Trading Lesson of the Week

• November 3, 2024
• LX | HASI

In This Week’s Issue:

• Market Outlook – The Waiting Game
• This Week’s Market Minutes video – This is Why MOST Stock Traders Fail
• Trader Training – Keep It Simple Stock Market Tactics
• Strategy – Stockscores Simple

Market Outlook – The Waiting Game

Markets are quiet heading into the US Presidential election but with the votes tallied Tuesday, we should see a pick up in volume and volatility. Last week saw a short breakdown in the SPY which could telegraph some selling pressure for the week ahead. I prefer to not hold much going into events like this and wait to see how the market reacts to the election results.

Bond prices have fallen but are nearing support where we should see them bounce back. If we get a break of the short term downward trend is broken, we should see a resumption of the lower interest rate trade which benefits the broader market. However, we need to see the break of the pullback first.

This Week’s Market Minutes Video – This is Why MOST Stock Traders Fail

Most stock traders and investors fail to beat the stock market. It is not because there is something wrong with them, it is because they are normal. Normal people are predisposed to fail in the stock market. This week, I explain why this is and how to overcome. Then, my analysis of the stock, commodity, currency and bond markets and the trade of the week.

Click Here to Watch on YouTube

https://youtu.be/_wIr3BEmXOg

Commentary – Keep It Simple Stock Market Tactics

Over 30 years of trading, thousands and thousands of trades and many 10s of thousands of hours looking at stock charts. You might think that this has led me to extremely sophisticated or complex analysis, difficult for most people to understand. Instead, it is quite the opposite. I find that the simple things continue to work the best, here is a breakdown of the Basics.

Focus on Abnormal Activity – to beat the market, you have to trade Alpha stocks. Alpha stocks are those that come alive with abnormal price and volume activity and strong liquidity. Find the stocks that are just starting to attract a crowd but before everyone knows about the stock.

Practice Good Risk Management – losing is part of successful trading. Good traders don’t take big losses. This means sizing your positions to reflect the risk and planning to lose at the price point where the market will have proven you wrong.

Be Patient with Winners – since we are all going to take some losses, we must also ensure that our winners pay for our losers. Don’t sell a winning trade because it feels good or because of a fear that the winner is going to turn into a loser. Practice good exit strategy and hold on to the winners as long as they are trending higher. Exit when the trend is broken and an exit signal is triggered. Remember that up trends start slowly and end quickly so be patient with a stock when it is just starting to gather momentum.

Don’t Listen to What People Say – I never read news, listen to stock tips, trust the advice of others. The only thing that matters to me is what people are DOING with their money, not what they are saying. If the stock is going down, there is something wrong, no matter how good the story sounds. Buy stocks that the market is optimistic about, not those that are in the control of the sellers.

Avoid FOMO – the Fear of Missing Out is one of the biggest reasons aspiring traders fail. We must not chase strength, even when our emotions are telling us to buy because the stock is going up so quickly. Buy breaks from low volatility or breaks of pullbacks in longer term upward trends. Don’t chase parabolic trends.