Whether you are new to investing in the stock market or have been trading stocks for decades, if you want to make money in the long term you need a strategy.
There are thousands of stock investment strategies out there, and it can be extremely difficult to pick one. While it’s impossible to compare all of them at once, this article attempts to tackle 2 popular stock signal services out there. Mindful Trader and Formula Stocks.
What is Mindful Trader?
Mindful Trader is a stock market trade alert service that offers trade signals for stocks, options, and futures based on statistical research by Eric Ferguson.
There’s not much information available on what his “statistical research” is based on. Other than they are swing trades and it mentions that:
“One more over-arching fact we rely on: over time, the U.S. stock market goes up. It’s been doing it for more than 100 years. There are certainly periods where it has setbacks, but long term this thing goes up.”
And they also mention that they use MES futures:
“A lot of my trades are on MES futures (which is basically like trading the S&P 500 index but with leverage).”
So it sounds like this is a strategy that should perform well when the market goes up.
The trade alerts are released every day around market open hours and require daily trading of stocks, options, and futures to keep up with.
Aside from trade signals Mindful Trader also offers training and a daily watch list.
Mindful Trader was launched in November 2020 by Eric Ferguson.
Mindful Trader costs $47 per month.
What is Formula Stocks?
Formula Stocks is an artificial intelligence stock signal service based on the trading strategies of the best super investors like Benjamin Graham, Philip Fisher, Warren Buffett, Jesse Livermore, etc.
Formula Stocks’ strategy is simple. It attempts to find and invest in wonderful growing companies that are selling for less than they are worth. Companies with good growth prospects, a great business model available at a price well below its intrinsic value (a large margin of safety)
Formula Stocks is a long-term investment strategy using artificial intelligence and +100 algorithms to evaluate all businesses in the market and attempt to find the best-undervalued companies to invest in.
The portfolio is updated every month with new trade alerts to follow. Due to the long-term approach, it requires very little time to keep up with.
Aside from the Portfolio and Trade alerts, Formula Stocks also provide “weekly suggestions” for other potential investments, as well as AI Reports on +3,000 companies. The AI Report provides an easy-to-understand evaluation of a company and can be used to find investment opportunities, evaluate your current portfolio or know what investments to stay far away from.
Formula Stocks began the development of its strategies in 2002 and was in development for 8 years before going live in 2009.
The founder of Formula Stocks is Thomas Lyck an investor and programmer with +25 years of investing experience.
Formula Stocks has 3 pricing plans available starting at $49 a month for small portfolios.
They also offer an institutional plan for funds or large businesses.
How do they work?
Both services work in a similar fashion. they both provide Trade signals that the customer would follow in their own brokerage account.
You log in to either site to follow these signals. The main difference in how you follow the signals is that Trade Ideas is a daily trading service. That means you have to log in every weekday to use it. Whereas Formula Stocks can be used on a monthly basis only requiring you to rebalance your portfolio once a month.
What about their performance?
Okay, let’s get to the important part. If a strategy doesn’t beat the S&P500 it is after all probably not worth considering.
Since Mindful Trader is very new being just over 1 year old at the time of writing we have very limited results to work with. So everything below will come with a huge asterisk that there is very little data to base this on.
Mindful Trader does show their results for 3 accounts with different start dates. These are the results from inception until now, as of writing (12/16/21)
- +21.2% (From November 2020)
- 283 profitable signals
- 242 losing signals
- win ratio: 53.90% (average)
- -12.4% (from May 2021)
- 94 profitable signals
- 135 losing signals
- win ratio: 41.04% (bad)
Low-Priced Stocks and Options account:
- +1.2% (From October 2021)
- 28 profitable signals
- 26 losing signals
- win ratio: 51.85% (average)
The results are quite mixed. But again their “main account” has only been running for a little over a year, and the other two for just a few months. So it is too early to draw any conclusions.
But let’s compare this to the S&P500 for sake of completeness.
From November 2020 till now the S&P had a total return of: +42.28% So at least during these 13 months Mindful Trader underperformed the S&P500 quite a lot, and it is the same story for the other 2 accounts.
Mindful Trader does claim that their strategy would have made an average annual return of +143% per year in their backtests. This raises some questions when it underperformed the S&P500 by a lot during a very bullish period.
All that being said, Mindful Trader does not look like a scam. Unlike many other stock signal systems out there, they publish their results for everyone to see. whether they are positive or negative and they are very upfront about the high risk, potential losses, and the fallacies of the backtest they reference.
Since Formula Stocks has been in the game a lot longer and also shares their results and trades publicly we have some more solid numbers to compare with including periods that were both bearish and bullish.
Formula Stocks has 4 accounts to follow named (Entry, Premium, Business and Fund). However, to keep things Apples to Apples, let’s look at the cheapest plan which is only a $2 difference from Mindful Trader.
Formula Stocks Entry plan: ($49 / month)
- +1,065% Return since 2009. (+22.93% avg. annual return)
- 104 profitable signals
- 13 losing signals
- win ratio: 88.89% (very good)
Doing the same comparison to the S&P500 the index had a total return of +465.29% in the same period from 2009 till now.
That being said, no trading strategy is of course perfect and Formula Stocks had bad periods as well as can be seen on the chart above
It is also worth noting that Formula Stocks managed to beat the S&P500 with far fewer trading signals than Mindful Trader, this means you’ll be spending less time trading and paying less in trading fees.
Formula Stocks is the clear winner when it comes to performance and the number of trades. At just a $2 price difference there’s no question about pricing either.
Feature-wise Formula Stocks also offers more tools like AI Reports to find your own investment ideas.
One point for Mindful Trader though is the personal touch since it is run by a single investor and based on his statistical research Mindful Trader will provide more commentary about the stock picks. Whereas Formula Stocks is based on algorithms and AI to find undervalued growing companies to invest in there is not much commentary about “why” it’s a good stock pick.
Mindful trader: https://www.mindfultrader.com
Formula Stocks: https://formulastocks.com