10 Do Nots to Make More in Trading
Stockscores Foundation for the week ending February 19, 2019
In this week's issue:
In This Week’s Issue:
- Stockscores’ Market Minutes Video – Traders Need Focus
- Stockscores Trader Training – 10 Do Nots to Make More in Trading
- Stock Features of the Week – Morning Movers
Stockscores Market Minutes – Traders Need Focus
One of the important basics of trading, beyond just having the right trading strategy, is to have the focus to make the trades when they come. This week, I discuss why this is so, provide my weekly stock market analysis, scan the market for opportunities and discuss the trade of the week on SOLO.
Click here to watch this week's Market Minutes https://youtu.be/hGMUVRZUmfs
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Commentary of the Week – 10 Do Nots to Make More in Trading
Here are 10 things that may help you be a better investor, some ways to think differently from the crowd in that pursuit to achieve market dominance.
1. Do not think about making money, think about losing money - the first step toward success is accepting that losing is part of trading. You will not be right all of the time, you cannot always trade your way out of a bad situation. There will be times when you simply have to walk away with a loss. The key is to keeping the losses small and manageable. When the market proves you wrong, take the loss.
2. Do not think you can average down to win - it is a logical idea, add more to a losing position with the expectation that the market must eventually go your way. Many times this strategy will work but, when it does not work, the loss may be insurmountable. The market does not eventually have to go your way.
3. Do not think that your success is entitled - you may make a great trade, pick a really great stock and have a feeling like you really have the market figured out. Forget your gloating, no one ever has the market figured out. We must always remember that we have to work as smart for the next trade as we did for the last.
4. Do not think that talent is required - making money in any trading endeavor is a small part technical skill and a big part emotional management. Learn to limit losses, let winners run and be selective with what you trade. Emotional mastery is more important than stock picking skill.
5. Do not think that you can tell the market what to do - the market does not care about you, it does not know that you want to make a profit. You are the slave, the market is your master. Be obedient and do what the market tells you to do.
6. Do not think you are competing against other traders - trading success comes to those who overcome themselves, it is you and your persistent desire to break trading rules that is the ultimate adversary. What others are doing is of little consequence, only you can react to the market and achieve your success.
7. Do not think that Fear and Greed can ever be positive - in life, fear can keep us from harm, greed can give us the motivation to work hard. In the market, these two emotional forces will lead to losses. If your decisions are governed by either or both you will most certainly find that your money escapes you.
8. Do not think you will remember everything you learn - every trade provides a lesson, some valuable education on what to do and what not to do. However, it is likely that your lessons will contradict one another and lead you to forget many of them. Write down the knowledge that you accumulate, return to this trading journal so that you can retain some value from the lessons taught by the market. Remember, the market is cruel, it gives the test first and the lesson after.
9. Do not think that being right will lead to profits - you may be exactly right about what the fundamentals are and what they are worth. However, timing is everything, if your expectations for the future are ill timed, you may find yourself losing more than you can tolerate. Remember, the market can be wrong longer than you can be liquid.
10. Do not think you can overcome the laws of probability - traders tend to be gamblers when they face a loss and risk averse when the have a potential for gain. They would rather lock in a sure profit and gamble against a probable loss even if the expected value of doing so is irrational. Trading is a probability game, each decision should be made on the basis of the best expected value and not what feels best.
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I like to look at stocks behaving abnormally but if you do the search too early in the day, the daily volume may not stand out relative to previous days. The Morning Movers scan compensates for this and is a good way to find the stocks that are showing abnormal price and volume action if you run the scan early in the trading day. You still have to check the charts for good patterns, here are two that I found from today's scans.
T.MAXR showing signs of life after being in intensive care for a long time. Strong volume as it breaks out of its short term trading range.
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NXTD is breaking from a flag pattern after starting to move higher in January.
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