How to Build Your Own Trading Model in 8 Steps

As we wind down Financial Literacy Month, I want to point out Joel Greenblatt's book The Little Book That Beats the Market. In the book, Greenblatt describes a trading model that he developed. While I have not tested his model and therefore can't recommend an investment strategy that's based on it, the book is worth reading because it outlines how he developed a profitable and consistent model for trading.

I have my Seton Hall students read Greenblatt's book in advance of a class I teach entitled Simple Guide to Building an Investment Model.

Models give us an objective manner in which to trade. They help take some of the guesswork and subjectivity out of deciding when to buy and when to sell. Just like chart formations provide technicians with trading models, a well-tested statistical model can provide a framework for successful trading as well.

Thus, as you develop your investing knowledge, here is an eight-step overview of my investment modeling class. ...