Trading Lesson of the Week

• January 5, 2025
• TVGN | MSS | ABAT

In This Week’s Issue:

• Market Outlook – Long Term Optimism, Short Term Action
• This Week’s Market Minutes video – Why Stocks Make Massive Gains (and how to find them)
• Trader Training – Trading is Simple (But Not Easy)
• Strategy – Stocks in Play

Market Outlook – Home Traders Pushing Stocks

Stocks have been weak since mid December when the US Fed made comments that indicated there would be fewer interest rate cuts than the market hoped for. While the overall market has been quiet, and somewhat weak, there are two important things to recognize.

First, the long term upward trend is intact, meaning the buyers are still in control of the market. It is normal to have short term pullbacks in the long term upward trend. Until the upward trend line is broken, we should remain optimistic about stocks.

Second, there is very good strength in the very small cap stocks that are traded by retail traders. For the short term trader, these stocks are the place to focus as they have been making significant gains in a short period of time. However, it is important to recognise that these stocks are very volatile and therefore very risky. Risk management is essential as these bubbles can burst very quickly.

This Week’s Market Minutes Video – Why Stocks Make Massive Gains (and how to find them)

There are stocks making massive gains every day and they all have similar characteristics that you can use to find the next big winner. This week, I discuss why some stocks make big price gains in a short time and show some tools to find them. Then, I provide my analysis of the stock, commodity, currency and bond markets and, finally, the trade of the week on CRNC.

Click here to watch this week's video on YouTube

https://youtu.be/aUM-x1G8JmY

Commentary – Trading is Simple (But Not Easy)

Indicators, tools, processes, strategy rules, risk management techniques – these are all critical components of trading success. Yet, a person can have all these external things and still fail as a trader. Why? They are missing the parts that come from within that have a major effect on profitability. Here are five things you need to bring to the venture of trading if you want to be successful:

Hard Work

Trading is simple, but it is not easy. It takes hard work to learn. It takes a lot of time to develop rules, processes and tools. Once you get it figured out, it does not have to take a lot of your time to make the trades but if you don’t do the hard work, you will never be successful.

To highlight this fact, consider I was in and out of all my positions within one hour today. If I say, “I only worked for one hour today, made $5800, and then took my son to school” it sounds like a nice lifestyle. If I showed you the hundreds of hours (maybe even more than 1000) fine tuning and testing the rules I put in to being able to do that for one hour, you would realize how much hard work goes in to trading success. It is not easy.

Determination

Learning to trade is more about learning how to bounce back from failure. Humans are wired to lose in the stock market because we approach trading decisions with our emotions involved. This means that you will face failure until you can overcome being human. How many times can you get up after being kicked in the head by the market? Most don’t succeed because the market beats them until they give up.

Independent

Good traders approach the market with a method that is their own. Yes, they can be taught the approach by someone else but failing to understand every rule and why it exists will not work. Learning how to trade from me or any other qualified trading teacher can save you a lot of time and money, but it is important to approach trading with an independent mind. Rely on me to learn but rely on yourself when you are trading.

Optimistic

I recently read an excellent book called “The Happiness Advantage” by Shawn Anchor (watch his great Ted talk here). It highlights how optimism has a significant effect on success. While many of us think that once we get successful, we will be happy, those who are happy first often find success much faster.

Complaining about the market, being pessimistic about the potential to make a living trading stocks, being angry after a bad day trading – all these things are destructive to trading success. Sit in front of your trading computer with a smile on your face and optimism in your heart.

Focused

Bill Gates and Warren Buffet were once asked what the most important determinant of success was. Both answered the question the same – Focus.

You can not succeed in trading if you are trying to do other things at the same time. It will take focus to learn how to trade and focus when you are trading. Our minds are not powerful enough to multi-task with something as complex as trading.