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Think methods

Posted on 5/24/2010

IKEA Instructions

One of the most useful thing you must do if you want to be successful in trading or life is to think methods. To be successful trader what you need is a well thought out  method. If you want to trade say growth stocks, then you should have a method to find growth stocks. If you want to trade pullbacks, you must have method to find pullbacks. If you want to trade breakout, you must have a method to find breakout. If you want to use stops in your trading you need a method to determine stops. If you want to time the market, you need method to tell you which is good time to enter and which is good time to exit. 

Why is it difficult to think methodically. In many cases people do not have skills in methodical thinking. The other problem is we are surrounded by opinions and judgments. Everyone has a opinion about everything, not necessarily based on facts. The mass media thrives on that, lot of blogosphere is about it. Opinions and judgments are unique to a person. They are about biases, misconception, ego, influence and seduction. How can you trade a opinion like "Bernanke is a  idiot" or " we are all doomed" or  "US is doomed". Opinions are opinions, they are not tradable. They get you on to TV or get you quoted in Newspaper but they are perfectly useless for trading. Motivations of those who offer opinions is to influence you or seduce you not necessarily to offer tradable method. Those who influence opinions have a method to generate opinions. Glenn Beck is a perfect example of that. 90% of what he says is his opinion it is not based on facts. What is his motivation for churning out all these opinion, money, fame, influence and so on. Same way if you look at CNBC most of it is about opinion.
But to make money in trading or in life you need method. What does a entrepreneur do, he finds a better way to do something. If you work in a organisation, what do successful managers, workers or supervisor do? They find a method to do the job more efficiently. As against that you will see lot of headless chickens wondering around asking what should they do. You will see the same thing in trading, people will ask you what do you think about AAPL  or SNDK, or LOPE or any other stock, or ask I am in ATSG now what do I do. What does it tell you. That person has not thought about a method.

If you spend time on understanding a method and developing a method you will have method related question as against questions on specific trades. If you learn methods it will be life long learning and you will get benefit from the method for years. What stops people from thinking method. Most of the time they have been rewarded in life for not having a very good method. So methodical thinking is not part of their thinking repertoire. 

If you can define a problem properly, you can find a method to solve that problem. Many people ask me what mutual funds they should buy or what ETF they should buy in their retirement account, but very few ask how do I go about finding which mutual funds or ETF to buy in my retirement account. If you ask the second question it is a method question and then one can methodically develop a way to find when to invest in IRA or 401k, how to find mutual funds to invest in, when to exit and so on. I have talked about my method to invest in 401k many times before. If you spend 3 days understanding and replicating it, you will have a lifelong way to answer your question which funds should you buy in 401k and when.

Same thing applies to trading. If you decide to trade momentum stocks, then you need to develop a method to find them, enter them, exit them and so on. What did William O'Neil do, he found a way to find and trade growth stocks. That method works for him. He has detailed it many times in his book , if you spend one month internalizing it, you can also handily beat the market. What did Charles Kirkpatrick do. He found a method to trade value stocks with momentum. If you spend just a week understanding his method, you will find profitable way to trade value stocks. And I can go on and on about this thing, but they key to trading success is about developing method. 

Method is something which you can break down in to steps. Method is something which you can replicate. Method is something you can practice and learn. Method is like driving direction. If the directions are clear and you have the right vehicle you will be able to travel from A to B. Once you have a method you can train your procedural memory to become efficient at performing that method. Methods are about regiments, set of guidelines and rules. Opinions create dependency, methods are about independence. You can replicate a method and trade it on your own. You may or may not agree with the logic of a method and you may find different results with it, but ultimately it is a step by step replicable process.
Methods are like those stick figures Ikea provides to put together the furniture you bought.

When I visit a blog or read something on blog or interact with traders, I am primarily interested in learning what method does this person use. I have studied most of the trading blogs and made detail notes about methods and incorporated some in to my methods. Similarly when I am reading a book or come across an idea my primary focus is how do you make this work. How can I design a method to make this work. As Brett Steenbarger says trading is performance sports. Performance is all about methods.

If you can draw a  Ikea style instruction about your trading method then you have a method.....

Are you serious about your trading?

If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.

It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.

Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.

Why traders come to stockbee?

The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial  and no tall claims of making you instantly wealthy, and yet the site attracts new  members everyday. Members come from all walks of life and all kinds of trading size and trading styles.

You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.

Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.

What will I learn in the members site?

The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.

As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.

You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.

You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.

You will learn about  Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.

You will learn about  Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.

You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.

You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.

You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.

You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.

You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.

You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.

You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.

The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.

The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.

If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.

Do you have a trial?

If you are just looking for trial you are better off trying thousands of other trading sites that offer free trial or one month trial and offer you promise of riches.

It is for those who are ready beyond the trial phase and ready to put serious months or years  of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.

The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.

How can I become a member?

To sign up go to and follow the sign up process. The site uses Paypal for payment processing.


Banenga said...

gr8 post

Unknown said...

Dear Pradeep

Thanks, this post encapsulates in entirety the pointers regarding memory, cognitive load, traits of successful traders, different trading methodology for different market conditions etc. that you have been providing to the followers of your blog.

Since I am a johnny come lately and have been slowly catching up by reading your previous posts, a comment on finding new leaders - From the method you outlined (in your posts and video), I find that whenever the market turns downwards, as it has in the recent past, one can find new leaders by simply measuring the percentage of fall of all stocks and comparing that to the broad market index's erosion. The one which fall the least i.e the top 2% whose fall is less than the broad market index are likely to be the new leaders. Though I do not use telechart but going by coding examples provided by you the scan would be something like


wherein the MaxC referred to would be the highest reference C a week or so prior to the market turn. After the scan it is then only required to sort out the top 1% - 2% above the broad index!

Pradeep Bonde said...

Very easy way to do that in Telechart is by using custom date sort.