What Is TradeSmith’s “Cash Out Code” System About?

I recently stumbled across a TradeSmith presentation about “Cash Out Codes” and was curious to know what it was all about, so I decided to look into it.

In short, TradeSmith’s CEO, Keith Kaplan, says there are 3,318 stocks in the “Red Zone” right now, and “buy-and-hold investors” could see potentially devastating losses over the next 12 months. However, he claims there’s a way to “capture maximum potential profits” by getting out before a “catastrophic plunge,” and it all has to do with Cash Out Codes.

Until now, I’d never heard of such a “code,” and most of the presentation was shrouded in mystery, which made it difficult to know what Kaplan was (actually) talking about.

But he did share some clues about how the system works. So, long story short, I looked into his claims, and I’ll show you what I discovered in this post.

What Are Cash Out Codes?

According to Keith Kaplan, a Cash Out Code is a “four-digit number” separated by a decimal point that can pinpoint an “optimal exit date” for any stock, ETF, or mutual fund.

“This four-digit number is now known by some as a ‘Cash Out Code,’ because it is able to pinpoint an optimal exit date on any stock, ETF, or mutual fund.”

[…]

“Cash Out Codes look like this:

‘60.73’

Four digits, separated by a decimal point.”

Kaplan also said Cash Out Codes are “based on thousands of data points that shift every Saturday” and that they’re based on behavioral finance and historical price patterns.

“This 4-digit code is based on thousands of data points that shift every Saturday, based on behavioral finance and historical patterns in price action to pinpoint a stock’s next move.”

Kaplan didn’t elaborate much on what “data points” he was referring to in the presentation, other than saying, “Cash Out Codes track over 3,053 dynamic data points per stock.”

For the most part, he focused on how potentially beneficial Cash Out Codes can be for investors. For instance, he claims that backtesting data shows that “Cash Out Codes” could’ve helped investors add an average of $97,347 to their accounts.

“In fact, a series of rigorous backtests showed…

By exiting stocks when ‘Cash Out Codes’ trigger, investors could have added an average of $97,347 to their account.”

He also listed several other potential benefits. But when you boil it down, he basically claims that it can help you recognize the optimal entry and exit points in the market and suggests that it’s a better approach to buying and holding stocks long-term.

That said, Kaplan did provide two other clues about what Cash Codes are based on, which led me to gain a better understanding of what the system is about.

First, he said that what led to the discovery of the “hidden 4-digit code” was Nobel Prize research by behavioral economist Daniel Kahneman.

“The good news is… there’s a way to play offense on virtually every stock, ETF, and mutual fund you own.

A way to capture maximum potential profits by getting out before a catastrophic plunge. Because Nobel Prize research by behavioral economist Daniel Kahneman has led to the discovery of a hidden 4-digit code that’s tied to every publicly traded stock, ETF, and mutual fund. It’s something that has never been factored into trades before.

This four-digit number is now known by some as a ‘Cash Out Code,’ because it is able to pinpoint an optimal exit date on any stock, ETF, or mutual fund.”

According to apa.org, Kahneman is a psychologist who won a Nobel Prize for his groundbreaking work in applying psychological insights to economic theory. And the article states that his work focused on judgment and decision-making under uncertainty.

Long story short, Kahneman appears to have made great contributions to the field of behavioral economics, which involves analyzing how individuals make financial decisions.

However, he’s not the creator of the “Cash Out Code” Kaplan is pitching.

Instead, Kaplan is suggesting that Kahneman’s research “led to the discovery” of this “code,” but says that Cash Out Codes were created by TradeSmith. Here’s a snippet from the presentation to show you why I say this (emphasis mine):

“These four-digit codes can change every Saturday. To understand what these numbers mean for any particular stock… you would have previously needed to use math equations to translate this insight.

The good news is you won’t have to do that.

That’s because TradeSmith, the WealthTech company that created Cash Out Codes automatically does all that for you on each of your stocks, ETFs, and mutual funds.”

As for the second (and final) clue about Cash Out Codes, Kaplan said that the foundation of the system is The Volatility Quotient (emphasis mine):

“The formula that translates a stock’s real-time, dynamic movement into a predictive, easy to read Cash Out Code. You’ll learn its technical name too: The Volatility Quotient (or VQ for short). The VQ is the foundation of our system. As the #1 measure of volatility, it’s more important than ever to know in this turbulent market.”

That’s another thing I’d never heard of until now, but this page on finnotes.org suggests that the creator of The Volatility Quotient (VQ for short) was Richard Smith, the founder and former CEO of TradeSmith. And the page above states that the VQ tells you the “risk measurement of a security” and indicates how volatile a stock is.

How does it work?

I’m not an expert on VQ since I literally only just found out about it (lol), but it basically appears to be a measure of a stock’s volatility.

According to the above page, “the VQ% is measured by calculating the standard deviation of the annualized returns over a given period of time.”

From what I can gather, the lower the VQ, the more stable the movement has been in a given stock, and the higher the VQ number, the more volatile it has been historically.

So, long story short, the VQ is (as Kaplan puts it) the “foundation” of the system, and it’s essentially a measure of volatility.

Out of curiosity, I looked further into VQ to see what I could find and stumbled across a TradeSmith report about knowing when to sell stocks, written by Dr. Richard Smith.

And it goes into a lot more detail on how VQ works. So if you’re looking for more info on how “Cash Out Codes” work, those two pages I just shared may be worth a look.

Based on the above report, it seems as though the purpose of VQ is largely about helping investors manage risk by predicting when it’s the ideal time to exit a trade. And that more or less lines up with what Kaplan said about “Cash Out Codes” in the presentation.

As for the “four-digit code” aspect, the examples shown in the above report show that VQ is a percentage. So, since Kaplan said that VQ is the foundation of the Cash Out Code system, my guess is that Cash Out Codes are just VQ percentages expressed without the % symbol. So instead of 23.49%, a “Cash Out Code” might be 23.49, for example.

That’s ultimately just a guess, though, so there could be more to it than that. Either way, the best way to see how it works would be to join TradeSmith’s TradeStops Plus service because that’s the only way to access these so-called “Cash Out Codes.”

What Is TradeStops Plus?

TradeStops Plus is TradeSmith’s flagship service that, according to the website, provides subscribers with the “Cash Out Codes” of stocks, ETFs, and mutual funds in real time.

The site says it also gives you access to “24/7 Red Zone and Green Zone readouts of your portfolio positions.” In short, the site says that after a Cash Out Code triggers, it enters the so-called “red zone” and enters the “green zone” when the Cash Out Code is lifted.

Aside from that, the service comes with several bonuses.

One is a DIY guide called the “The 10-Minute ‘Cash Out Code X-Ray.'”

Another is a list of “ticker symbols of common funds and ETFs found in 401k plans” that have supposedly “already triggered their Cash Out Codes.”

Third, according to Kaplan, the system interprets the Cash Out Codes of over 150,000 stocks, funds, and ETFs. And he says it has “pinpointed 10 strong stocks” whose Cash Out Codes have “recently been lifted.”

And fourth, subscribers get access to “Cash Out Code Bootcamp,” a video that shows you how to use Cash Out Codes to “know the day to sell your stocks.”

There are some other aspects to the service, but that’s the gist of it.

And according to the presentation, TradeStops Plus costs $79 if you sign up through the presentation instead of the $588 retail price, and it renews automatically at $99.

Bottom Line

According to TradeSmith’s CEO, Keith Kaplan, “Cash Out Codes” can help investors “pinpoint an optimal exit date on any stock, ETF, or mutual fund.” And the gist of the presentation is that this could be a better approach than buying and holding long-term.

To get access to these “Cash Out Codes,” however, you have to join TradeStops Plus for $79. And while the service itself may be worthwhile, there’s no guarantee it’ll help you make money or identify the best times to enter or exit a trade.

Regardless of how good any tool, algorithm, or “code” is, there’s always risk involved with investing. And “Cash Out Codes” don’t change that. So it’s unlikely that this system, or any system, will help you time the market perfectly.

Nevertheless, hopefully what I’ve shared has helped demystify the “Cash Out Codes” pitch. And if you’d like to share your take on any of this, chime in below.

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