stockbee

8/22/2016

Work on procedural memory to improve your trading


Procedural memory is memory about how to perform procedures.
We have as an adult thousands of procedural memory. We perform these processes without thinking.
Driving a car is about procedural memory. We drive effortlessly without thinking. We are not even conscious of the process unless something happens.
Shaving, brushing your teeth, washing dishes, cooking, and many other things are stored in brain as procedural memory where we can do them without thinking.
The day you realize trading success is about developing procedural memory specific to a setup or style of trading , you will be on path to success. You will do things that will enhance procedural memory.

Trading success is about developing expertise. When you try and develop expertise you train your procedural memory.

As a trader you need to develop a setup specific procedural memory. If you are trading 4% or $ b/o , you need to develop procedural memory specific to that setup.
Same way if you are going to trade anticipation setup and want to buy first viable setup on stock with momentum, you need to develop procedural memory about it.
Procedural memories are implicit memories. They allow us to lower cognitive load. They are learned intuitions.

Procedural memory is memory about how to do a process. It is stored in memory as one schema.

A process containing say 32 steps is not stored in memory as 32 discrete step but as one sequence of step. When performing that task the brain efficiently recalls all those steps simultaneously so you can do the task effortlessly.
Procedural memory helps free up the brain to do other things.
It frees the brain by reducing cognitive load. We have thousands of procedural memories developed over our lifetime. They make our life easy.
As a infant we have very few procedural memories but we quickly build them as we grow and they become part of us.
For example take a simple skill like swimming your teeth, it is a procedural memory once you develop it you can perform it without thinking or without focusing on a step by step sequence. But it takes us some time to develop.

Same is true of trading . If you read about trading or buy trading manual you will not develop procedural memory. You develop trading related procedural memory by doing actual trading . If you do a process thousands of time you develop procedural memory.

How many hours and tries are required to learn to swim or perform dance or gymnastic. It is same for trading.

If your setup is fast setup requiring fast entry and exit like say day trade , then procedural memory is even more important. You have to perform the task at speed without thinking too much.

New traders spend too little time developing procedural memory.

Before they can develop procedural memory they switch to new ideas and setup.
One day they ride bike for few hours struggle, next day do few hours of swimming and give up because water enters nose and ear, next day they try something new. In the process they do not have procedural memory for setup.

Stick with a setup for six months to a year to become good at it.

Procedural memory also allows us to do vast number of day to day tasks. Imagine if you had to learn to drive everyday, or learn to walk everyday. Life would be impossible without well developed procedural memory.
Same things happens in trading. As a trader you develop hundreds of procedural memories to make your trading effortless.

Where to enter, where to exit, where to abandon a setup without waiting for stops to hit, how to determine risk are all procedural memories developed through practice.

Finding anticipation setup is procedural memory. Once you develop it , you can quickly go through 400 to 500 stocks and identify those 5 to 6 good setups. No amount of instructions and manual can make you learn that skill unless you do it daily for say 90 to 100 days.
Most successful traders who survive the market for many years have developed a procedural memories specific to a style of trading or a setup.
They can instinctively trade those setups without thinking about individual processes or steps involved in that setup. They are not conscious of the steps.
A novice watching them trade many times do not understand their decisions. Many times they get out of a trade just before it hits a pothole or avoid certain trade that novice will take.
Lot of it is instinct developed as a result of procedural memory development. It is like a driver instinctively hitting breaks at sign of something on the road.
For discretionary trading it is all about procedural memory development on a specific setup.
If your efforts at training procedural memory to trade a setup or style are successful then you will become efficient in trading that style.
Once you learn a setup it become relatively easy to develop procedural memory on related style or setup.
But it is difficult to develop procedural memory on another instrument or style. That is why you will see many successful traders focus on very narrow niche in the market.
Some focus on growth investing , some focus on value, some on options, some on futures, some on currencies.
Within that they focus on very niche setup. Some trade say growth stock as swing trades, some trade them as position trades. These two setups require distinct procedural memories.
Most successful traders learn by trial and error that sticking to their setup is best because when they do it the procedural memory automatically kicks in.
As against that novice traders are ambitious, they want to trade as many setups as possible. They don't want to miss out on any style or instrument like option or futures. So they try and simultaneously develop procedural memory. That obviously leads to failure.
If we know that the key to discretionary trading success is procedural memory then why is it difficult to develop procedural memory?
To develop procedural memory you need highly structured environment.
When you learn to drive, it is done under structured environment. You learn it in step wise manner under close supervision. There is someone sitting next to you closely supervising every step and also ensures you don't get killed.
Every month you will see some young kid getting killed in car accident, and the reason is largely to do with lack of well developed procedural memory and bravado.
As against that much of learning to trade on your own is unstructured and unsupervised process unless you join a trading firm or a Wall Street trading house or bank.
You are your own instructor and you need to create your own structure and you need to give yourself correct feedback and you need to ensure you do not get killed by blowing up your account. And more importantly you need to persist for months in learning stage still it becomes effortless exercise.
If you want to develop trading procedural memory and make thousands or millions the first step is to put all your effort in developing procedural memory.
It is not about trying thing once, it is about the 500th attempt and the thousandth and three thousandth attempt that makes you effortless. That is what develop procedural memory. You can not do it in 15 days.
If you read the classic Wall Street books like How I made 2 million dollars in stock market by Darvas or Reminiscence of a Stock operator, you will see that much of the struggle depicted in those book is about trying to find a setup and a process and sticking to it.
Once Darvas found his setup and developed a process it was easy. In Livermore case he went from setup to setup and from day trading to position trading before making big money.
It is the same thing that happens on Stockbee site hundreds of novice join every year. Some give up in few months , those persist for months , six month, a year at some stage develop procedural memory and then they develop their own setups .
Some still stick around , because they find the environment enriching and motivating. They like learning from others and continue to improve.
Some become very good at particular style or time frame like day trading . They start their own site.
Some are scared of sharing their setup and secretive, they spend time talking in riddles. Some do not want to help others. But that is what makes the world interesting . Not everyone is motivated by helping others.
The Stockbee site fosters such ecosystem and survives the process as new traders bring in new ideas and new energy . And some old traders here take on mentor ship role to guide newcomers.
As a novice trader if you understand the role of procedural memory in trading you would approach the task differently. You will set process goals as against monetary goals.
You will focus on well developed setup idea with step by step instructions.
You will try and find someone to supervise your process and ensure you do not get killed during the earning process.
In most procedural memory development situation a apprentice model has shown to be most effective for learning.
When you attempt to develop procedural memory on your own, unless you are extremely motivated and driven (or the correct word according to psychologists is you have very high self efficacy beliefs) the task is difficult. That is why you will see few extremely motivated individuals make it in this field.
This is the reason most ordinary and less motivated traders fail before they can achieve profitability.
They blame markets or other things for it but in many cases the fault lies with failure to train procedural memory.
In order to develop procedural memory for any given time frame or style or set up first you need to start with well defined setup with clear step by step process led out with clear explanation for each step.
For example if you were to decide to trade a swing trade setup, you need clear well defined highly structured process that you can follow and master till you can do it on your own without supervision. That is why I and many other traders here repeatedly share processes, setup and repeat things till people get it.
That is why this site puts so much focus on becoming process oriented. The daily posts like Night Time is right time, Good Morning Wall Street, Anticipation as your tool box and so on are designed to drive the importance of procedural memory.
Develop process flow and develop procedural memory. Once you do that you are on your own.

8/08/2016

Stockbee 50: New entrants 08/08/2016


The Stockbee 50 is a list of fastest moving stocks in the market. These are stocks with above average momentum.
Stocks with good momentum keep going up. If you are serious about making money, it is a good idea to keep an eye on the stocks in the Stockbee 50 list.
Momentum ranking is relative and so stocks that gain momentum move up the rank and those that lose momentum drop off.
There 25 new entries in the Stockbee 50 list this week. The new entries at some point will setup again. Once they are ready, they can be entered as an anticipation trade or as a breakout trade.
There are 30 that dropped from the list this week. It is also a good idea to keep an eye on these as well as they might set-up again for a second leg up.

List of New Entrants:

EGLE SINO AMBR HTBX SHIP GLBS ADXS BVX SNMX HEB NVCN FMSA MGN HSC BNSO GEVO NAK PCMI HCLP QUAD DELT EMXX ETSY ABEO ADVM

List of stocks dropping rank

LNTH TRCH BEBE ALIM TCK PBYI GNMK LOGM N BIOD DRRX HTWR SGNT S CDTI ROKA OPGN LEDS HL SSRI ASM CCCL FSM VGZ PVG TGD PTN MUX XRA XCOM
From the list that has dropped ranking
PBYI LOGM
are looking good.

8/02/2016

Bullish Anticipation List

Stocks to watch for breakouts
DV JBL SWK EBAY DPZ KMX ITW

IPO Anticipation List

CHUBK BNED PEN HRI CHUBA PFGC PLNT

Stockbee50 Anticipation List

TSRO CLF PEN PLNT HSC

7/17/2016

Bullish Anticipation Watch list for next week

XNCR CEQP WIN VEEV LOCK MAIN HAS ECA MLM NDSN PES MDVN STOR NOC CYS GLPI DGI MTZ QLYS CPRT NFG ACC NWL IDA JNJ SCLN ENLC MASI MXL MRO AUY AMD DHI ERF GWPH OUTR PETX DPM WES GLOG PBA INGN SXL SA BTE GLBL

7/15/2016

How to use momentum to find explosive stocks


Understanding Momentum helps you find explosive stocks and exploit them as swing trader or position trader. As a trader you want to be in stocks that for a given holding period are the fastest moving stocks.

At simplest level momentum is rate of change (ROC) with which stock is going up or down. It measures speed of a move. Knowing ROC of stocks allows us to rank them and focus on those with top speed.

Let us say if you want to focus on say only 50 strongest stocks in the market. You can find them if you understand momentum. If you want to narrow your focus and only focus on best stocks in the market , focusing on 200 stocks with most momentum is sufficient to find big moves both for swing and position traders.

Momentum is time specific. In order to find stocks with momentum you must first decide your time frame. A time frame of 3 to 6 month is good for finding momentum stocks.


How can you scan for momentum?

There are many ways to rank stocks by momentum and every method has some advantages and disadvantages. Once you understand momentum you can use it creatively to find many kinds of stocks

Let us say we are talking about momentum on 6 month time frame to rank stocks

6 month = 126 trading days

Using Telechart we can find momentum in various ways

c/c126

will give you six month momentum compared to price 126 days ago

c/avgc126

will give you six month momentum compared to average price of 126 days

c/minl126

will give you six month anchored momentum compared to lowest price in 126 days

(c/c63+c63/c126)/2

will give you six month momentum calculated as equal weighted 2 period for 3 months

There are many many ways to slice and dice momentum. But all the above momentum scans can be used to rank stocks . They help you find relative momentum for a universe of stock. These are simplest scans for momentum, you can improve on these by using absolute momentum scans instead of relative momentum.

7/14/2016

Trading Tools I use

The tools you use depend on your setups, account size , and trading time frame. I primarily trade momentum and growth based setups on a swing time frame. I have million dollar plus account to trade. The tools I use are suitable for that .

The cost of tools for me is minuscule as % of capital traded.The cost of all  the tools for me is around 2500 dollar a year.
But for those with small account keeping cost of trading low is important.

Brokers

Interactive Brokers (recommended)
TD Ameritrade 
Fidelity 
I use three brokers for my trading but my favorite broker is Interactive Brokers. It has the best execution. The user interface is very suitable for active trading. Shorts are widely available.

Telechart 2000 Gold with real time data add on 

This is my most used trading tool. I run all my scans on this.
For my style of trading this is the best and simplest trading tool.
The only big limitation of TC2000 is it does not have more than 2 years of history.

Old Telechart 2000 for Stockbeebot Data

Stockbeebot is automated bot that calculates breadth intraday and posts on memers site.

Marketsmith 

I use Marketsmith primarily for Episodic pivots strategy as it has sales , EPS growth rates, fund holding and other information easily available.
I also run bunch of scans in Marketsmith for earnings surprise and growth stocks.

Investor's Business Daily

Not very useful in current weekly format. 

Free Tools I use

Finviz
Zacks
Seeking Alpha

Stocks setting up for 8% to 20% move

To become profitable work on your self efficacy beliefs


"If I have the belief that I can do it, I shall surely acquire the capacity to do it, even if I may not have it at beginning." Mahatma Gandhi

The most important determinant of your success in trading or in your personal life is your self efficacy beliefs.
In last 16 years I have talked to several successful traders including mane very well known traders and interacted with them on regular basis and some of them are now personal friends.
One of the most compelling reason why they are successful is they have high self efficacy beliefs.
It is not their unique setup or scan or entry or exit or position sizing that can explain there success.
One thing that clearly separates traders who succeed and sty in game for decades is their strong self efficacy beliefs.
Because of their self efficacy beliefs they figured out profitable ways to trade. No one gave them a 1000 pages manual on trading or held their hands when they were taking baby steps in trading. They figured out things for themselves. And they continue to tweak their approach to date.
Almost every successful trader I know of has developed their unique style on their own.
Which is true of most Stockbee members also.
The days, the months , and the years they spent trying out different things and failing at it or losing money further enhanced their beliefs in their own capabilities.
Yes they borrowed from some other traders ideas or books or courses but that is not the key to their success. Thy are self made traders.

The most important determinant of your trading success will be your self efficacy beliefs.

It might take some few days to understand that and some years. But once your self efficacy beliefs about trading change things start to happen.
Once that is in place your self talk will change to "hey I can do this", "hey I don't have all the answers but I am confident of finding the answers", "hey I know how to bounce back from setbacks" .
When you attempt trading some find early success and some find early setbacks. That experience sets your self efficacy beliefs.
Some people give up believing markets are too difficult or manipulated or beyond my understanding . Their self efficacy beliefs dictate their behavior.
In the beginning year I spent almost 18 to 20 hours trying various things going through hundreds of trading books, testing hundreds of ideas.
The intense effort ultimately started paying off as more and more market and setup clarity started to show up and then I put my own method together and over the years modified it.
The same story repeats for most successful traders.
If you read the Jesse Livermore book it details how he developed his unique style after several efforts.
The Darvas book again details his struggle to develop his own method.
Every trader goes through same phases as Livermore or Darvas or any other market wizards or successful traders like George Soros, Paul Tudor Jones, Stanley Druckenmiller have also gone through same learning curve and figured things on their own.
In the Stockbee Advance Bootcamp several traders presented and it is same story for Stockbee members.
Once your self efficacy beliefs specific to trading change you will start experiencing success.
That does not mean you will not have setbacks. If you have high self efficacy you will find a method. If you don't have it, even the most profitable method will not work for you and you will keep finding faults with methods.

Self efficacy beliefs is the biggest determinant of your trading success.

Unless you work on self efficacy you will find many inhibitors and will be constantly dissatisfied with any method, guides, videos, or instructions, or site. You will constantly chase new methods, new scans, new claims, new gurus, new newsletters, and so on.

Psychologist have found that self-efficacy beliefs help determine how much effort people will expend on an activity, how long they will persevere when confronting obstacles, and how resilient they will be in the face of adverse situations. The higher the sense of efficacy, the greater the effort, persistence, and resilience.

Profitable trading involves all these challenges.
You need to put in lot of effort to understand and internalize key concepts like equity selection, entries, exits, risk, risk/reward and then put it all together.
In the process you will have several setbacks and false starts. If you have enhanced self efficacy beliefs you will persist in face of such adversities.
If you have high sense of self efficacy beliefs then you will spend time mastering trading software, and mastering trading setups and make them work. Absent that you will abandon your effort at first hint of failure.
Learning to trade is not an easy task. It is one of the most challenging task you would handle in your life. Some are lucky and they find success instantly. For rest it is a big battle.
People with a strong sense of self efficacy beliefs approach difficult tasks as challenges to be mastered rather than as threats to be avoided. They have greater intrinsic motivation. That helps them to engage for long periods in activities and helps them overcome repeated obstacles. They do not have discipline problem.
People with high self efficacy beliefs set themselves challenging goals and maintain strong commitment to them, and heighten and sustain their efforts in the face of failure.
People with high self efficacy beliefs quickly recover their sense of efficacy after failures or setbacks, and attribute failure to insufficient effort or deficient knowledge and skills that are acquirable rather than external circumstances.

Your self-efficacy beliefs also influence your thought patterns and emotional reactions.

This is critical in trading. You should not be overly excited by profit on single trade and same way not get depressed by loss on single trade. At the end of the day trading is probability game. High self-efficacy helps create feelings of serenity in approaching difficult tasks and activities and activities where outcome is uncertain.
If you have low self-efficacy beliefs then often you believe that things are tougher than they really are. As a result this belief that fosters anxiety, stress, depression, loss of discipline, over trading and a feeling of being lost. You are unable to solve your own trading problem.

Psychologists believe that self-efficacy beliefs influence the level of accomplishment that one ultimately achieves.

Self-beliefs can also create the type of self-fulfilling prophecy in which one accomplishes what one believes one can accomplish. This further enhances self efficacy beliefs. This leads to higher performance this in turn leads to higher effort and higher accomplishment which in turn further enhances self efficacy.
The goal of this site is to constantly challenge you to enhance your self efficacy beliefs. To constantly goad you to keep working on your self efficacy beliefs. To challenge your existing beliefs. To provoke you to examine your current beliefs. To offer you a template for enhancing your self efficacy beliefs.
If you do that then you will achieve your trading goals. And you will not need this site, or alerts, or alerts with sound effect.

Everyday think of how you can enhance your trading related self efficacy beliefs.

7/13/2016

Follow a systematic daily approach


Trading is easier if you have a set process and everyday you follow it i.
A set process allows you to do the same thing over and over in a systematic manner till it becomes second nature.
Once you have a well thought out method the day to day challenge is largely about implementing your plan and sticking to it.
That requires setting up a daily routine and adhering to it as far as possible.
Profit is a outcome of executing a well thought out and designed setup idea day in and day out.


Situational Awareness (SA)

We know swing setups work, but overall market conditions can have impact on the % of trades likely to work.
So SA helps you in controlling your trade pace. In good environment you want to be more aggressive. In bad conditions you want to focus on risk management.
Question you need to ask daily for SA:
What is your market bias today
Is there a plan to exploit it
Is there an alternative plan


Anticipation

Anticipation allows you to control risk and get in to setups early or as they are breaking out. Anticipation is also useful on current open positions. If you have thought through what you will do under different circumstances on your open positions you are in better position.
Question you need to ask daily for Anticipation:
What homework have I done to identify good opportunities ?
What are the 3 to 5 very high probability opportunities I must focus on today
What is my plan for existing open positions

What is working currently

Different phases of market favor different kind of stocks or setups. Some time beaten down stocks do well. Sometime stocks with momentum do well. Some time value or growth is in favor. Knowing what is working helps you focus on hot opportunities.
Question you need to ask daily for What is working:
What is working in the market currently
What stocks and sectors are leading the market currently
What style and setups are working currently
What kind of follow through is happening

The hardware and software

All our good plans or intentions or setups are of no use if our hardware or software fails or is not optimum for trading.
Are you setup for today
Is your hardware in proper condition
Is your software working without glitch
What is your backup plan in case of failure.

Your mental state

Your mental state affects your trading. If your are well organised and in proper frame of mind for trading you will be successful. If you are excited, harried, angry, disorganized you will find same thing in your trading.
Are you calm, excited, harried , or confused today?
Are there distractions likely to affect your trading today?

Continuous improvement

As a trader you need to focus at least 25% of your daily efforts on developing new trading setups and ideas and on enhancing your trading skill and knowledge of market. A purposeful plan to do this will cumulatively help you transitions in to new setups and ideas as market changes.
What is your plan for enhancing your market knowledge today
What is your plan for enhancing your trading skills
What is your plan for enhancing your trading mindset

What needs to happen for me to be a confident and in control trader

Do I have resources to get there?
Do I have the burning drive to get there?
Everyday using this kind of framework will make you a better trader . If you rigorously follow these kind of checklist you will see improvements in your trading in 90 days.

7/12/2016

Guidelines to find good momentum burst setups

Guidelines to find good Stockbee Momentum Burst setups


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6.png


BWEN , LCI, CRBP, LFVN, BEAT ,and TXRH are examples of good momentum  burst setups showing up on my scans yesterday and many of them were already on my Anticipation Watch List

Momentum burst is the tendency of stocks to move in sharp 3 to 5 days moves of 8% to 40%. This can be used by swing traders to capture part of that explosive move.
In order to find candidates like BWEN , LCI, CRBP, LFVN, BEAT , or TXRH, you have to run a range expansion scan and then select stocks that meet a particular set of criterias.

There is a very specific range expansion pattern we are looking for when trading momentum burst. The following examples show that:

11.png
12.png
13.png

In all these examples you will see a period of very orderly consolidation prior to the breakout. During the consolidation the stock exhibited very low volatility and did not have wide ranges.

Essentially these stock were  consolidating pre breakout. The breakout triggered a mini buying frenzy and stock went up for the day and as more buyers step in will  likely go up for next couple of days.  As swing traders we are interested in setups like these.

Here are my guidelines for finding best setups like these daily:

  • stock should have range expansion on breakout day
  • volume on breakout day should be higher than previous day
  • day before breakout should be narrow range day or negative day
  • pre breakout there should not be many big range moves or breakdowns
  • stock should have linearity in prior uptrend before the consolidation period
  • correction or consolidation should be orderly during the entire move
  • volume during consolidation should be preferably orderly and lower
  • stock should close near high on breakout day


Here is another  example of a good setup and how it would look on breakout day.



How did the above stock look on breakout day


Does it meet all our requirements. It traded in narrow range pre breakout . It had low volatility pre breakout. It traded linearly in previous move and this was a very compact orderly correction. On breakout day volume was higher.

To identify these kind of setup you have to understand this is a skill which requires some minimum level of competency. You develop that by correctly identifying setups after setups. For that you need to study historical setups and develop guidelines to identify such setups.

7/11/2016

BWEN: Stockbee Trend Intensity Breakout


BWEN is an example of Stockbee Trend Intensity  Breakout today which I bought. The stock has established momentum for last 4 months or so. Stock was consolidating near high for last one month . Today it showed up on scans early as buyers stepped in.

BWEN is an example of momentum bursts move in stocks. This stock had a big momentum burst move in May. In just 6 days it went up 54%.

To find stocks like these you need to focus on stocks with established momentum and that are in consolidation phase.

Anticipation Watch list for July 11, 2016

Anticipation allows you to control risk and get into setups early or as they are breaking out. Anticipating a breakout helps improve your per trade profits. It can also lower your risk as your stop is close. It can help you profit from even smaller moves.
Anticipation requires more pre planning and effort then buying a breakout. You need a process flow to do that. The process should be done daily and followed consistently.
To find Anticipation setups focus on stocks with established momentum. That helps you improve your probability of breakout working.
My Anticipation Watchlist:
YNDX GWPH CVGW PE GKOS DXCM WES NS EEQ MASI FANG BTE XNCR AERI GGAL LOCK CGNX SNX JACK ERF NERV RP TXRH MAIN LCI EMES ANIP

7/08/2016

PLAY : A good breakout from anticipation watchlist


PLAY ( Dave and Buster)  has been on the Anticipation watch list for couple of days. It had a big earnings breakout a month ago. After that it went sideways and consolidated, The last 3 days were low range days. Today it is breaking out of that consolidation.

To find opportunities s like these daily , develop your own scans to identify anticipation setups on stocks with established momentum. If you do that you will never run out of trade ideas.



Bullish Anticipation Setups for July 8, 2016


Anticipation allows you to control risk and get into setups early or as they are breaking out. Anticipating a breakout helps improve your per trade profits. It can also lower your risk as your stop is close. It can help you profit from even smaller moves.
Anticipation requires more pre planning and effort then buying a breakout. You need a process flow to do that. The process should be done daily and followed consistently.
To find Anticipation setups focus on stocks with established momentum. That helps you improve your probability of breakout working.

FMSA
ANIP
AERI
NERV
WPZ
PE
GWPH
YNDX
BIG
TBPH
CALD
GKOS
PLAY
MAIN
LOCK
EA
GEL
IRWD
KRA
FIVE
TPC
CVGW
ABM
TXRH
CPRT
EBIX
LBIO
XNCR