This Trick Will Improve Your Stock Market Trading Profits
Stockscores Foundation for the week ending August 13, 2023
In this week's issue:
In This Week’s Issue:
- Market Outlook – Are High Interest Rates Weighing on the Stock Market?
- This Week’s Market Minutes video – This Trick Will Improve Your Stock Market Trading Profits
- Trader Training – The Purity of Stock Trading
- Strategy of the Week – Canadian Stock Breakouts
Market Outlook – Are Rising Interest Rates Weighing on the Stock Market
Investors were starting to expect that the cycle of rising interest rates was going to come to an end soon and interest rates sensitive stocks would be able to catch up to the cash strong large cap tech stocks. However, recent drops in the bond market have caused rates to start to move up again, showing that the US Federal Reserve may not be done with rate raises yet. That has caused the stock market to show some weakness over the past two weeks. We have not yet seen a negative break of trend or support yet so this could simply be a pause that recharges buyer interest. However, September is normally the weakest month of the year for stocks before market strengthen late in the Fall. Therefore, focus on Alpha stocks and be cautious with higher priced stocks that will tend to be more correlated to the overall market.
This Week’s Market Minutes video – This Trick Will Improve Your Stock Market Trading Profits
You make more profitable trades with greater consistency using a simple technique that I show in this week's video. Plus my analysis of the stock, commodity, and currency markets and then the day trade of the week on GNS.
Click here to watch this week’s video
Trader Education – The Purity of Stock Trading
In many areas of life, we can get by and even succeed by fooling others. There are some who speak well, went to the best schools, or live at the loftiest address. Social media is littered with people who portray images of success, driving expensive cars, looking beautiful or vacationing at exotic locales. Their “followers” aspire to their success without much critical thought about whether that success is real. It is appearance that matters and it often fools people into believing the stories that they tell.
Politicians excel at this sort of misdirection. They often use words to arouse fear or greed or legitimize questionable policies and can quickly pivot when voter sentiment turns against them. New words can cover up prior deceit. Old mistakes can quickly be forgotten.
In stock trading, there is only one thing that matters.
There is nowhere to hide. Our success or failure is captured in every trade. There are no mulligans or ways to bend the truth. If we consistently profit in the market, we are good investors. If we are consistently wrong, we face emotional and financial punishment. It is the purest of occupations.
To be successful in trading, being right is all that matters. How well you know finance and economics does not matter. The information that you can share at parties may impress your friends, but they do not attest to your investing acumen. Whether you sound smart or stupid has no bearing on your performance.
Part of being right is being wrong some of the time and adjusting to make a correction. Falling in love with a company’s story can lead you down the wrong path, unwilling to waver from a bad decision and destined to take on a much larger loss. Being right means being humble and able to admit to being wrong. Never double down on being wrong.
There will be times when it will feel that you can do no wrong in the market. In a hot market, everyone is a genius, leading to a false sense of security that will surely bring harm when the trend reverses. Being right is not about your last trade, it can only be measured over a large number of trades over different market conditions.
Each trader must simply strive to be right. Not on each trade, but over many. And when the market proves you wrong, have the strength and emotional control to admit the error and accept loss.
Trading success requires a consistent record of being right, measured entirely by the appreciation of your trading account.
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This week, I ran a Market Scan for stocks that were up at least 3% on Friday with abnormal price volume and at least 100 trades, on the Canadian markets. I inspected the 22 charts that the scan revealed in search of those that were breaking out from predictive chart patterns. Here are two that I like.
V.EMO broke out from a cup and handle pattern with good volume support. It looks like it should at least come back up to resistance in the $0.80 to $1.00 price range for a double from here.
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T.TSAT made a strong price gain with abnormal volume on Friday, breaking it out of a sideways basing pattern. Good chance it starts to recover from the downtrend it went through in 2022.
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