Trading Lesson of the Week

• July 5, 2026
• TBLA | TBI

In This Week’s Issue:

• Market Outlook – Small Caps Winning
• This Week’s Market Minutes video – My Complete Routine for Finding Hot Stocks
• Trader Training – Trade Like a Pumpkin Farmer
• Strategy – Stockscores Simple Strategy

Market Outlook – Small Caps Winning

June brought some profit taking in large cap technology stocks and July is starting with some stability as many of these stocks have pulled back to support. The bounce back keeps the upward trend intact, although the small caps do look more promising than the large.

Gold and Oil do not look promising. After being market leaders in the last year, money is generally coming out of these commodities while the US Dollar climbs.

Short trading activity is pretty good, the change of the US pattern day trading rule has brought in a lot more traders so liquidity is up and strong short term price moves are happening every day.

This Week’s Market Minutes Video – My Complete Routine for Finding Hot Stocks

My approach to trading stocks, whether for day, swing or position trading, is to start with abnormal price and volume activity and look for surprise breaks from low volatility. In this video, I show the tools that I have created to identify trades early in the upward trend. I also provide my analysis of the overall stock, commodity, currency and bond markets. Finally, the trade of the week on CLRO.

CLICK HERE TO WATCH ON YOUTUBE

Commentary – Trade Like a Pumpkin Farmer

Does a pumpkin farmer worry that every seed planted must grow into a pumpkin?

Of course not.

And does the farmer expect every pumpkin to grow to exactly the same size? No. Some seeds will never sprout. Some plants will produce small pumpkins. A few will grow into massive ones.

The farmer’s success is not determined by one seed. It is determined by the combined result of all the seeds planted.

That is exactly how traders need to think.

Too many traders judge their ability, their strategy, and even their future based on the outcome of a single trade. They become obsessed with making every trade work. They hold losers too long because they do not want to admit they are wrong. They take profits too quickly because they are afraid a winner might turn into a loser.

In doing so, they destroy the very math that could make their strategy profitable.

A good trading strategy is not one that wins every time. It is one that has a positive expected value over a large number of trades.

That means the average amount made on winning trades, combined with the probability of those wins, is greater than the average amount lost on losing trades.

Consider a strategy that loses $100 on nine out of every ten trades but makes $2,000 on the one winner. It has only a 10% win rate, which sounds terrible to most traders. Yet over ten trades, the result is still positive:

Nine losses of $100 = -$900
One winner of $2,000 = +$2,000
Net result = +$1,100

That is a profitable strategy.

The problem is that most traders would never survive emotionally long enough to experience the big winner. After a few losses, they begin to question the strategy. They hesitate on the next valid entry. They reduce their size. They skip the trade entirely. Or worse, they abandon their rules and start trying to “fix” a trade that is not working.

This is where traders get into trouble.

You cannot know with certainty at the moment of entry which trade will become the big winner. The stock that looks ordinary may turn into the one that doubles. The setup that looks perfect may fail within minutes.

Your job is not to predict the outcome of every seed you plant.

Your job is to recognize valid setups, take the trades that meet your rules, limit your losses when the market proves you wrong, and give your winners enough room to make a meaningful difference.

That requires a mindset built around sample size.

Do not judge your strategy based on your last trade. Do not judge it based on your last three trades. A strategy should be evaluated over a meaningful number of properly executed trades—perhaps 30, 50, or 100 trades, depending on the strategy and timeframe.

The question is not, “Did my last trade make money?”

The better question is, “Did I follow my plan, and does my strategy produce a positive result over a large sample of trades?”

When traders think one trade at a time, they become emotional. They fear losses, chase certainty, and interfere with their own edge.

When traders think like pumpkin farmers, they understand that losses are part of the process. They accept that not every trade will work. They also understand that the occasional large winner can pay for many small losses—and create the overall profitability they are working toward.

A winning trader does not need every trade to be a winner.

They need a proven strategy, disciplined risk management, and the patience to let the results of many trades tell the real story.