the stocks that Dan looks to trade that's where I'm going to jump across to Market Smith who are the video sponsors there's a link in the comment section below if you're interested in a discounted trial and I'm going to show you how you can create a screen that I run in Market Smith to find these stocks that Dan is looking to trade in essence that have huge earnings huge sales institutions are looking to in on them and there is fantastic relative strength because you'll find out a little bit later on William O'Neal who wrote how to make money in stocks and the founder of Investors Business Daily and Market Smith had a significant impact on Dan zanger so let's get into it Dan zanga 10 golden rules this is the summary don't worry you're going to learn about all of this as we progress throughout this presentation trade breakouts from well formed base pattern buy base breakouts preferably with a volume search and never end enter greater than 5% above the technical buy point be quick to exit if price returns under the technical buy Point by 3 to5 some Traders employ 5 to 7% stop losses you probably would have read about that in O'Neal's book as well sell part of your position as a stock advances hold your strongest stocks and sell your weakest stocks that there is also a line from reminiscences of a stock Operator by Jesse Livermore those two books how to make money in stocks reminiscences were Danzer's two favorite books trade only strong stocks from strong groups in essence focus on the leadership after long Market rallies stocks become vulnerable to a sell-off look for breakdowns and exit promptly it takes volume to move stocks volume is key to your stock success monitor the stock at the technical buy point plus action of the market before entering never go on margin until you have mastered the market now this slide here this is actually the breakdown of how did he do it how did he turn 10 grand into 46 million in 23 months these are down own words at the beginning of my big big run I would only own one stock at a time at 2 to one margin and swing trade that one stock up from 2 to 5 days and then move on to the next one as time goes on I increase my allocation owning two stocks at a time I stay at two stocks until I go over the $500,000 portfolio Benchmark I then Branch out to owning three stocks I pretty much stay with three stocks until I go over 4 million in cash value when I get to about 20 million I have seven to eight stocks at the peak of a run I own about 12 stocks at any given time certainly early on if you're a newer Trader you need to understand this certainly ear early on here this is Extreme concentration especially this is Extreme concentration without margin but especially when you factor in margin as well this is Extreme concentration and was one of the main reasons obviously Dan's technical ability and skill is fantastic but his risk management as well and the con conentration to have and kind of the control of emotions to be able to do that as well is absolutely staggering but make absolutely no bones about it this is extreme extreme extreme concentration I cannot stress that enough now I've got around about 15 charts or so and these are charts from the time period where Dan Dan made his big run and at the time of an interview where I got a lot of these quotes from really good interview if you search search YouTube you'll find it the interview is from 2005 so these are going to be charts that are during their kind of growth phase if you like so you're going to see charts of Google Apple Amazon eBay qualcom so on and so forth so I'm going to read out the quote because I really think the quotes will help you understand Dan's mindset his mentality his thought process how did he think about things so important to to understand then obviously we can talk about the chart patterns thereafter so I'm looking to be selective in my selection of stocks with earnings up 50 60 80% if not more stocks like Google have earnings up 140% I'm looking for basically Rel relatively new companies that dominate their space that are Global players Niche players that are changing the entire space of which they operate that sounds very similar to what you would read in William O'Neal's book how to make money in stocks which had a significant impact on Dan as you're going to learn a little bit later so if you look at Google hit you have a huge runup good action on the earnings holds up and then it builds this flag type pattern into the 10um you get this flag type pattern look how the volume dries up now if you want a little freebie if you search my name on trading View in the indicators Jack Willis RS line you will find my relative strength line just a little Point here if a stock is building out especially a flag type pattern like this and it's got 52 we Highs coming through on the relative shmp line the stock is screaming at you it is incredibly incredibly strong so common theme that you're going to see here not only were these stocks that basically met the can slim criteria but the relative strength was ridiculously strong let's go on to the next one this is eBay here from actually the IPO volume is everything no stock can make a move up without volume the greater the volume the better the potential move so look at eBay here and this is a theme that you're going to see on the ebays the apples the Amazon the Googles of the world around the earnings the vast majority of cases and a stock that I'm going to show you two stocks I'm going to show you later on when we go into the screening for stocks present day that look very interesting and tip many of the counseling boxes if not all the csing boxes is huge relative volume coming through on the earnings look at the volume coming through look at the volume coming through through and then you build a flag type pattern here quy kind of Daris box as well but a flag type pattern then you build this little cup and handle so Flags cup and handles triangles you could also think about vcps as well so low pivots mid pivots as well so see how you get this little cup and handle type pattern for these momentum stocks the 10 EMA and 21 EMA which is the black line is the 10 EMA the blue line is the 21 EMA and also the 50 SMA which is this purple line that you see here very very very important indeed so here you get a flag here you get a cup and handle with a little low handle coming through here note the tightness in price note how the volume dries up look at the 52 REI coming through then you get this vcp one contraction two contraction look at the tightness 1021 and 50 clustered like this look how the volume dries up 52 K soon after the breakout these repeatable characteristics you just want to just just hammer it into your mind just reps and sets reps and sets this is down on trading and you actually get a real kind of emphasis for his love of this as well boy I love it I wouldn't trade it in for the world every day is thrilling every day is new and it's exciting filled with lots of spills and chills but the rewards are absolutely phenomenal when you get it right it takes years and years of learning and hard work and 15 hour days a lot of UPS a lot of downs before you can before you get to put the whole package together but if you do the homework if you really study bright hard long hours you just stay focused and get rid of all the stupid indicators out there all this macd stuff volume accumulation and money flow I don't use any of it it's totally worthless it's price action it volume it chart patterns it's spectacular earnings and that's all there is debunk in a few Miss there isn't it this is a head and shoulders bottoming type pattern as well left shoulder head right shoulder perfectly holds to the 200 SMA Google has been my big winner and I've had an awful lot of money in Google remember Dan's kind of concentration this actually in 2007 an extraordinary amount of my money in Google here's a company that is underknown and under owned I love that phrase under owned and under under undern and under own try and say that quickly five times but yeah everyone uses Google for search so think about this from a canceling perspective if you read the William O'Neal book how to make money and stuff Google are revolutionizing how they collect money for revenues you think about Google ad Google Google revenues coming through no one's really doing it that that that's what you want someone who is the dominant leader earnings are explosive they're up 100% 120% and 140% to that quarter over quarter based on year over year revenues are up 90% 95% 110% as they the instit tions come in and start buying it it fuels stock prices so the stocks run up I've been in the stock on three big runs and the money I've made has just been garant you let's do another one this is Google again I allow a stock by its own action to put me into the trade and then once again by its own action to take me out of the trade that's very much a Jesse Livermore Point as well from reminiscences of a stock operator so this one here it didn't go on to make an absolutely huge move this 2004 but it builds this nice as quasi vcp volatility contraction P those of you have studied manini's work big move on the earnings look at the volume coming through 52 High one contraction two contraction look at the tightness coming through means you can create more asymmetric R versus water trades note where these stocks are then setting up in relation to key moving averages before they break out really really important so the Stock's acting well but then you can start to see this change of character Behavior the bearish candlesticks the widening of them the volume coming up on them as well I think the market is a lagging tool so if I'm going to wait for the market to take off and break a trend line or break through a resistance point or something my leading stocks have already gone so again the leadership stocks are leading and then the market will get up and follow that leader so I focus in on the leading stock first with the big earnings what Dan's saying is if you're waiting for the market to suddenly look all Rosy and look good a lot of leading stocks they would have already gone they'll be trending up they already would have broken out of their bases so dial it in focus on the leaders Amazon this is where the reporter ask that what would you attribute your tremendous success to follow the leaders in following the leaders in the market and having a lot of the money in the leaders that concentration point I'm looking for stocks that have great explosive earnings and explosive price movement on the explosive earnings so if you take a look here at Amazon look at the volume coming through on the earnings price is powering up and then it builds this quasy cup and handle type pattern B of vcp type action volatility Contracting certainly over here look how you go tight tight tight see how price is getting extremely tight on the 10A and look how the volume drives up there's no volume look at the 52 Amazon is screaming at you it's a leader then note what happens after the breakout look at the trends that play out what moving averages are the stocks respecting then a nice qu over here in terms of the screening once or twice a day I manually scan about 1,500 stocks there is a hard work element to this there is no kind of magic pill that's just going to put the perfect flag in front of you the perfect vcp the perfect cup and handle the perfect pennant perfect perfect triangle you have to do the work have to look at the leading stocks scan for them which I'm going to teach you later on Amazon again basically I'm focusing in on the leading stocks that make the big moves all the time typically if I find a stock that has powerful chart patterns and really explosive behavior underneath you'll find a stock that has really tremendous fundamentals here's a really nice flag that Amazon built this is split adjusted but runs up from about $120 what's that up there to $190 pulls back note the tightness so price pulls into the black line the 10 EMA really important for quick momentum stocks see how it pulls in and then it's tight tight tight and the volume just stair steps down this is where livermore's point the line of leash resistance is forming there isn't much selling pressure because price action is getting really really tight volume is coming down there's just not much Supply coming to the market then it breaks up look how the stock then rides the 10 EMA rides the 21 EMA think about that for some of your sell rules as well Amazon again if a stock remember this is in 1998 this is not Amazon in in 2023 this Amazon in 1998 drawing much more of its growth phase as well if a stock is breaken out of a pivot and or base area and has powerful earnings and it has a really big Global product apple is global Google is global sandis even though the name is not well known they're making products that go into these Global products these are powerful stocks and these are the criteria that I need to see and when they make their big move on volume then I'll go ahead and make my move I want to go with the institutions when they go so again D was looking for what are the in essence it's the O'Neal it's cancel them criteria what are the liquid leaders in the market what are the ones that the institutions have to get in and that have huge earnings coming through huge sales coming through they have the liquidity as well they have fantastic relative strength look at Amazon see just in the base here as it starts kind of going sideways and drifting see how you get these 52 we High coming through remember what I said earlier on eBay here you get the black line the blue line and the purple line 10 21 and 50 SMA see how they're clustering see how the volatility dries up you then get what I call a trigger bar really tight bar look how there's no volume on it and then see how the stock then powers out here this obviously split adjusted for amson it was not it was not um 36 Cents when it was breaking out here Amazon again cup and handle type P so here's the cup here's the handle look at the tightness look at the volume dry up so question today from the interviewer what would be your single biggest lesson in 2005 which was when this interview was taking place not to be in the market all the time and to trade far less than I do I really have found that the market may have two big moves during the year and that they may last 6 8 10 12 weeks and other than that they just exhaust themselves and the rest of the time the market is just consolidating the game so the big lesson for me this year being 2005 has been to trade less trade fewer stocks own just about four stocks that are real powerhouse stocks that tick those can slim criteria huge earnings huge sales Global products is D say when the market bottoms out and then the market will take off and run for maybe 10 12 13 14 weeks whatever it does and then just trade out and then go to golf down was an avid golfer he probably still is and go go and go to swimming and go go to cash just have fun and enjoy and wait for everything to set up again and do it again it takes about four four to five that should say months for everything to set up again this is also a um I really like this quote from Dan as well I never give up I never ever give up this was actually after Dan had a 75% draw down dur the 200 2 2002 2003 bare bare Market you had a stock that actually brought actually brought his account down I think was around about 32% in a single day but he had a draw down of 75% so the uh the interviewer was actually asking him what is it that separates you apart and before this quote here it actually says persistence I never give up I never ever give up and that kind of resilience and persistence I think is uh I think is extremely key and was obviously key obviously key to Dan's success as well so this one here question to that what are some of the things to give you a heads up the market may be bottoming or about to take off I say well leadership stocks will be sitting near New highs such as Google or Apple this was in October of 2005 while the market looks like it's cascading down this is the relative strength point so you got the market that's doing this but hang on a minute these leadership stocks are doing here and sitting new sitting new new new all-time highs maybe 52e highs as as well basing constructively RS line remember what I said about the 52 we highs so sitting there new highs with powerful earnings will come out build bases and then the stock explode meanwhile the market is still trying to grab its legs and the market will lag these leading stocks and that's why they're known as Leaders this is a vcp type pattern see this one contraction two contraction tight tight tight what do you notice black line Blue Line purple line 1021 50 SMA look how the volume dries up it's the same thing as uh as Jesse livmore said in reminiscences there's nothing new Under the Sun this one here is Apple there's a couple of chart patters for us to talk about what the clues the institutions are moving that's should say I see massive volume if a stock is trading four or five million shares a day and all of a sudden it starts trading 15 or 20 million shares a day and the stock is leaping $3 to4 dollar and the percent change in volume is really and the percent change in volume is really one of the big keys to find the big Winners and following institutions so institutions because of their size they can't hide it they it turns up in the volume the volume is the footprint of the institutions so in talking about institutions they're just not afraid to really piling hundreds of millions of dollarss on a trade to get into that stock and if they want it badly I want it badly and if they don't want it I don't want it it's as simple as that so Dan is following the institutions and again how are you how are you spotting the institutional footprint well it's chart patters it's relative strength it's doing your it's doing your research on what of the leading stocks in the market earning sales estimates all of that good stuff stocks near near near 52 week highs or alltime highs 52 we Highs coming through on the RS line and then constructed basing patterns as well so if you take a look at Apple here you actually get this little low pivot 10 21 and 50 just in here but then it builds out this larger cup and handle positive reaction to the earnings positive reaction to the earnings then it builds as mini flag Daris box and it builds a bigger flag type pattern here see where the stock is when it's setting up before it breaks out in relation to these key moving averages look at all the 52e highs on the RS line the stock is screaming at you remember relative strength it's not my opinion it's not Dan's opinion it's not your opinion it's the opinion of the market focus on the stocks displaying the best relative shrimp and tick in those canceling criteria here's Apple again if the 20-day average volume is 4 million and the stock is trading 4 million after 2 hours of trading in the day the stock by the end of they could be running 16 million shares a day so this is talking about the breakout that's the kind of percentage change that I'm looking for changes of 300 400 600% whatever it is it's got to be huge on a relative basis and the stock has to be breaking out so breaking out of a well- defined base and I'm looking for the market to be oversold as a general rule to start getting into these big moving stocks quom 1999 had excellent little vcp down here tightening up look at the 52 we highs on this stock Powers up see how just rides this 10 EMA in here builds his flag builds the high lows look how the volume dries up this stock then goes up around about 97% in the space of 3 weeks look at the 52 we Highs coming through but Dan says even if a stock has a super chart pattern I probably won't buy if earnings are up 25% and revenu is up 25% the stock really has no place to go so by these ques you can see the emphasis that Dan is putting on huge earnings huge sales Global product kind of liquid leader in the market true a true market leader type stock never lose focus on the market or the job of watching stocks this one here let's go on to the next one this is Charles swap sorry this should say Char swap here I own what the big institutions want to own and go when they go I'm always scanning to buy leading High beta stocks that means more volatile stocks relative to the S&P 500 coming out of well defined patterns so you can see here one contraction two contraction tight tight tight tight tight 10 EMA 21 EMA look at the 52 we cars then the stock builds this bigger base see how it's building the higher lows and then you get the extreme tightness over here look how the volume dries up 52 we highs in the base the look is telling you it's extremely strong what say it's about 100% move in the space of a month or so 5 weeks but look at the tightness look at the 52 we highs the leadership is obvious if you know where to look now Dan did say this is looking then at a short I really don't make a whole whole lot of money shorting stocks I found shorting stocks to be very tough remember a stock can go down 100% but it can go up 2 3 400% stocks like tasler went up 5,000% in 18 months so the real big money is made on the upside I actually think this is quite humbling and kind of links back to Warren Buffett's Point obviously Dan zanger and Warren Buffett extremely different in terms of being one being a momentum swing trade and one being a value investor but the circle of competence Point Buffett knows his circle of competence Dan Zango very humbly here he saying I know what my circle of competence is however I've had some very good shorts in my career and most notably last January they were talking in October 2005 at the point of this interview where eBay earnings were beginning to decelerate quite rapidly uh quite rapidly eBay had broken down from a high level Channel which is this up here so it broke down from this channel this kind of flat based Channel if you um if you like and then the stock created a bare flag pattern after that I noticed that the stock was being was beginning to sell down the day of earnings being reported after the close don't worry I'll explain it in a second so I began to short the stock the day earnings were going to be posted I ended up shorting 160,000 shares and the stop GED down after earnings because they missed earnings and projected weak earnings going forward so bringing the guidance down and stock gap down $20 so this is the flat channel here quy kind of Daris box as well but do you see how if you look at the chart here do you see how there's a change of character eBay is in the context of a very strong up Trend here but then earnings have begun to sell the market at this point here I think had been turning up for around about 3 or 4 months as well so it was all a little bit long in the too but do you see how you get I call these bearish synchronicity bars which is basically a widening of the price spread to the downside and volume picking up above the 30 bar average which is is black line so bearish synchronicity bars multiple there's one two three four in here the stock then go sideways build this bare flag you get one bearish synchronicity bar in here and then you see it starts taking out the low so this is what Dan's saying here so earnings are being reported after the close on this day but you see how the stock there's been this change character it's topping out here see how it starts sliding off here look at the weakness going in so you have to think in these two weeks leading up to it do you think some institutions had maybe a little clue of what of what potentially was going to happen and they were looking to exit their positions ahead of the earnings then you can see San then actually exited his position here I think he had a gain of 3.2 million um in the single day he then from what I can understand he covered his whole position on the uh on the gap down here for around about round about 20 points um on 160,000 sh so 3.2 million stop then continued to slide a little bit reclaim the 10 em and then turn around but he did he did short but as he said shorting very very tough he focused much more on the uh on the long side this section here I wanted to take you through there's a couple of quotes I think there's around about six quotes that I just want to read to really give you an understanding of Dan's mindset M mentality his kind of thinking as well and how much work he actually put actually put into this as well so the interview ask him do you have any favorite books my favorite book is how to make money in stocks by William O'Neal for me it's the stock Bible I've probably read the book front to cover maybe six seven times for the first five or six months of my trading and then I read selective chapters probably 30 times 30 times after that over the next 6 years he was studying this for six years as you'll see I think I did the quote earlier on he was studying chart patterns 30 hours a week for 6 years before it all started coming together there's a real time element to learn to learn this so 30 times after that over the next six years constantly hammering into my mind how to trade what to trade what your mistakes are you just can't do this this is going to be wrong and over and over and over and over again for 6 years it was constantly changing my mind my thought patterns what I'm looking for and after a while it was like the light really came on like Eureka light coming on moment I started making incredible amounts of money and then when the internet bubble hit that's when things really took off for me up until then it was a brutal brutal learning curve lots of ups and downs making money losing it making money losing it and finally putting it all together then the bubble hit and it was just the right Trader with the right mentality the right trading tools in the right Market environment other books that have to be read by people who want to learn how to trade chart patterns the Jesse Livermore book reminiscences of a stock operator is critical really teaching you how to identify when to get in and when to get out of stocks trading fast moving stocks in particular don't worry about expensive stocks they're probably the biggest money makers in the market percentage wise you really need to read these over and over and over and over again and you until you just know it inside and out so when you see the situation in real time you just know how to react so if you follow me for a while you know and speak about deliberate practice the Reps and set studying things in a very deliberate manner trying to improve your skill set in different areas of trading you can't imagine the amount of hours that I put in this is Dan studying for those six years weekends 6 8 12 hours on the weekends 3 to 4 hours after my regular job it takes a long long time to put the whole package together I've got one more page of quotes and I'm going to take you across the marketsmith where I can show you a screen that you can run so the Market's not here to give you money it's here to take your money so you have to learn to play with the pros the market is designed to shake you out of your cash once you get the routine down of how there in terms of the larger operators in the market the institutions they're trying to shake you out then you can be in front of them and that's what the game is really about being in front of the institutions what's your advice on buying cheap or expensive stocks I never made any money in the market until I quit buying cheap stocks and always focus on buying the most expensive stock in the market right now this was around about 2005 October right now I always focus on 60 80 or $100 stocks but I also look for 1503 $100 stocks boy when these things get up and run you can just pile your money into it remember you're going to buy fewer shares but you're looking at your perc so if Google makes a 50% run like it did from 200 to 300 that's a 50% run if the stocks turns around and starts to break down you may lose 3 or 4% on your money so remember the risk management here so your risk reward ratio is enormous on the expensive stocks so remember risk versus Ro maintaining the healthy the the healthy reward to risk ratios really really important cover that on some uh some recent videos isn't is is enormous on the expensive stocks and these are the real quality stocks and they make huge runs for long periods of time so this is the interviewer saying to D in the orange so you're saying don't make the mistake of buying a stock because it's inexpensive buy a stock because it's it's the one that's actually got the greatest potential for making a big move so you want to find the market leaders dominant in their space with quarter over quarter earnings increases in stocks that basically own the space which are leaders producing new products new Services New Management is that correct Dan replies that's correct and it's basically known as the can slim formula by William O'Neal it's absolutely brilliant I just have to hand it to O'Neal I focus on those can slim leader stocks and then I use my own trading style to enter and exit the trades so now we're going to go across to Market Smith and I'm going to show you a screen that I like running to find the type of stocks the liquid leaders the can slim leaders in the market the down looks to trade okay here we are on marketsmith remember if you want to do what I'm doing there is a discounted trial in the comments below so come over here click new screen and we're just going to call this screen the zanga screen so I want to go new stock screen and we're just going to call this the zanger screen for the purpose of this video so we've got this loaded up now a couple of things that we want to be doing I'm going to go to my favorites first we want the 50-day average volume we want it to be greater than 500,000 we are looking for the real liquid leaders in the market with the screen I like using the relative shm 3 month as opposed to the relative shm rating which is over the last 52 weeks I just find the 3 month is a much more efficient way to get the stocks moving so relative strength this is looking at the stocks versus all of the other stocks within Market Smith's database we're going to go for greater than 90 another thing that we are going to do is we would like the stock to be in a nice uptrend so we want the 50-day to be above the 150 day and the 150 day greater than the 200 day so we are going to click yes on that one and now we're going to go across here let's start putting in some earnings to this so percentage change last scure I'm going to click include stocks with negative comparisons we're going to look for stocks greater than 50% okay High bar so you can see we've already filtered it down from 9,652 stocks to 52 stocks but we're not done quite yet now what we're going to do is we are going to come down here we are going to go into the sales and I'm going to say here we go sales post percentage change last quarter I want that to be a minimum of 50% now we are down to 19 stocks that meet this requirement let's see what 19 stocks we have and you can see them down here and I'm going to pick off a couple of them to show you so the first one that I'm going to show you is going to be AET so let's take a look at AET so again what are you looking for you are looking for stocks that have huge earnings huge sales fantastic relative strength lots of liquidity and own their space so this one here AET look at the consistency of the earnings look at the consistency of the sales in terms of year-over-year growth quarter over quarter growth so the sequential growth is there and then look you have Fidelity in here they are adding to their position in recent quarters RS lines are fantastic the stock is just pulling back in to its 10- we line which is this red line that you see here and putting in this little Hammer type bar and it's come out of a very large Basin here and had a bit of ECP action one contraction two contraction three contraction looks very very strong indeed then let me just scroll down this list remember that we only have 19 stocks here from this screening criteria out of around about 9,600 this is the creme DEA creme and I'm going to show you let me show you at least one more maybe I'll show you two more I'll just I'll just show you one more for this one you you can go do you can go and do your own screening this one here is on so apparel shoe related company I actually have a pair of their shoes my wife has a pair of their shoes really like them really like the product take a look here look at the earnings coming through four quarters of triple digit earnings look at the sales accelerating as well look at the estimates for the next couple of years look how the guidance is up as well the stock has come out if you know about price Cycles this stock has come out a phase one base huge move up here look at the move up here look at the huge volume this stock has and now I'm looking for it to start building a flag but the likes of anet the likes of an on these are potentially understand the kind of point that I'm trying to say here these are the potential apples the Googles the Amazon the sandis I know the business models are completely different the qualcom so on and so forth of 20 years ago when Dan was having that huge run 20 years ago 25 years ago so this is how you find the leadership you're looking for extreme relative strength the strongest stocks in the market that are extremely liquid have the really high earnings have the really high sales preferably they have the estimates there they are Market leaders dominant in their space preferably they have new products exciting products and expanding industry as well so I will wrap the video up there guys I hope you have really enjoyed that you've learned a lot about Dan zanga and how he trades please do subscribe to the channel if you're new here press the like button if you've enjoyed the video and I will see you in a future video