Conceptual understanding will help you build enduring edge..... | stockbee


Conceptual understanding will help you build enduring edge.....

Everyday same thing happens in the trading world. Someone talks of a tactics or a scan or a trade and then every one runs after it. Many have been doing this for years and still struggling in their trading. The reason for that is very simple. Low conceptual understanding.

Concept comes first then strategy then tactics.

If you are serious about your trading there are some concepts you must know in significant details. Once you understand those key concepts you will stop chasing tactics and will find greater success.

Deep understanding of concepts will help you build a strong foundation on which you can build a trading system. There are seven concepts you should study:

Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. Once you understand momentum you can design hundreds of ways to trade momentum. Billions of dollars are traded and invested using momentum. Momentum is one of the core strategies used by every single quant fund.

Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. Market breadth deals with the participation of moves in any market or sector. Market breadth is the basic concept used by every big institutional player to build trading strategies and determine market direction. Once you understand market breadth you will find 500 tactics to make market breadth work. Market Monitor is one of the ways to do that. And there are several ways to do it.

Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of 8000 stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities. Your returns are a function of your equity selection method. If you are trying to make big returns then equity selection is key. You need a equity selection strategy before you can move to next level of trading decision. Most novice traders have no understanding of equity selection concept.

Market Anomalies: Market anomalies are the proven structural phenomenons in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.In last 40 to 50 years there has been significant understanding of the market in terms of what works and what does not work. Every single thing which you can think of has been tested. If you know what works then you would spend time on it rather than chasing tactics. Most retail and novice traders have no understanding of what works and why. So they are gullible to any tactical claims.

Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets. Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns.Quant funds exploit such patterns daily.

Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. Growth investing is a well established field of study and practice in the market. There has been thorough research on what growth factors work, why they work and under what conditions they work. Many well known traders are growth investors or growth stock traders.

Value investing : Value investors buy stocks of companies which are cheap or out of favor. Valuation has again been extensively studied and there is lot of analysis to tel you what exactly to look for in value stocks. Big funds and hedge funds and institutions are primarily valuation driven. It allows them to put large sums of money to work.

These are the core concepts around which all trading strategies revolve.
Once you understand these core concepts then your next line of study is about trading tactics. Tactics are methods to implement some of these core concepts. Here again certain trading strategies have emerged over the decades like position trading, swing trading, hedging, arbitrage and so on. Knowledge of these concepts will help you understand how and why these strategies work.

Unfortunately most traders start at tactical end. Many blow up their account before they even can understand core concept. Many of you are going to do exactly the same thing.

If you want to become a surgeon would you start your study with what scalpel to use or with anatomy and physiology. If your understanding of core concepts is weak or non existent no amount of scans or software's or indicators or trading psychology or multiple monitors or trading chat rooms or advisory services will help you become a successful trader.

So next time someone talks about a tactics, scan, or a software, or a trade, instead of immediately jumping on it and deciding to learn it, relax, sit back, think. First ask yourself what is the core concept behind this. Is it based on data. Is it logical. Is it really a new new way of  doing things or same wine in different bottle.

Conceptual understanding will help you build enduring edge.....

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.


rmike said...

Dear Pradeep,

Very nice post, neatly encapsulating the whole paradigm of the trading process. Would love to hear more regarding your take on profitable momentum dissection and equity selection.


Renu said...

Hi pradeep,

could you please tell what indicator do you use to decide whether a particular stock is over bought or not.


Pradeep Bonde said...




I do not use overbought or oversold indicators in my trading. But you can try Stochastic which is used by many traders.