Odds are you do not know me, and, as such, it seems appropriate that I tell you a little about who I am and how it is that I have written this book. After all, I am going to ask you to make the 10 rules in this book an integral part of your life when it comes to investing in and profiting by investing in the stock market.

You should know that I do not come from the world of finance. In fact, when I started out in my professional career, I never dreamed that I would be where I am today. I'll get to that part in a bit.

You see, I started out in life as a civil engineer. My goal was to build massive structures that would be of great benefit to mankind. But a fledgling engineer just graduating from college is never put in charge of building great structures. In fact, most new civil engineering grads are lucky if they get to design handrails for second-story apartments—but, I digress.

This preface is not an autobiography. I would not insult your intelligence by any such self-aggrandizement. However, it is important for you to know how someone like myself, who never intended to have a career in finance, much less become a professional portfolio and hedge fund manager, has managed to come to the point where you would care to take the time to learn how to become a master stock investor by reading my thoughts and ideas and how I approach making money in the stock market.

The reason why this story should matter to you is that, in a lot of ways, I suspect that you and I are very much alike. You are probably not a finance professional. You probably have a day job or are retired from one. You do, however, have a very strong desire to take control of your own investments and make wise, profit-generating stock market decisions. You want to make significant returns through your stock investments and you don't want to take a lot of risk.

I am of the same mind....

I also want you to believe that you can make money in the stock market and become more competitive with your returns than a lot of the so-called investment or fund managers. Regardless of your background, you can, with the help of this book, learn how to generate consistent profits in the stock market.

Here is why I know this to be true. My story:

My early (very early) professional life was all about being an engineer. My first job was assistant city engineer for Edmond, Oklahoma. There, I met a wonderful man by the name of Augie Gale. Augie was many years my senior, and we rapidly became good friends. One day, over lunch, he handed me a book and said I should read it. He said it was the greatest book he had ever read on the stock market. He was enthusiastic and made it sound like it was almost impossible to lose money in the stock market if a person would just do what the author suggested.

Intrigued, I took the book home and read it through. It was a numerical analysis approach to knowing when to buy and when to sell stocks. It was one of the earliest books on technical analysis, but in 1973, that term wasn't nearly so common as it is today.

I was fascinated by the concept and especially the mathematical approach taken by the author. Being in my first job out of college, I didn't have any money to invest in the market, but I was sure—even then—that one day I would take the concept of statistically analyzing stocks to make buy/sell decisions. At least, that became a dream of mine. One reason why I was so intrigued by the algorithms in the book was that I knew it was going to take a computer program to do what the author was doing by hand. Software engineering was really my first love when I was in college and it was a significant component of my formal education.

I wanted my own copy of the book, so I tried to find a copy at the local bookstores. This was long before online bookstores or the Internet. No one carried the book, but I was able to find the address of the author and wrote to him to see if he would sell me a copy. He not only sold me a copy, but began sending me periodic updates to his book as he refined his algorithms and strategies. I corresponded with the author for several years.

Each time I got an update to the book in the mail, I immediately read it through to see what nuance had been added and pored over every new rule and/or rule modification.

I began writing pseudo code and flowcharts on the steps and processes. I would dream about how to get the data constructed and how I would need to have a mainframe computer just to process the rules and data and generate the charts. I know, this all sounds very geeky—and, it was. But that's what we engineers do. We like huge problems that require a methodical set of logical steps that build one upon another until a final solution can be generated. Building large, complex software designs is very akin to building large, complex structures. The big difference is that one set of structures is very physical and made of concrete and steel; the other is equally (if not more so) complex but is made up of bits and bytes.

I kept my designs and algorithms in notebooks that I would often dig out and review and rethink, but, in the meantime, I had to put food on the table. As most careers evolve, mine evolved along the lines of engineering and construction, at least for a few years.

I went on to become a materials engineer for a nuclear power plant, and then I founded and ran a commercial and residential construction company. In 1980, just about the time that some of the very first small computers came on the market, I was given the opportunity to start a software design and development company. I was finally able to get into my first real love: computer programming.

For the next 17 years, my software applications company developed enterprise-level software systems for the preclinical drug safety industry. By the time I sold the company in 1997, we had most of the major pharmaceutical companies in the world as clients and a majority of the world's medical research universities were using our software.

After selling the company in 1997, I had a fairly nice nest egg of cash. I wasn't sure what I wanted to do next, but I knew I needed to put that nest egg to work. So I did what I thought was the smart thing to do: I put my money with one of the biggest investment firms on Wall Street and assumed that I would see my nest egg grow at least 8 to 10 percent per year. Based on this firm's record, I was actually hoping to see a much higher return.

I can remember those first few quarterly reports. Each one would show that I had less money in my account than the previous quarter. I still recall the knot I would get in the pit of my stomach when I would open my quarterly report. I couldn't believe that I was reading the reports correctly. So I went in to see my account manager.

The ability of this firm to obfuscate performance (or, in this case, the lack of performance) was amazing. But, after digging through all the charts and tables and graphs that showed I was doing exceptionally well when comparing my performance to a bunch of indexes I had never heard of, I would leave thinking that I must be overreacting to the fact that my nest egg was getting smaller each quarter—a lot smaller.

The next quarter, I went in to speak with my account manager again. And again I listened to him tell me how wonderful my investments were doing and the great job he was doing by moving me from bonds to stocks and back to bonds and then back to mutual funds. I should feel very privileged to have my money with some of the greatest fund managers in the world. He would go on and on about how these fund managers were beating this or that index. I was fortunate to have such a talented and thoughtful account manager. He was doing a masterful job. During my visits, he would have several computer screens all buzzing with account information and stock and market information. He was very impressive. At the end of the discussion, I would leave thinking I just hadn't given my account manager enough time to really generate the returns he was capable of. He would tell me of the huge amount of money he had under advisement and would impress me with the names of some of his clients.

All the while, my nest egg was getting smaller and smaller.

Keep in mind that this was the 1997–1999 time frame. You could throw a dart at a wall of stocks and make money in those days.

Finally, it got to a point where I couldn't bear to even open the quarterly reports. It was during this time that I pulled out my design notes and my old, dog-eared, massively highlighted book on technical analysis. I decided that I would write some programs and see if I could get my system to pick some stocks and time the buy and the sell action.

I did, and I immediately began to see promise in the algorithms.

I went to a few investor conferences and began seriously considering taking over my own stock market investing. I don't mind telling you that I approached that decision with more than a fair amount of trepidation. After all, who did I think I was? How could I possibly compete with the investment giants of Wall Street?

But, after two long, agonizing years of seeing my nest egg almost cut in half, I finally decided that the worst I could do was probably better than a 45 percent loss. So I walked into that big, fancy investment firm and fired my account manager and moved the money into my own self-managed account at a discount brokerage firm.

If I was going to take responsibility for my family's financial future, I knew that I needed to know more than just what was in that technical analysis book that had followed me around for nearly 30 years.

I began doing a lot of research and a lot of reading. I researched many, many investment methodologies. I looked at every technical approach from Fibonacci analysis to Elliot Wave theory to neural networks. One conclusion that I arrived at was that if any of these technical methodologies always worked, everyone would use that method. But there was no consensus approach (and there still isn't) to the best technical analysis.^[1]

My research (and, thankfully, a bit of common sense) also led me down the path of fundamental analysis. The gurus of fundamental analysis almost universally discounted the value of technical analysis. These fundamental masters believe in an efficient market theory, and as such, put no stock whatsoever in a technical approach to timing the market or repeatable pricing trends.

I found it amazing that these two camps were at odds with each other, when it seems intuitively obvious (in an engineer's mind) that these two camps should embrace each other's input and methodology. It rapidly became clear to me that I needed a system that did both a fundamental and a technical analysis of stocks such that I would not only know what to buy (fundamental analysis), but would know when to buy and when to sell (technical analysis).

I then assumed that someone surely, by this time, had developed a sophisticated stock analysis tool that the average investor could use to manage his/her stock investments. So, I went to a number of investor conferences, did a lot of research on the Internet, and tried out several systems—all to no avail. None of them had the right combination of technical and fundamental analysis rules.

I knew I had to develop my own system using my own methodology. So, in 1999, I began the design and development effort.

A task that I thought might take a year or so actually took closer to three years. But, after several thousand man-hours of design and development and decades of back-testing, my software tool was ready to be put to use.

I remember some of my first trades as if it were yesterday. It is one thing to do fictitious trades; it is quite another to put real money (my nest egg, or what was left of it) into the market using a system that I believed in, but had never trusted my financial future to. It was an auspicious and stressful step off the edge of financial security.

But I rapidly began to see my nest egg grow. Even when the market began collapsing in 2000, I continued to make money. Not every trade was a winning trade, but way more trades were winners than losers. I began to see that I not only had a great methodology of combining both technical and fundamental analysis, but the software system I had designed and developed was more productive than I could have imagined.

Since my big Wall Street account manager had taken me from the realm of semiretirement to needing to build another company, I began to look at how to make this system available to other investors who were trapped into either having to let Wall Street manage their money or try to find multiple systems, tools, and methodologies to do what we had in one very powerful stock market investing system. That is when TurnerTrends, Inc. was launched in January 2002 with our first portfolio: The Market Trend portfolio.^[2]

From there, we launched three more portfolios and in 2007 opened our investor tools to individual investors to use. (The portfolios are: The ETF Total Return; the TurnerTrends; and the Covered Call. The ETF Total Return portfolio is an ETF-only portfolio. The TurnerTrends portfolio is the companion portfolio to this book. The Covered Call portfolio is a unique approach to using covered calls.

Then, in 2008, we launched Sabinal Capital Investments, LLC, a managed account service, and the Sabinal Capital Investments Market Bias Fund.

My point in sharing all of this with you is so you can understand that when I approached solving the problem of growing my nest egg through smart, safe investments in the stock market, I did not start out with any preconceived notions about the "right" or "wrong" way to "properly" buy and sell stocks. I approached this problem like any engineer would approach a problem. You must first identify the problem. In this case, the problem was "avoid losing money in the stock market and replace that with making consistent profits in the stock market."

Next, I identified all the inputs to the solution, which includes historical stock prices, stock fundamentals, diversification requirements, asset allocation requirements, risk mitigation requirements, and historical market trends.

I had a set of knowns (empirical data about equities and markets) and a set of unknowns (what to buy, when to buy and when to sell). Without boring you with more analogies, my job then was to take a set of equations and balance those equations, with the result being consistent profits in the stock market, while maintaining low levels of risk.

I approached this entire process from a nonbiased numerical methods perspective. I had no preconceived biases or belief structures. I was when I started—and I still am today—very agnostic when it comes to buying and selling equities. I really don't care about the companies except from a fundamental perspective. I don't really care about technical trends except from the timing of when to buy and when to sell. My methodology is very "quant" driven,^[3] and it is a methodology that you can learn to use very quickly.

I have done all the hard work. You don't have to spend thousands of man-hours and several years of your life to learn the principles and rules that I have for you in this book. You can read this in a weekend and start making a lot more money when the markets open this coming Monday.

Enjoy!