9 Essentials for Trading Success
Stockscores Foundation for the week ending July 20, 2020
In this week's issue:
In This Week’s Issue:
- Stockscores Market Minutes Video – Day Trading for Beginners – When to Buy
- Stockscores Trader Training – 9 Essentials for Trading Success
- Stockscores Feature Strategy – Abnormal Breaks
Stockscores Market Minutes –
Every aspiring day trader needs to know the key reasons to buy a stock. In this video, I focus on a skill important for the beginner day trader; understanding the reasons for entering a day trade and how I find the stocks I trade each day. Then, my analysis of the overall market and whether another market crash is coming. The day trade of the week on RMBL and a Market Scan in search of opportunities.
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Commentary of the Week – 9 Essentials for Trading Success
Here is a list of things that I think are essential to becoming a successful stock trader:
Find Alpha. These are the stocks that are moving on their own story, with less correlation to the overall market. There will be a different list of Alpha stocks every day but they are characterized by abnormal price and volume activity. These attract the crowd, the crowd brings the emotion, emotion causes a break down in market efficiency and that creates opportunity.
Overcome Yourself. Humans are predisposed to fail in the stock market because we have an emotional attachment to money. That clouds our judgment and makes us do irrational things. Computers have been programmed to take advantage of those emotions. To be successful, you have to learn to overcome yourself.
Trade Positive Expected Value. Your trading strategy should be based on logic based rules that can be tested over a large sample size. That testing should show that the strategy makes money consistently through varied market conditions. Just as the odds favor the casino, your strategy should have odds that favor you. Otherwise, you are just the gambler on the wrong side of the table.
Define Your Process. A great strategy is useless if you don’t have the process in place to find and execute the trades before the opportunity is gone. It is not about buying or shorting the right stock. It is about buying or shorting the right stock at the right time. With a sound process, even the best strategy will fail.
Have Optimism. You are what you think. If you are negative then you will get negative results. With optimism, you can overcome the hard times and find your path to trading success. Optimism does not mean recklessness, for that is the way of the gambler who seeks fast riches without the hard work.
Work Hard. Once your trading strategy is defined and your emotions under control, trading is not that difficult. However, getting to that point takes hard work, discipline and perseverance. Many aspiring traders fail because they give up.
Focus. The market can change direction very quickly. If you are not focused, you can miss opportunities or quickly watch a good trade turn in to a bad one. When you are trading, trade.
Have a Plan. Without a well thought out and tested trading plan, you will succumb to your emotions when trading gets difficult. The plan should be concise enough for a computer to follow. Don’t leave room for judgment because your judgment will be clouded when you risk your capital.
Have an Edge. You are competing against millions of other traders. To win, you have to have an edge. That could be better information, a better strategy, better technology, better emotional control or anything else you can find that most people don’t have.
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Ran the Abnormal Breaks Market Scan on Monday and assessed the daily and weekly charts for breaks from low predictive chart patterns. Below are three of the names that I like:
OCGN breaking a downward trend line with abnormal price and volume activity.
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AMPE breaks through long standing resistance with abnormal price and volume action.
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AGE moving up through resistance from a rising bottom and with abnormal price and volume action.
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