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Stockscores Trading Clubs
Toronto
The Toronto Stockscores user group will be meeting Thursday, June 24 from 7 till 10 pm. I won't be at this meeting (I hope to come out to Ontario soon) but I am hearing that the meetings are going well and good trading ideas are being shared. The location is:
Humber College
203 Homber College Blvd
Guelph Humber Building
Room GH122 Ground Floor
Enter in Driveway A and park in Lot 3
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Stockscores.com Perspectives
For the week ending July 17, 2004
In this week's issue:
A recent study found that approximately 80% of day traders lose money, and 20% are able to consistently make a profit. Numbers like that are not too encouraging, but when examining the path that many take to become day traders, it begins to make a lot of sense.
Doctors and lawyers go to school for a long time to learn their craft. Professional athletes spend most of their youth developing their abilities to win in sport. A carpenter spends a few years developing woodworking skills. However, most aspiring day traders read a couple of books, open a brokerage account and start trading. Is it any wonder that most fail?
I spent 8 or 9 years trading the market before I found success. While I was able to support myself through those years, I was not living the high life. Living in a 600 square foot basement suite, working at night so I could trade during the day were the realities of my time in training. My friends and family thought I was crazy, but I stuck with it.
With time, I learned how to trade. In a hot market, I was averaging $10,000 a day in profits. In a slow market, I can still find opportunities that make a few thousand dollars in an hour or two. Easy money, right? Wrong.
Trading the stock market is simple, but not easy. I can teach someone the rules and mechanics of trading in a couple of days, but the art of trading takes time to learn. I have seen some of my students catch on right away, and make $20,000 in their first week. I have watched others quit in frustration after mounting losses convince them that profitable trading is impossible.
What is it that makes the difference between a good trader and a bad one? After teaching hundreds, I have a few ideas about what is necessary to be a good trader. If you are considering a career as a trader, consider the common failings of the rookie trader:
1. Unrealistic expectations: the potential to make a few hundred thousand dollars a year is achievable, but don't expect that to happen right away. You have to not only learn how to trade, but also, how to manage your emotions. The latter is more important.
2. Fear: good traders make good decisions. Trading with a fear of losing will cause you to make destructive decisions. If you can not afford to lose, then you will be afraid of losing, and you will make mistakes.
3. Greed: we all want to make money, but those who want to make money the easy way will trade like gamblers. Successful traders make trades that have a high probability of success. Gamblers make trades that make them dream of fast profits. In gambling, the house always wins.
4. Lack of training: you can spend eight or nine years like I did trying to learn how to trade, or you can have someone that knows what they are doing teach you how to do it. Some people think that the two or three thousand dollars that I charge to teach people how to trade is expensive. However, it is a bargain when you consider how much it costs to learn it on your own. Find some one that has succeeded as a trader and is a good communicator, and pay them to teach you how to trade.
5: Confusion of what is important: most traders think that knowing what to buy and when to buy it is what makes a good trader. In my learning process, I had that part figured out in the first year or two. What makes good traders is the ability to manage risk and emotions. Make that the focus of your learning. Many traders are always searching for the best system to beat the market, when they really just need to learn how to follow their rules instead of their emotions.
6. No determination: to excel at anything, you have to possess the determination to get you through the hard times. There will be days when you feel beat by the market, but good traders don't give up.
7. Penny wise, pound foolish: good tools will help you make money, but good tools cost money. If a good, reliable charting package costs you $300 a month, but allows you to find more opportunities than an unreliable tool that is free, isn't it a smart business decision to buy the expensive product? Consider your return on investment when judging the cost of any tool.
8. Lack of confidence: emotional mistakes can also come from a lack of confidence. If you don't believe in what you are doing, how can you expect to succeed? Any time I lack confidence in a strategy, I go back to testing that strategy until I have convinced myself that it is effective. With confidence, I can trade better.
9. Failure to recognize that the market changes: in my courses, I teach a variety of strategies, but I also teach an understanding of the market. The market changes, and we have to change with it. That means applying a different strategy, or coming up with a new strategy that fits current market conditions. A strategy might make you lots of money today, but if you fail to adapt to changing market conditions, those profits will only be short term loans.
10. Inability to laugh at your self: all traders make mistakes. If you let your mistakes get you down, your negative psychology will become destructive to your trading. If you screw up, laugh at your mistake and get focused on disciplined trading again.Back To Top
Stocks that have their Sentiment Stockscore above 60 are worth considering because the market is showing affection for them. There is optimism surrounding the stock, and that can lead to good upward trends.
Abnormal volume can be indicative of institutional interest. If the smart money expects good things from a company in the future, they will work to accumulate the stock in anticipation of an upward trend, creating the abnormal volume.
This week, I created a Market Scan that combined these two components, and found 78 stocks that traded at least 100 times on Friday. From the list of 78, I went through the individual charts to find good patterns that I think have good potential for longer term trades. Three opportunities stood out:Back To Top
1. ECA
ECA also trades on the TSX, with the symbol T.ECA. The stock traded very strong volume on Friday, and the chart is showing a long term ascending triangle pattern, which is a good indication of future strength. The Energy sector is one of the leaders in an otherwise quiet market, I think this stock has good potential for the months to come.
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2. GPT
GPT recently broke its downtrend and has been trading in an ascending triangle consolidation patter for the past couple of months. It broke out on Friday with good volume support, and looks like it can work on making a move back toward the highs from the beginning of the year.
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3. T.HTE.UN
Canadian Trust Units are doing well, and this one has a good chart and an historical yield of 16%. With a chart that is breaking out with good volume support, a return on ownership of the trust could be complimented by a capital gain as well.
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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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