9 Ways to be a Better Trader
In This Week’s Issue:
- Stockscores Market Minutes Video – What Are the Best Stocks to Trade?
- Stockscores Trader Training – 9 Ways to Be a Better Trader
Stockscores Market Minutes – What Are the Best Stocks to Trade?
Traders often overlook a simple concept when approaching the market and miss trading the best stocks. This week, I discuss this simple rule that everyone should add to their trading approach. I also provide my analysis on the Canadian and US stock markets, crypto currencies, gold and oil. Day trade of the week on ANVS and a Market Scan in search of opportunities.
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Commentary of the Week – 9 Ways to Be a Better Trader
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.