www.zacks.com/counterstrike Zacks Investment Research, Inc. 10 S. Riverside Plaza, Suite 1600 Chicago, Illinois 60606
Contents Introduction 2 Section 1: The Mental Aspect 3 Section 2: Getting the Most Out of Zacks Counterstrike 4 Section 3: Follow the Leader 5 Section 4: How to Read Zacks Counterstrike Alerts 6 Section 5: How to Read Zacks Counterstrike Daily Summary 7 Section 6: Virtues of Money Management 8 Section 7: Tying it All Together 9 1
Introduction Thank you for joining Zacks Counterstrike! This service was created to take advantage of the inefficiencies that computers create in markets through the means of high-frequency trading. Let s face it, computer traders are better than human traders as they are systematic, disciplined and operate without emotion. However, these robot traders create tremendous opportunities with the imbalances they create on a day to day basis. Zacks Counterstrike was conceived by the match between Zacks and myself. Having been an electronic equity and futures trader for over ten years, I have seen how high frequency trading has slowly gained control of our markets. It is a different world than when I first started, but it is still a world where individual investors can make a great deal of money. The combination of my market structure knowledge and the Zacks Rank allows for investors to take advantage of irrational moves created in the marketplace. Counterstrike will target Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) for long positions. Examples of why these stocks might be sold off irrationally would be the earnings, stock specific news and times of market panic. The idea behind Counterstrike is to recognize when the computer-driven selling isn t warranted and take advantage of the price that the market is offering at the moment. Counterstrike will also target Zacks Rank #5 (Strong Sell) and Zacks Rank #4 (Sell) stocks for short positions. These stocks are struggling fundamentally and when they go irrationally higher, Counterstrike will look to go short. Recognizing short squeezes and shorting stocks when those squeezes are over will play an important role in our portfolio. High frequency trading can help exaggerate these dips and present opportunity once they are done. Times of panic and greed create opportunities in the markets in general. With my eyes on multiple global markets I will take into account market movements with each position I have. Whenever a market is moving, my eyes and my actions will be moving along with it. Think of this service and myself as a robot/human combination that guides you through these opportunities every step of the way. Welcome to the matrix side of the investing world. Welcome to Counterstrike. Jeremy Mullin Editor, Senior Stock Strategist Zacks Investment Research 2
Section 1: The Mental Aspect It is important to realize how much investment success is related to what goes on between your ears. There are so many ways to get distracted and question yourself while trading. You must be in the right frame of mind and have reasonable expectations to achieve success, with this or any investment service. Be sure to pay attention to the tips in this section carefully; they will get you headed in the right direction. NOBODY IS 100% PERFECT First of all, there will be losing picks, but if we cut them out early to minimize losses and maximize gains on winners, we can achieve phenomenal results. A little known fact is that the Zacks Rank, even with its 26% annual return, is only right 56% of the time. We are extremely confident that over time we will produce substantial returns, but it is important that you learn to take the losing picks in stride. COMPOUND YOUR RETURNS Zacks Counterstrike uses the Zacks Rank and a proprietary blend of indicators to determine exactly when to buy and sell. These attributes should produce exceptional gains over time. However, while there will be some big winners, we will also be looking for consistent smaller gains that will really add up over time. This is what we call the beauty of compounding and how it works to an investor s advantage. Albert Einstein is said to have called compound interest the eighth wonder of the world and this is a prime example. So don t get discouraged when you are only seeing small gains on each respective trade, because that is exactly what this product is designed to do. TIMELINESS INCREASES ROI So let me ask you a question. Would you rather make 10% or 20% on a trade? Yes it s a trick question. The missing piece of the puzzle is how long each trade was held. So now let s say that the 10% gain was made in 3 months-time, which computes to a 46% annual return. Whereas the 20% winner took 2 years to achieve and is really only good for a 10% annual gain. This example solidifies the power of timely stock trading that we will harness with this service. Most often we will be holding on for only a few weeks or months and stringing together a series of smaller winners. But from time-to-time we will let winners run longer or cut losers early when necessary. 3
Section 2: Getting the Most Out of Counterstrike It is our job to provide you with timely and profitable stock picks, but there are steps that you can take to ensure your success with Zacks Counterstrike. Here are a few things you can do to get the most out of the product. 1. Read this Guide carefully This guide is your friend. It has valuable information on how to use the product and succeed with the assistance of Zacks Counterstrike. It gives you step-by-step instructions on how to receive alerts and what to do when you receive them. It has important money management tips. 2. Have a working email address This is necessary to receive trading alerts. Make sure you can access your email in a timely fashion because acting on trades is essential to success. The Daily Summary email will be sent at around 8:00 p.m. EST, which summarizes the positions as well as what happened on Wall Street during that trading day. Intra-day trading alerts will typically be sent within the first hours of the trading day. Unfortunately, many Internet service providers have software programs that filter out emails you want to receive, like Zacks Counterstrike Daily Summaries. To get optimal delivery of our emails follow this link for quick and easy instructions. 3. Have an online trading account We are not advocating any particular company for this, but ideally lower commissions will help you achieve a higher overall return. You will make several trades a month, and high commissions can really eat into your profit margin, especially if you have limited capital. 4. Access the site To access the site, go to http://www.zacks.com/counterstrike and enter your username and password. This will take you to the main page where you can view the portfolio, any pending trades, and the commentary. 4
Section 3: Follow the Leader The process to receive our trades is very simple, yet we feel it is so important that we are going to spell it out for you. Here are the four steps: Receive the email with the daily summary or intra-day signal Read the email to determine appropriate action Place trades through your broker with the appropriate % allotted Follow the emails to determine when to sell ACT PROMPTLY = MOST SUCCESS And if you don t beat the market, you can take advantage of our 100% Money Back Guarantee. SPEAKING OF THE GUARANTEE. We feel that if we are not able to live up to our word and help you beat the market then we shouldn t be deemed worthy enough to take your money. So in addition to the 90-day, no hassle guarantee, there is a 100% Money Back Performance Guarantee. There are a few conditions that have to be met first, but the bottom line is that we have to perform. Click here for details. 5
Section 4: How to Read Zacks Counterstrike Alerts From time-to-time, this strategy will have a trading alert during the trading day. When a Buy Alert, Sell Alert, or Intraday Alert is sent out, you should receive the alert within the first hours of the trading day detailing what stock is being bought or sold and the rationale behind the move. It is important that you act as soon as you can. Here is an example: Subject line = The type of alert. The subject line of the email will say Buy, Sell, or Intraday Alert. Company Name = The name of the company that is being added to or sold from Zacks Counterstrike portfolio. Symbol = Ticker symbol of stock being added to or deleted from the portfolio. Mkt Val % = The percentage of your allotted portfolio to allocate to this position Date Added = The date on which the stock was added to the portfolio. Long/Short = Denotes whether the stock is to be purchased or sold short Zacks Counterstrike Portfolio Commentary = This section will fill you in on the why s and how s for individual trades. Intraday alerts typically use the average of the price at the time of the alert and the closing price that day. Recommendations that use stops or limits will use that price for performance figures. 6
Section 5: How to Read Zacks Counterstrike Daily Summary The Daily Summary provides a wide array of details for the portfolio each trading day. This summary may have new signals as well as the current open portfolio with daily commentary. The % allocation for each stock is also shown for trades. This is valuable information as it conveys what our game plan is, why we are in each stock, when to get out and why, as well as any relevant news. This is emailed to you around 8:00 p.m. EST. In regards to the price added for the portfolio, Zacks uses the average of the price at the open and the closing price on the day the stock is deleted. 7
Section 6: Virtues of Money Management Money management can be the difference between realizing large gains and going broke, even if the winning percentage is the same. How can this be? The key point is that winning investors know to ride their winners and cut their losses quickly, and stick with a plan that has proven to work in the past. Here are a few rules that you can follow to further improve your returns: First of all, don t dump your entire portfolio into these Zacks Counterstrike picks. Only allocate that portion of your capital that can be comfortably devoted to speculation. This portfolio will typically hold around 10 positions. You should be able to sleep soundly and act rationally if you are only trading with your speculative money. Keep in mind that reinvesting profits and the power of compounding are your friends in this portfolio. Those frequent singles add up to be a home-run in the end when the phenomenon of compound interest works its magic. EVER-PRESENT CLICHÉ RINGS TRUE Zacks Counterstrike will have many recommendations coming at you each month. It has been said millions of times before, but it is so important it needs to be said again: Don t put all your eggs in one basket. Even if you are the most brilliant investor in the world, there will be losing trades. The key is staying in the game and building your equity over time in a systematic way. This can only be done when diversification is put to use. Not that we have to remind you, but the main point is that your capital was earned through years and years of hard work. Capital conservation sounds boring, but without it, you are fighting a losing battle. We don t want to see the money you have put your blood, sweat, and tears into evaporate due to lack of discipline. 8
Section 7: Tying it All Together It is our goal at Zacks to enhance your trading results via Zacks Counterstrike. This booklet touches upon the details of the service and provides several useful tips to realize the vast potential that institutional investors hold. We feel it is our job to let you know that we are here to help you get the most out of Zacks Counterstrike. Again, let s go over some of the important points made in this booklet. Small Gains Add Up To Big Results Not Every Trade Will Be A Winner Timeliness Is Of The Essence Money Management Matters Greatly Have A Working Email Address We Are Here To Help The last point is important as we have free customer support that should be taken advantage of. Any additional questions that you may have can be answered by just picking up the phone and giving us a call or emailing us: 1.888.775.8348 (outside the US, 1.312.265.9309) counterstrike@zacks.com 9