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Fearlessness in Facts

Fearlessness in Facts
Stockscores Foundation for the week ending May 20, 2019

In this week's issue:

In this week's issue:

  • Stockscores’ Market Minutes Video – How to Trade the Crash Channel
  • Stockscores Trader Training – Fearlessness in Fact
  • Stock Features of the Week – Stockscores Simple Weekly


Stockscores Market Minutes – How to Trade the Crash Channel

As a stock market goes into a correction, there are predictable waves that can be traded. The key is overcoming emotion so that you can be a buyer when people are feeling fear and a seller when people are feeling greed.

That topic this week, plus my weekly market analysis, a search for trading opportunities and the trade of the week on $OTLK.

Click here to watch this week's Market Minutes

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Commentary of the Week – Fearlessness in Facts

Speaking from experience, I have found that most mistakes in trading are the result of succumbing to fear. When I say mistakes, I don't mean losses since losing money on trades is part of trading. Instead, I mean those bad trades that we all take which don't fit in to our trading strategy and plan.

The fear-based decisions that cause us to deviate from our trading rules can be broken down in to two types.

First, the trading decisions that we make because of our fear of losing money. These are usually exit trades; we sell too early for fear that our winner will turn in to a loser. Perhaps we fail to take a trade that fits our criteria because our "common sense" tells us there is something wrong with the trade and that it can't succeed. Maybe we enter a trade later than we should because we want to see the market prove our trading idea correct, only to end up getting in once much of the run has happened.

The second fear-based trading mistakes we make are those that are the result of our fear of missing out. These tend to be on the entry; we take trades that don't quite fit our rules because we focus on what might be, the profits that could happen. It may be that we listen to an "expert" in the media or follow the actions of the crowd and do what the headlines are telling us to do.

Have you ever succumbed to either of these fear-based trading mistakes?

If you are a normal human being, I think it is highly unlikely that you have not. Since they happen to all of us, we need to figure out a solution. Fortunately, the solution is quite simple.

Rather than focus on fear, focus on fact. Make trades based on what is happening, not what you think could happen.

Many have described fear as "future events appearing real". We don't walk down a dark alley at night because we might get mugged. We don't swim in the ocean because we might get attacked by a shark. We don't fly on a plane because it might crash.

When we focus on what might happen, what our fear tells us to do, we typically ignore probability. The probability of getting attacked by a shark is extremely low. Last year, you actually had a greater chance of dying taking a selfie photograph than by being attacked by a shark. If we focus on fact, we get better results.

This does not mean you should ignore fear. It is there to protect us and, when probability is on the side of the decision, it is best to listen to fear. I stopped flying small airplanes because the statistics showed that it was a dangerous thing to do. I still trade stocks because I have strategies that put the statistics in my favor.

When you trade, take your focus off of your emotion and look at the facts. Develop a trading strategy that puts probability for profit in your favor. Have a process in place to assess the facts and take the trades that meet your requirements. Overcome fear in favor of fact.

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The Stockscores Simple Weekly Market Scan searches for stocks making gains over the past 10 days with good Stockscores. I then inspect the 3-year weekly charts of the stocks that come up, here are three that look good this week:

AVXL broke its long term downward trend recently and is now moving up from a low volatility, rising bottom pattern. This is a good reversal pattern that should lead to higher prices in the months ahead.

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T.BLDP broke its downward trend line from a rising bottom last week, setting up for a reversal of weakness and a move up toward resistance at $7.50.

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IIIV is breaking out of an ascending triangle on the weekly chart today and does not have a resistance to work through.

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This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Foundation is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of this newsletter may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.

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