5 Ways to be a Better Stock Trader
Stockscores Foundation for the week ending August 31, 2020
In this week's issue:
In This Week’s Issue:
- Would You Like to Help the Special Olympics?
- Stockscores Market Minutes Video – Stock Trading with Stop Losses
- Stockscores Trader Training – 5 Ways to be a Better Trader
- Stockscores Feature Strategy – Abnormal Breaks
Would You Like to Help the Special Olympics?
On Saturday Sept 5 I will be participating in the Hublot Diamond Rally to raise money for Special Olympics BC. If you are able, I would appreciate your support by making a donation through the link below. All of the money I raise will be donated to Special Olympics BC.
Click here to see how you can donate
Stockscores Market Minutes – How to Use Stop Losses When Trading Stocks
Stock traders have to limit the size of their trading losses but doing so with stop losses is often done wrong. This week, I show you where to set stops and size positions to do responsible risk management. Then, my regular weekly market analysis, the day trade of the week on EROS and a Market Scan for new investment opportunities.
Click here to watch this week's video
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Commentary of the Week – 5 Ways to be a Better Trader
Indicators, tools, processes, strategy rules, risk management techniques – these are all critical components of trading success. Yet, a person can have all these external things and still fail as a trader. Why? They are missing the parts that come from within that have a major effect on profitability. Here are five things you need to bring to the venture of trading if you want to be successful:
Trading is simple, but it is not easy. It takes hard work to learn. It takes a lot of time to develop rules, processes and tools. Once you get it figured out, it does not have to take a lot of your time to make the trades but if you don’t do the hard work, you will never be successful.
To highlight this fact, consider I was in and out of all my positions within one hour today. If I say, “I only worked for one hour today, made $5800, and then took my son to school” it sounds like a nice lifestyle. If I showed you the hundreds of hours (maybe even more than 1000) fine tuning and testing the rules I put in to being able to do that for one hour, you would realize how much hard work goes in to trading success. It is not easy.
Learning to trade is more about learning how to bounce back from failure. Humans are wired to lose in the stock market because we approach trading decisions with our emotions involved. This means that you will face failure until you can overcome being human. How many times can you get up after being kicked in the head by the market? Most don’t succeed because the market beats them until they give up.
Good traders approach the market with a method that is their own. Yes, they can be taught the approach by someone else but failing to understand every rule and why it exists will not work. Learning how to trade from me or any other qualified trading teacher can save you a lot of time and money, but it is important to approach trading with an independent mind. Rely on me to learn but rely on yourself when you are trading.
I recently read an excellent book called “The Happiness Advantage” by Shawn Anchor (watch his great Ted talk here). It highlights how optimism has a significant effect on success. While many of us think that once we get successful we will be happy, those who are happy first often find success much faster.
Complaining about the market, being pessimistic about the potential to make a living trading stocks, being angry after a bad day trading – all these things are destructive to trading success. Sit in front of your trading computer with a smile on your face and optimism in your heart.
Bill Gates and Warren Buffet were once asked what the most important determinant of success was. Both answered the question the same – Focus.
You can not succeed in trading if you are trying to do other things at the same time. It will take focus to learn how to trade and focus when you are trading. Our minds are not powerful enough to multi-task with something as complex as trading.
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Stockscores Feature Strategy - Abnormal Breaks
This week, I created a custom scan that looked for the following:
- Abnormal volume
- Volatility yesterday = low
- 15 day Resistance - Breakout
- Number of trades > 1000
This will find stocks that are hopefully coming alive with strong buyer interest after being ignored for some time. I then inspect the charts to see if there is that sort of price pattern. Here are two that I think have good potential for the weeks ahead.
KIN has been sleepy for some time but is getting buyer interest today. Some resistance between $5 and $5.50 that may slow it down short term but if it can get through that, could make a nice up trend.
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APTO has broken its downward trend line after making a triple bottom at $4.75. Decent potential to start a move back up toward $8 resistance.
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