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The Stockscores Trading Clubs are open to anyone with an interest in the stock market. Each month, we meet to discuss trading methods, identify opportunities and other topics related to trading. Club membership is $60 for six months, but is free the first time you come.
In addition to our regular search for opportunities, we will look at the different ways to narrow possible opportunities to the very best, and the importnce of being selective.
To Register, and for location details, click on the links below:
Calgary - Wed Feb 11
Vancouver - Thu Feb 12
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Stockscores.com Perspectives
For the week ending February 6, 2004
In this week's issue:
What makes a good stock market trader? A person beginning their study of the stock market will put their focus on identifying opportunities, how to find the next winning trade. There are numerous stock trading programs that focus on knowing when to buy. Some of these software programs have simplified the entry decision with green lights, others produce buy signals with seemingly very sophisticated analysis. Most all of these magical systems for trading the stock market miss the point.
Contrary to the beliefs of the neophyte investor, trading the stock market is not about knowing what to buy, or when to buy it.
The decision to enter a trade is only one part of the formula for successful stock market trading, and its mastery will not ensure success. While we have all heard of the guy who bought some hot stock early in its up trend and held on till it was worth a fortune, the reality is that most of these stories have an epilogue. For most who lack the complete suite of trading skills, stock market profits are nothing but short term loans.
Long term success in the stock market also requires the ability to manage risk effectively. How much of a stock do you buy once you have identified it as an opportunity? More importantly, when do you decide that the market has proven you wrong and it is time to take a loss? For many traders, the quantity of stock purchased is dictated by the amount of capital at their disposal, and the exit point is driven by emotion and not analysis. Many traders turn in to long term investors because they would rather ride out a loser instead of take a loss.
Suppose that the trader has evolved in to a very good stock picker, and has a firm grasp on proper risk management techniques. Are they now ready to take the market bull by the horns? Unfortunately, they are only half way there, because the other half of the trade is something called selling. I find that this is where most aspiring traders truly lack skill.
The stock market is a probability game, which means that each of us can not expect to be right all of the time. Our success is dictated by how we do over a large number of trades, and should never be judged one trade at a time. We must accept the idea that our winners have to outweigh our losers, which makes the ability to know when to sell so important.
This is a double edged sword, for we must learn to minimize losses by selling stocks when the market proves us wrong, but also let profits run higher when we have made a good decision. It may feel good to sell a stock that makes you a thousand dollars in a very short time, but selling a thousand dollar winner is foolish if the stock is destined to gain another four thousand dollars. Limit downside, and let profits run.
The ability to identify good opportunities is important. Knowing how to manage risk effectively is essential. Proficiency at selling stocks at the right time is also mandatory for success. However, above all else, it is important to have the discipline to consistently apply good methods. Emotion is the enemy of every trader, and all good traders must learn to fend off emotion at its earliest appearance.
This is what turns the simple act of trading in to a difficult endeavor. When we put cash on the line, we get nervous because most of us have an emotional relationship with money.
Good traders are cool when watching a profit grow, and unshaken when the inevitable loss presents itself. They look at the big picture of trading, and judge their success on a weekly or monthly basis, rather than by their last trade. There is an art to trading the stock market, and that successful trader know how combine many different skills to paint a very pretty picture of profit.
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This week, I conducted a more conservative, top down approach to finding opportunities. Using the Sector Watch tool, I decided to see how the Canadian Trust Units were looking. Trusts have been very popular to Canadian investors, and have provided great returns over the past few years. The Sector Watch tool allows the user to see the Stockscores and charts for all Trust Units that trade in Canada. I sorted the list of Trust Units by Signal Stockscore, so that the highest scoring stocks were at the top. I then inspected the charts of the Trust Units that had Signal Stockscores of greater than 80. From that, I found one decent Trust to consider.Back To Top
1. T.SFK.UN
T.SFK.UN is breaking through resistance at $8 from a good chart pattern. The bottoms on the chart are rising, which is a sign of optimism, and is breaking from low volatility which improves the probability of success of a breakout. The next level of resistance is $9, but this Trust has good potential to go there and earn a 5% yield.
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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.
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