The Money Needs to Be Irrelevant
Stockscores.com Perspectives for the week ending May 2, 2016
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Saturday Webinar - Hey Its Free!
Saturday May 7
11:00am PT, 2:00 pm ET
Understand Tyler Bollhorn's six elements of chart patterns and you can quickly assess the health of any stock or market. Whether you are managing your retirement portfolio with longer term trades or actively trading the market, these elements will help you improve your market performance.
Click Here to Register
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In this week's issue:
In This Week's Issue:
- Upcoming Webinar - How to Analyze Any Stock or Market in 10 Seconds
- Important Announcement - Changing Stockscores Memberships
- Stockscores' Market Minutes Video - How to Trade Like a Contrarian
- Stockscores Trader Training - The Money Needs to Be Irrelevant
- Stock Features of the Week - Abnormal Breaks
Webinar - How to Analyze Any Stock or Market in 10 Seconds
Saturday May 7
11:00am PT, 2:00 pm ET
Understand Tyler Bollhorn's six elements of chart patterns and you can quickly assess the health of any stock or market. Whether you are managing your retirement portfolio with longer term trades or actively trading the market, these elements will help you improve your market performance.
Click Here to Register
Important Announcement - Changing Stockscores Memberships
My developers and I are doing some work to upgrade Stockscores so that it will work better on mobile devices. The tools will remain the same but the look of the site will change.
With these changes we will also be requiring that any new subscribers to the Stockscores Tools also complete one of the Stockscores courses (Foundation, Investor or Active Trader). Once we are done the change, new subscribers will not be able to use the Market Scan and other paid tools if they have not completed one of our courses. We will grandfather any existing subscribers so that they can continue to subscribe to the tools. Not sure how long it will take to complete the change but if you want to subscribe to our tools without taking one of our courses, you should subscribe now.
Stockscores Market Minutes Video - How to Trade Like a Contrarian
Trading against the story or mood of the market only makes sense when the chart disagrees with the crowd. This week, I explain how to trade as a contrarian and then provide my analysis of the markets. Click Here to Watch To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel.
Trader Training - The Money Needs to be Irrelevant
"Anything worth doing is worth doing for money." - Gordon Gecko, Wall Street
It is generally accepted that money is a motivator; if you link pay to performance, performance will improve. For that reason, many people's salaries vary with their performance. This is most prevalent on Wall Street where bankers and traders receive most of their compensation in the form of incentive based pay.
In his book, "Drive", Dan Pink considers whether pay for performance really works. Does dangling a carrot and threatening with a stick cause people to deliver better results? The research finds that this is not always the case.
For very mechanical tasks, incentive based pay does work. A brick layer who is paid by the brick will work more effectively than one who is paid by the hour. However, for tasks that require analytical thinking, performance is actually worse when it is linked to pay.
Pink cites research involving the solving of puzzles. The person who was told she would receive a financial reward if she solved the puzzle in the shortest time performed worse than a person who had no potential for financial reward if the puzzle was solved quickly. The person who was solving the puzzle for the sake of solving the puzzle did it quickest.
I have been teaching people how to trade the stock market for over ten years, teaching a lot of people from many different backgrounds. One constant that I have seen is those who perform the best as traders are those who don't care about the money. They trade with a set of rules and the discipline to follow the rules, making the money irrelevant.
The market is a puzzle that we want to solve. Why does a focus on money make us ineffective traders, or puzzle solvers?
I am not a behavioral scientist and I have not done the kind of research necessary to really answer that question. However, I do have an opinion based on what I have learned from trading.
Money causes us to focus on something that is irrelevant to the problem. In doing so, it complicates the puzzle, making it more difficult to solve.
If we aspire to make money from the market, we should change our focus to find trading opportunities with a positive expected value. Money will be the determinant of success, but it will not be something that is part of the problem to be solved.
Suppose you buy a stock and it is showing you a profit of $1000. It is near to the end of the month and you need $1000 to pay bills. There is a good chance you will sell the stock because of your need, regardless of what your analysis would tell you about the stock's potential to move higher.
Money causes a greater problem to our trading when it comes to taking losses. A stock may remain a good hold despite the fact it is showing as a loss. The size of the loss often causes traders to exit the trade simply because the money, and the potential loss of more, causes them too much concern.
Not only can money bring an irrelevant condition in to our problem solving equation, it also tends to bring emotion which hurts our ability to make good decisions. Most people function poorly under stress and the fear of losing money brings stress. When we focus on the money, we trade with emotion and that means we make bad trades.
Every trader has to overcome their emotional attachment to money. Trades have to be based solely on the merit of the trade. Our pursuit must be on doing the right trade, doing good analysis. If we trade to make money, we will lose it! Our chances for success improve when we simply trade to solve the market's puzzle.
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Stocks that enjoy market beating trends usually start their trends with abnormal price behavior. However, not all abnormal behavior leads to market beating trends. You have to read the chart pattern to find those with the best potential. Here are two low priced stocks that I found today which show good potential.Back To Top
1. V.NGE
V.NGE is not too liquid but it came alive today with abnormal volume and a price break from optimism, should set up for higher prices in the near term but this one will be volatile.
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2. ULTR
ULTR came alive with big volume and price action at the open today and then spent the rest of the day building a pennant pattern. Looks to be working through the overhang of pessimism and has good potential for a high volatility swing trade.
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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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