4/17/2007

Concepts is key not the tools

Success in trading is about consistently pulling profits out of market with controlled risk. To do that successfully, you need a concept based on some structural understanding of markets. The understanding might be one 1 minute time frame or several years time frame. It might be understanding about how markets or stocks react to an event. It might be a understanding about various elements like earnings, sales, debt, valuation, margin, etc. It might be understanding about momentum, price volume relations, long term price behavior. Whatever may be the concept it is the ability to interpret price activity,which determines our ability to extract money out of market.

Scans, softwares, websites, data sources, multiple monitors, power of computers are not the most critical element for success. If you have successful concept the tools help to speed up the trade identification process or manage it. As a rule of thumb one must spend 80 % of the time mastering the concept and once that is in place put the tools together.

Many of you have emailed asking which software to use or what specific scans or data sources. Almost all the concept I have discussed can be traded or a variation of the same by using free information. Go to Barchart or Yahoo finance, you will get everyday list of breakouts. You will get list of Episodic Pivot candidates by going here Same way you can find momentum candidate list by various time frame here
You can use the list here as substitute for 100% plus universe or you can use this list here at Barchart. You do not need TC2007 to trade "the concept"

If you do not understand the concept, no scan or software is going to make you profitable.

Related Post
Three Concepts

4 comments:

Balle said...

Agreed... Concept is key and the king.

But how do you develop a concept. How do you spend 80% of your time developing the concept. You can read about the Virgin Strategy or the Double Trouble Strategy or the IBD strategy... but how do you know it is good

Well, I like to backtest. I like to define a strategy, assume I today was 5 years ago and scan and filter and see if my strategy would have worked.

But I don't think that there are lot of tools for backtesting and you need to develop one. Once you get into that you start spending more time developing tools rather than developing strategies.

Albert S. said...

Pradeep, I cannot agree with you more. Eventhough I have been trading in equities for about 10 years, beginning with the age old idea of buying low to selling high to my current strategy of utilizing IBD techniques, my problem was gathering a universe of stocks to put on buy or sell lists. Even without these "tools" I was successful in having 7 of 10 winners because I understood the concepts. Although, my big gainers were few and far between and I always made the mistake of getting out of a stock too early and missing the uptrend.
Within the last year or so, I began using the "tools" I found in the web to enhance my knowledge on building a universe of stocks. I will tell you that you have, by far, provided some very useful tools. Have these tools made me wealthy? Time will only tell, but I know it will only happen as long as I stick to the concepts and techniques of speculating and investing I feel comfortable with. So once again, it is about the concept of understanding the market and then implementing your speculating and investing technique in order for it to work for you.
Thanks again for the information you provide.

Tim said...

I agree with everyone. On the 'tools', MSN Stock Screener can handle very similar screens as those previously described including an intraday screen spotting stocks moving up on high volume.

Pradeep Bonde said...

Once upon a time my monthly expense on such tools was around 1200 dollars per month.
Now I use only TC2007 which costs me 20 dollars and Investors Business Daily which is around 25 bucks per month and my profits are much better. More tools add more complexity.
Soon you become tool manager rather than a trader.