Trading Lesson of the Week

• February 26, 2023

In This Week’s Issue:

• Market Outlook – Investors are Nervous About Inflation
• This Week’s Market Minutes video – IS SINGLE STOCK TRADING A GOOD STRATEGY?
• What’s Working Now – Low Priced, Hot Stocks for Quick Trades
• Trader Training – Analyzing and Trading Small Cap Stocks

Market Outlook – this past week saw some market weakness as recent strength in inflation has investors concerned that there could be more rises in interest rates than expected. While this has brought some short-term weakness, the process of reversing the downward trend from 2022 still seems to be underway. February is historically the second worst month of the year with market activity improving in March and going in to the late Spring.

This Week’s Market Minutes video – IS SINGLE STOCK TRADING A GOOD STRATEGY?

Should you focus on trading the same stock every day or trade the hot stocks that are in play? There are a number of things to consider and this week, I share with you what I have learned from my 30 years of trading experience. Plus, I provide my analysis of the markets and look at the trade of the week on AMAM.

Click here to watch the video on YouTube

https://youtu.be/uJ7a8UIOJaE

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What’s Working Now

Day trading is generating good trades daily, swing trading a few opportunities a week and position trading is showing very few opportunities. With the lack of upward trend on the daily and weekly charts, we must remain very picky for longer term trading opportunities but Alpha stocks come up every day and these can be exploited with short term trading strategies.

Trader Training – The Markets Require this Pure Action

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.

Being right.

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.