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Stockscores.com Perspectives
For the week ending March 12, 2004
In this week's issue:
Over the last few years, I have taught a lot of people how to trade the stock market. That process has taught me a lot about what makes a good trader, and helped me to improve my own stock trading skills. When I started trading 15 years ago, I thought successful stock market trading was all about picking the right stocks. While this is important, I have realized that there is a lot more to successful trading than just knowing what to buy. While successful trading is simple, it is not easy. Here are some things to think about if you aspire to consistently profit from the stock market.
First, you have to realize that trading stocks is an art, and not a science. You will not be right all the time, no matter how good your indicators are or how sharp your ability to read the market. Losing money trading is part of the business.
What separates good traders from bad is how good traders handle this reality. It is not a question of whether you will lose money on some trades, but instead, how much you do lose when you have a trade go against you. Risk management is very important, and a trader who does not plan their losses is destined to fail. When you buy a stock, pick the price where you will take a loss.
I don't believe intelligence has a great influence on the success of a trader. I have met people that are very smart, but unable to make money in the market. I have met others who would not be considered rocket surgeons, but are able to do very well with stocks. However, I think the idea of emotional intelligence is important to a trader's success. Daniel Goleman wrote a book called Emotional Intelligence, which defines it as "a type of social intelligence that involves the ability to monitor one's own and others' emotion, to discriminate among them, and to use the information to guide one's thinking and actions." The ability to manage emotions is an important consideration of emotional intelligence.
When I think of the people that I know who are good stock traders, they all seem to have one thing in common. They are cool.
I don't mean this in the Teen Beat sense of the term; how they dress or the friends they have are irrelevant. I mean they have a very calm personality, and are not easily excitable. In the face of adversity, they are composed and able to face the challenge. These people do not show strong emotional responses to problems or successes. While they may be boring at parties, they are sharp traders because they just don't care that much.
Therefore, I think it is important to be cool if you want to be a good trader. You have to teach yourself to not care about the money, which is a very hard thing to do. Train yourself to think of profit and loss like a scoreboard, instead of framing your trading finances in how much work it takes to make the money (which is what most of us do).
I think good traders are disciplined. They follow a methodology and stick to the rules. They don't search for new methods every time they suffer a loss. They take the time to test their rules so that they will have confidence in following them.
Finally, the most important criteria for success is that which governs success in all aspects of life. Determination is what sets winners apart from the crowd. If you want to make a million dollars trading the stock market, you just have to be determined to do so. With unwavering focus and the desire to succeed, profitable trading can be achieved. As Yoda once said, "Do or do not, there is no try."
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The markets switched from complacent to pessimistic this week, and we saw a lot of stocks finally fall lower after a strong 10 months. While I do not believe that the long term up trend is dead, I do think that there are opportunities to short sell stocks that are more likely to go lower than higher.
This week, I ran the Long Term Breakdowns Market Scan on Stockscores to identify these kind of opportunities. From the scan, one stock stood out and is this week's feaure stock.Back To Top
1. PTRY
Falling tops are a sign of pessimism, and this stock has a nu,ber of them that hve formed over the past few months. The stock broke through long term support on Thursday, and look like it is destined to cruise lower after a strong move to the upside over the past year. I think this stock is a good short, and will remain so unless resistance at $21.50 is violated.
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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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