Work Hard When the Market is Easy
Stockscores Foundation for the week ending August 28, 2017
In this week's issue:
In This Week’s Issue:
- New Stockscores website coming soon is live
- Stockscores at the Toronto Money Show
- Stockscores’ Market Minutes Video – The New Stockscores Site
- Stockscores Trader Training –Work Hard When the Market is Easy
- Stock Features of the Week – Stockscores Simple Weekly
New Stockscores website is live
The new Stockscores website has launched. If you are having trouble accessing it, email me tylerb@stockscores.com. We have a few bugs to fix and will be working on getting everything correct soon. However, if you can not use the main areas of the site, please let me know so we can look in to it.
Stockscores at the Toronto Money Show
I will be doing two presentations at the Toronto Money Show in September, one free and the other a Master Class that you can purchase. For more information on these two presentations, click here.
Stockscores Market Minutes – The New Stockscores Website
This week, I highlight the new Stockscores.com website and then provide my market analysis and the trade of the week, a short sell on SJM. Click Here to Watch
To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel
Trader Training – Work Hard When the Market is Easy
This is the time of year when it is really necessary to be selective with the trades you take. We are at the seasonal end of the weak season for trading; the market tends to improve sometime in October or November.
Before that happens, the market also tends to be its most volatile and difficult. We often get sharp corrections at this time of year so it is essential to be very fussy about the trades you take. We are likely within a few weeks of an improvement in the market, so be patient.
It's better to miss a good trade than to take a bad one. Missing a good trade doesn't deplete your capital-it only fails to add to it. A bad trade will not only reduce the size of your trading account, it will eat up emotional capital and your confidence.
A losing trade is not a bad trade. Bad trades are simply taking the trade that doesn't meet your requirements. Bad trades come from working hard to see something that's not there, guided by your need to trade rather than the market offering a good opportunity.
I have read very few books about the stock market, but one that I've read more than once and that I think is a must-read for every investor is Reminiscences of a Stock Operator by Edwin Lefevre. Here is a wonderful quote from that book that captures the essence of what this chapter is about:
"What beat me was not having brains enough to stick to my own game-that is, to play the market only when I was satisfied that precedents favored my play. There is the plain fool, who does the wrong thing at all times everywhere, but there is also the Wall Street fool, who thinks he must trade all the time. No man can have adequate reasons for buying or selling stocks daily-or sufficient knowledge to make his play an intelligent play."
-Reminiscences of a Stock Operator
I advise all my students that they will make more money by trading less, at least so long as trading less is the result of having a high standard for what they trade. If you tell yourself you're limited to only making 20 trades a year, you're probably going to be very fussy about what trades you take. With less than two trades to be made each month, only the very best opportunities will pass your analysis. All of the "maybes" or "pretty goods" will get thrown out.
We take the pretty good trades because we're afraid of missing out. It's painful to watch a stock you considered buying but passed on go up. You remember this pain and the next time you see something that looks pretty good, you take it with little regard for the expected value of trading pretty good opportunities.
Pretty good means the trade will make money some of the time and lose some of the time, and the average over a large number of trades may be close to breaking even. The fact that one pretty good trade did well is reasonable and expected. In the context of expected value, taking those pretty good trades many times will lead to less than stellar results when the losers offset the winners.
You shouldn't judge your trading success one trade at a time. You must look at your results over a large number of trades. To maximize overall profitability requires you to have a high standard for what trades you make. Maintaining that standard will be easier if you take the trades that stand out as an ideal fit to your strategy, not by taking those that are marginal and require a lot of hard work to uncover.
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This week, I ran the Stockscores Simple Weekly Market Scans which are available to Investor and Active Trader members. I look for weekly breaks from a predictive chart pattern, which typically is a break through resistance from low price volatility. Here are a couple that look promising:
1. NTLANTLA broke the downward trend line in June and then built a rising bottom since. It is now breaking through resistance with abnormal price and volume action.
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2. T.ART.AR is moving up form a rising bottom after recently breaking the downward trend line through resistance at $2.60. This as the Gold mining sector shows strength in general. Support at $2.50.
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