Wishful Thinking
Stockscores.com Perspectives for the week ending March 23, 2007
|
| Upcoming Events |
Exclusive Online Class for Pro Members
This week, our Pro members will receive exclusive access to an online video looking at Making Swing Trading Decisions in the Last Hour.
|
|
In this week's issue:
Wishful thinking. It drives the lottery business and billion dollar casinos in Vegas were built on it. Wishful thinking is why we take out the driver to cut the corner over water instead of taking the long way round. It is why there are a lot of golf balls in the bottom of that lake.
Are your stock market buy and sell decisions guided by wishful thinking? You may not think so, but a common trap that investors fall in to is letting their hope affect their perceptions and ultimately their trading decisions. Sometimes we see what we want to see rather than what is really there.
When you own a stock you will tend to pull out the positive aspects of the company story to support your position. If you have just suffered a loss on a previous trade you might see things in the next trade that justifies an entry, your decision more motivated by the desire to make back your recent loss than anything else.
To be a disciplined investor requires you overcome selective perception when evaluating opportunities. You have to make decisions on what is there and not what you want to be there. You have to be honest with yourself. Your bank account will thank you for it.
How do you do it? First you need to know what you are looking for. Write down your rules for entry and your rules for exit. Be very detailed, capturing all aspects of your trading strategy.
Now, when you are evaluating a stock make a point of breaking down what you see. Write down what you see, somehow the process of writing it down will keep you honest. If you need to, draw lines on the stock chart to support your evaluation of the chart. If you see rising bottoms on the chart, draw a line showing them. Make sure you can't draw the opposite.
You now have two lists. One is your rules; the other is what your stock is showing. If the two match, you have to take action. If one of these things is not like the other then you have to pass. Don't tell yourself that it is ok to break the rules.
At this point you may be saying that all of this is silly and you are not one of the people who imagine things. I am here to tell you that you are wrong; so long as we are normal human beings we are capable of falling in to this trap.
The problem is, trading is emotional and emotion makes us hope. We hope to avoid losses. We hope to make profits. HOPE stands for How Ordinary People Lose Everything.
OK, that is HOPLE, but you get the idea.
When you write down what you see and break what you see down in to pieces you will find you see a lot more than you thought was there. It will inspire confidence and make you a better trader. Go grab a pen.
Back To Top
This week's strategy is the Sentiment Crossover, a pretty simple set up that looks for stocks that had a Sentiment Stockscore below 60 yesterday and today it is 60 or higher. Inspect the charts to make sure that the crossover is the first one in three months and that the chart pattern looks decent. I ran this scan on the TSX market and found a couple of Trust Units that I think are showing good potential and will pay you a yield to hold them.Back To Top
1. T.DHF.UN
Buyers are in control of T.DHF.UN for the first time in months as it forms a rising bottom and looks to want to fill in the gap. Historical yield at this price is 9.63%, support at $15.90.
Back To Top
2. T.KEY.UN
Good breakout from a rectangle consolidation on the T.KEY.UN with support at $16.60. Historical yield at this price is 8.51%.
Back To Top
References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
Back To Top
|
If you wish to unsubscribe from the Stockscores Perspectives Weekend Edition or change the format of email you are receiving please login to your Stockscores account. Copyright 2006 Market Perspectives Inc.
|
|
