Think Like a Better Investor
Stockscores.com Perspectives for the week ending February 16, 2016
In this week's issue:
In This Week's Issue:
- Stockscores' Market Minutes Video - Support and Resistance
- Stockscores Trader Training - Think Like a Better Investor
- Stock Features of the Week - Abnormal Breaks
Stockscores Market Minutes Video - Support and Resistance
Many traders consider support and resistance and breaks through them as part of their trading strategy. However, it is easy to make mistakes with how you trade around these ceilings and floors. That plus my regular weekly market analysis.
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Trader Training - Think Like a Better Investor
Here are 10 things that may help you be a better investor, some ways to think differently from the crowd in that pursuit to achieve market dominance.
1. Do not think about making money, think about losing money - the first step toward success is accepting that losing is part of trading. You will not be right all of the time, you cannot always trade your way out of a bad situation. There will be times when you simply have to walk away with a loss. The key is to keeping the losses small and manageable. When the market proves you wrong, take the loss.
2. Do not think you can average down to win - it is a logical idea, add more to a losing position with the expectation that the market must eventually go your way. Many times this strategy will work but, when it does not work, the loss may be insurmountable. The market does not eventually have to go your way.
3. Do not think that your success is entitled - you may make a great trade, pick a really great stock and have a feeling like you really have the market figured out. Forget your gloating, no one ever has the market figured out. We must always remember that we have to work as smart for the next trade as we did for the last.
4. Do not think that talent is required - making money in any trading endeavor is a small part technical skill and a big part emotional management. Learn to limit losses, let winners run and be selective with what you trade. Emotional mastery is more important than stock picking skill.
5. Do not think that you can tell the market what to do - the market does not care about you, it does not know that you want to make a profit. You are the slave, the market is your master. Be obedient and do what the market tells you to.
6. Do not think you are competing against other traders - trading success comes to those who overcome themselves, it is you and your persistent desire to break trading rules that is the ultimate adversary. What others are doing is of little consequence, only you can react to the market and achieve your success.
7. Do not think that Fear and Greed can ever be positive - in life, fear can keep us from harm, greed can give us the motivation to work hard. In the market, these two emotional forces will lead to losses. If your decisions are governed by either or both you will most certainly find that your money escapes you.
8. Do not think you will remember everything you learn - every trade provides a lesson, some valuable education on what to do and what not to do. However, it is likely that your lessons will contradict one another and lead you to forget many of them. Write down the knowledge that you accumulate, return to this trading journal so that you can retain some value from the lessons taught by the market. Remember, the market is cruel, it gives the test first and the lesson after.
9. Do not think that being right will lead to profits - you may be exactly right about what the fundamentals are and what they are worth. However, timing is everything, if your expectations for the future are ill timed, you may find yourself losing more than you can tolerate. Remember, the market can be wrong longer than you can be liquid.
10. Do not think you can overcome the laws of probability - traders tend to be gamblers when they face a loss and risk averse when the have a potential for gain. They would rather lock in a sure profit and gamble against a probable loss even if the expected value of doing so is irrational. Trading is a probability game, each decision should be made on the basis of the best expected value and not what feels best.
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Abnormal price gain is a sign that investors are excited about something going on at the company, excited enough to push the stock price up more than what the stock would do most days. Stocks often go in to upward trends after an abnormal price gain day.
The Abnormal Breaks scan will identify the stocks making statistically significant price gains. We then have to inspect the charts for good patterns since not all abnormal price gains will turn in to upward trends. Finding those that break from predictive price patterns is key.
This week, I ran this scan for both the Canadian and US markets and focused on the downward trend reversal pattern. Here are two names worth checking out:
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1. T.CNE
T.CNE made an abnormal price gain today with abnormal volume. It has broken a downward trend line after forming a rising bottom three days ago. Good potential for a long term turnaround as long as support at $2.25 is not broken.
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2. GES
GES has again found support at $17 and is now breaking to the upside with an abnormal price gain today. Volume was not outstanding but the pattern is good, breaking the downward trend line with support at $17.40 after a rising bottom three days ago.
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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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