Trading Lessons | Week of 10-10-16

trader education

Finding the correct stocks to trade takes time.

There isn’t one correct trading strategy for everyone. We all come to trading with different skills and resources.

Different trading education, different trading experience, different risk capital, different risk tolerance, different time available to trade.

If you’re smart, each of these resources must be considered before you make your first trade.

In my sixteen years trading, these are the top three methods that have worked the best:

  • Build a Universe: This trading strategy focuses on the same stocks day-after-day. You ignore stocks in the news and simply look for trading scenarios in this list. If you’re a new trader, or struggling, this strategy would be my recommendation.
  • Scan for Patterns: Our second strategy scans the entire market and focuses on pattern recognition. You scan for break outs, bull flags, and pennants. You look for long-term trends and a short-term spot to enter. This stock picking method offers much more opportunity but challenges your skills because the stocks are not familiar. In this scenario you are familiar with the patterns but not the stocks.
  • Industry or sector specific: Many hedge funds and mutual funds specialize. The trade “gold, oil or retail.” The major advantage here is deep knowledge of the securities you trade. The major disadvantage is a dead sector. When a sector or industry consolidates you struggle to find acceptable trades.

Each of these three trading strategies gives you a solid place to start. My advice is to choose only one and fully commit to the process.

You have a better chance of succeeding when you know exactly how to run your trading business. Jumping around creates overwhelm which leads to hesitating.

If you would like help, leave your question in the comments.

Mentor Minutes | How to Develop High Probability Scenarios…

Winning Trades have a structure. Top traders make money because they have a trading system.  Watch how professional traders use order flow, momentum and tape reading to identify the best trading opportunities.

The key take-away from the meeting; is understanding the reasons why a trade might be a good idea, but also why it may not be a good idea right now.


Learn this trading skill and everything changes.

Most traders struggle because of lazy criteria. They don’t “look to the left” with enough intensity.

You want obvious. The more obvious, the more conviction you should have. Force your trading ideas to be obvious, or don’t put them in your game plan.

Chart #1: Not obvious, BUT meets all criteria for a long.

$DD-10-12-16 $DD-10-12-16

Chart #2: Recent Momentum But no Order Flow (A trading range since the August gap)
$KSS-10-12-16

Chart #3: Order Flow, Momentum, Room to Go
$GILD-10-12-16


Today’s Trading Education

stock trading mentorA gut-wrenching problem lies ahead for many traders.

Exiting winners too soon kills your confidence. The stock market puts us to sleep and makes us jaded when volatility remains low.

We book quick profits because they vanish if we don’t. If we don’t ring the register, we end up back at zero. We give back profits on a good idea. $500 becomes $50.

Certain market conditions call for a cash flow mindset, others provide better opportunity. Opportunity to hold trades longer and allocate more leverage.

If you’re booking profits the last 3 months, not building positions and holding fewer over nights, good for you.

But be ready.

When the market breaks out (or breaks down) your habits drive decisions instead of your trading plan. Don’t let this happen.

Plan today. How will you recognize when the market offers more? How will you trade it differently.

New traders hate losses. Experienced traders hate earnings less than they should.

Don’t be a hater. Be prepared.


Accelerating your trading success happens in two places:

With a  trading mentor you respect, and your trading journal.

Committed traders keep track of progress and there is no better way to do this than a trading journal. On the surface a journal helps evaluate performance but applied properly it should go much deeper than the results.

Today’s video discusses how to journal during market hours, to watch the complete series, click here — >>

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