Trading Lesson of the Week

Check back weekly for another free trading lesson:

Beat Your Enemy

In This Week’s Issue:

  • Upcoming Events – Free Webinars in October
  • Stockscores Market Minutes Video – Tools for Trading Stocks
  • Stockscores Trader Training – Beat Your Enemy
  • Stockscores Feature Strategy – Stockscores Simple Weekly US

 

Upcoming Events – Free Webinars in October

  • Tue Oct 22 6:00pm PT – How to Be a Profitable Stock Investor
  • Thurs Oct 24 6pm PT – How to Be a Successful Day Trader
  • Sat Oct 26 9am PT – Overview of Stockscores Trader Training

Click here to register

 

Stockscores Market Minutes – Tools for Trading Stocks

The tools you use to identify and execute your trades can give you an edge. This week, I show the tools I use to find long and short term trades. Then, my weekly market analysis, a Market Scan and the trade of the week on DERM.

Click here to watch this week’s Market Minutes

To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel

 

Commentary of the Week – Beat Your Enemy

Emotion is the enemy of every trader.

Our emotional attachment to money is what causes us to lose our discipline, to take big losses, to not let our strong and profitable trades run higher. It causes us to own too many stocks in one sector or fall in love with a stock that will only hurt us. Letting emotion in to our trading decisions is a fast way to insomnia.

The perception is that the stock market is too risky, many investors don't like the potential for a sharp sell off that can destroy their portfolio in a very short time period. The collapse of the stock market in 2008 has given many a form of post-traumatic stress disorder, leaving them on the sidelines when it has not made sense to do so.

The stock market may be volatile at times but that is not what determines risk. Risk is how you respond to the volatility, how you manage the potential size of your losses. The stock market is not risky, the people that play it are. It is how you deal with price volatility that determines risk.

If you want to sleep well while invested in stocks, you need to have a plan for managing risk. The notion that you can buy some "good" companies and forget about them is outdated and reckless.

Here are my essentials to being invested in the stocks and sleeping well:

 

Plan to lose. When you buy a stock, know the price level where the stock market will have proven you wrong. Learn how to determine where a stock's support price is and if the stock closes below that level, realize that the market is telling you that something is probably wrong at the company. Get out.

Know your tolerance for risk. How much are you willing to lose on any one stock trade? If you risk more than this amount, you will get emotional. Take the difference between the entry price and the stop loss price and divide that in to your risk tolerance to determine how many shares to buy. If you are buying a stock at $10 with a stop loss point at $9 and you are willing to lose $500 on any one trade then you should buy 500 shares.

Don't obsess. You don't need to watch your stocks constantly, if you are position trading then only look at the once a day or even once a week. You only need to check to see if your stock has given an exit signal, obsessing over every gyration will make you emotional and lead you to make mistakes.

Have a written plan. You must write down your trading rules. When will you buy, when will you sell, how will you manage risk and how will you review your positions. Keep the plan simple but concise enough that there is no room for interpretation.

Stick to your plan. Your plan should be based on strategies that you have tested and believe in. Deviating from the plan means you are going in to areas that have not been tested and that puts you closer to being a gambler. Gambling traders may win in the short term but in the long term they lose.

 

Remember that trading stocks is as risky as you make it. Not having a plan with rules for limiting the size of your losses leaves you exposed to big losses if the market corrects sharply. With loss limits and discipline, you should never be the victim of a major market correction.

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Past Trading Lessons

October 20, 2019Beat Your EnemyPDFS | CFFN
October 7, 2019The Basics of Stock Chart Reading
September 30, 2019Trading and Behavioral Science
September 22, 2019Scan the Market For Hot StocksHL | MLNT
September 8, 2019Good Stocks Do Not Go Straight UpOGEN | GTE | EYEN
August 25, 2019What Are the Stockscores?V.SVI | T.PEGI
August 19, 2019Look for Reasons to Say No to the TradeVVUS | CMCM
August 11, 2019What You Can Do to be a Better TraderT.VLE
August 5, 2019Get the Money Out of Mind
July 28, 2019How to Invest in Stocks and Sleep Well
July 21, 2019Essential for Stock Trading SuccessDRRX
July 14, 2019What It Takes to be a Winning TraderT.PTG | AQB
July 8, 2019How Much Money Can You Make Trading
June 23, 2019Avoid Fear Based Trading DecisionsT.PTG | T.ELD
June 16, 2019Keep the Money Out of ItPIRS | KIM | RDUS
June 9, 2019Trading Tactics and StrategySNAP | COTY
June 3, 2019Test Your StrategySATS | RDUS
May 27, 2019Overcoming Emotion in TradingT.NFI | AVP
May 27, 2019Overcoming Emotion in TradingT.NFI | AVP
May 19, 2019Fearlessness in FactsAVXL | BLDP | IIIV
May 12, 2019Traders Must Seek the TruthVXX | UVXY
May 5, 2019No to FOMOOVID | T.BU
April 28, 201915 Core Trading PriniciplesT.REAL | ZYME
April 21, 201910 Ways to be a Better InvestorKEG | CRZO
April 14, 2019How Do You Make Day Trading a Career?PE | T.LUN
April 14, 2019How Do You Make Day Trading a Career?PE | T.LUN
April 7, 2019Gambler or Trader?T.WPRT | T.CJ | T.GTE
March 31, 20193 Ways to Beat the Stock MarketLLNW | ALKS | NM
March 24, 2019Avoid Reckless TradingT.AUG | T.YRI
March 17, 2019What You Need to Know to Trade Stocks for a LivingJAGX | SELB
March 10, 20197 Ways to Trade Without EmotionV.META | SNOA
March 3, 2019The Hazard of Chasing TrendsVXXB | QID | SDS
February 24, 2019The Most Important Indicator for My Stock Trading StrategiesT.CMMC | GNCA | VERI | LKSD | RCKT
February 18, 201910 Do Nots to Make More in TradingT.MAXR | NXTD
February 10, 2019Trading Company SizePTI | NGD
February 3, 20193 Ways to Increase Your Trading ProfitsT.ROOT | MLNT | ABEO
January 27, 2019Wait for Great TradesTRVN | WHLR | DTEA | JMEI | AWSM
January 20, 20193 Ways to Improve Trading ProfitsT.BIR | T.CPG
January 14, 20198 Important Trading RulesAPRN | CPST
December 16, 2018Fear or Analysis?SSRM | T.BLU
December 9, 2018There is Strength in Market WeaknessT.ABX | RWM
December 2, 2018Keep Your Standards UpT.AC | T.GIL
November 25, 2018Beat Fear, Beat the MarketTYME | BIOS
November 18, 2018When the Unexpected Happens, Trade!KOOL | SQQQ
November 4, 2018Recent Stockscores VideosMARA | CNCE
October 28, 2018The Early Years of Trading
October 21, 2018How To Read Stock Charts
October 14, 2018The Behavioral Science of TradingFLKS | GLBS
October 7, 2018Market Scanning for Hot StocksPEIX | BDSI
September 30, 2018Overcoming EmotionsAKER | ETP