Trade and Sleep Well
Stockscores.com Perspectives for the week ending July 4, 2016
In this week's issue:
In This Week's Issue:
- Stockscores' Market Minutes Video - Stocks Are Not Risky, You Are
- Stockscores Trader Training - Trade and Sleep Well
- Stock Features of the Week - Canadian Movers
Stockscores Market Minutes Video - Stocks Are Not Risky, You Are
Traders often describe a stock as risky but it is really how we react to volatility that defines the risk of the stock. This week's video explains: Click Here to Watch To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel
Trader Training - Trade and Sleep Well
Emotion is the enemy of every trader.
Our emotional attachment to money is what causes us to lose our discipline, to take big losses, to not let our strong and profitable trades run higher. It causes us to own too many stocks in one sector or fall in love with a stock that will only hurt us. Letting emotion in to our trading decisions is a fast way to insomnia.
The perception is that the stock market is too risky, many investors don't like the potential for a sharp sell off that can destroy their portfolio in a very short time period. The collapse of the stock market in 2008 has given many a form of post-traumatic stress disorder, leaving them on the sidelines when it has not made sense to do so.
The stock market may be volatile at times but that is not what determines risk. Risk is how you respond to the volatility, how you manage the potential size of your losses. The stock market is not risky, the people that play it are. It is how you deal with price volatility that determines risk.
If you want to sleep well while invested in stocks, you need to have a plan for managing risk. The notion that you can buy some "good" companies and forget about them is outdated and reckless.
Here are my essentials to being invested in the stocks and sleeping well:
Plan to lose. When you buy a stock, know the price level where the stock market will have proven you wrong. Learn how to determine where a stock's support price is and if the stock closes below that level, realize that the market is telling you that something is probably wrong at the company. Get out.
Know your tolerance for risk. How much are you willing to lose on any one stock trade? If you risk more than this amount, you will get emotional. Take the difference between the entry price and the stop loss price and divide that in to your risk tolerance to determine how many shares to buy. If you are buying a stock at $10 with a stop loss point at $9 and you are willing to lose $500 on any one trade then you should buy 500 shares.
Don't obsess. You don't need to watch your stocks constantly, if you are position trading then only look at the once a day or even once a week. You only need to check to see if your stock has given an exit signal, obsessing over every gyration will make you emotional and lead you to make mistakes.
Have a written plan. You must write down your trading rules. When will you buy, when will you sell, how will you manage risk and how will you review your positions. Keep the plan simple but concise enough that there is no room for interpretation.
Stick to your plan. Your plan should be based on strategies that you have tested and believe in. Deviating from the plan means you are going in to areas that have not been tested and that puts you closer to being a gambler. Gambling traders may win in the short term but in the long term they lose.
Remember that trading stocks is as risky as you make it. Not having a plan with rules for limiting the size of your losses leaves you exposed to big losses if the market corrects sharply. With loss limits and discipline, you should never be the victim of a major market correction.
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The Canadian market is benefitting from the Brexit vote because of the expectation of lower US interest rates which means lower US dollar which means higher commodity prices. This week, I scan for Canadian stocks making breaks from good chart patterns using the Abnormal Breaks Canada Market Scan.Back To Top
1. T.LUN
T.LUN came alive with strong price action Monday, taking it up through resistance at $4.50. It has tried to make this break before but failed, perhaps this will be the time for it to start a new upward trend. Main issue with the break today was that volume was pretty normal, but markets were closed in the US.
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2. T.P
T.P is breaking its downward trend line from a rising bottom ascending triangle pattern. This is a good turnaround chart set up that should lead to a new upward trend. Support at $2.50.
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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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