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Divergence does not matter

Posted on 7/31/2014

The divergence was building since first week of July and was clearly visible on T2108 and Market Monitor. 

It showed increasing number of stocks in downtrend. The indexes were however near high , and it created false sense of bravado in some people.

People started saying divergence don't matter or market can keep going up in spite of divergences or divergences are good. If you believed that and were loaded up on stock , you would have some pain today.

Objective of trading for me is to make money and keep it and then add to it. Riding roller coaster of making money and giving up in correction is not my idea of fun.

If you want to make money and keep it develop tools that will proactively warn you of coming trouble.

Look for a 800% move in 17 days

Episodic Pivots (EP) is a very specific pattern post earnings that shows up on stocks with years of neglect. 
It is a very powerful pattern which results stock going up 100 to 500% in few weeks or months, obviously our first choice should be the one that goes up in few weeks. On large cap stocks it takes few quarters for them to go up 50% plus.

IDSA A 800% EP move in 17 days
IDSA was another very thinly traded stock with months of neglect. It broke out on earnings day as it had big earnings acceleration and in 17 days made 800% move. I bought on the earnings breakout day. 
Best EP are on low priced stocks with months or years of neglect and that have very low volume leading in to EP. The catalyst leads to buying frenzy and then it goes vertical. If you have small acount focus on these kind of lower volume stocks. Few moves like this can take your small account to a large account in few years.

I have detailed the process I use to find these stocks yesterday. If you are motivated to make money study that and develop your own process flow. 
The trick is to finding something like this is to have a daily set process to look for them systematically. You have to look for the one with blowout earnings.Not many ideas will show up daily like this , but you have to be alert everyday to the possibility of finding big idea like this. 
Large cap stocks attract lot of attention during earnings season and many gap up on earnings , but that does not lead to explosive moves. They go up but not with same velocity. 
Few trades like these in your lifetime can forever change your financial condition. 

My process flow for Episodic Pivots (EP)

Posted on 7/30/2014

Analyse all after hours movers up 4% plus on 50k volume to see if there is stock with neglect+ game changing earnings

Pre market Run IB scanner to find stock up on 50k plus volume and up at least 2% . See if there is stock with neglect+ game changing earnings

During the day Run EP scan c/c1>1.04 and v>3*avgv50.1 and v>=300000 multiple times , see if there is stock with neglect+ game changing earnings

Tools used:

Marketsmith to find earnings and earnings trends, float, fund holding

Theflyonethewall to see news on the stock

IB scanner Top % gainers volume >50k

Trade Ideas Biggest gainers scanner + Trade ideas stock with Most upside momentum

If I find a good EP I buy immediately in pre or post market.

Most EP where I made big money I bought in pre market.

You have to keep doing this daily and once in a while big fish shows up....

T2108 in rapid decline

T2108 is Worden indicator that measures % of stocks above their 40 day moving average. As you can see it is rapidly deteriorating . As of now only 39% of stocks are above their 40 day moving average.

In swing trading you want to see rapidly expanding breadth as it shows buyers coming in to market. Current markets indicate sellers in control.

Buyers have continuously stepped in on minor corrections so far, however now less and less stocks are participating in the up move.

I am extremely caution mode. Big drawdowns can happen in the kind of phases if you are too leveraged or have too many open positions.

Big intraday moves continue to happen and day traders must be laughing all the way to bank but for swing it is a risky period.

Playing great defense is important if you want to survive and prosper in this game. 

My swing trading Process Flow

I look for two kinds of opportunities every day , a big game changing catalyst trade that can add 25 to 50% to account (Episodic Pivots) and small swing trades that can add .25 to 2% to account.

Obviously the big trades do not happen daily so much of the daily focus is on finding swing trades of 8 to 20% profit potential. It is a very simple task now that I have been doing this successfully for 14 years. 

I just run a simple process loop daily and focus on it shutting out all other noise. I do not need others opinion or picks during trading day. It is just a bunch of simple tasks done efficiently. The outcome is profitable year. 

Basic Structural phenomenon

All my swing trading scans and efforts are based on a simple market observation, stocks when they move , move in momentum bursts of 3 to 5 days and 8 to 40% magnitude. This is inherent tendency of the market. 

Scans I run

To find stock likely to make these 3 to 5 days move I run a  bunch of scan throughout the day. 
  • 4% Breakout scan looks for stocks up 4% plus on 100000 volume
  • Dollar Breakout scan looks for stocks up 1$ plus on 100000 volume ( good at finding b/o on high priced stocks above 40)
  • Range Expansion scan for stocks whose range today is bigger than the range in last 3 days and that was not up more than 2% as of a day before
Same scans have bearish version to look for short candidates. 
The scans run on their own throughout the day and I use bunch of sorts using Trend Intensity to narrow down focus to few good candidates. 

If I find a stock that meets my setup definition I buy.

What do I look for in good setup

You can read my post which gives details of what I look for in a good setup for swing trading.

Basic things I look for is :

First leg should be linear

Stock should not be up 3 days in a row (small range days up 3 days is ok)

Orderly pullback or consolidation

Should close near high

Volume high

No 4% b/d in last 3 to 5 days

If good candidate shows up I calculate position size using risk calculator and buy.

Where do I put stop

If I enter a breakout I put my stop at low of the entry day. 

How much do I risk

.25% to 2% per trade. 

How Do I exit

Either it hits the stop in that case it is failed trade.

Exit after 3 to 5 days

Exit if position gives abnormal profit in one day of 10% plus. (at least part exit and move stop to protect rest.

Now this is a simple process I run day in and day out . Small gains like these add up due to compounding and in few years you can run up your account up significantly. 100k has compounded to 789k using this kind of method if you take every trade I take in last 5 years. 

The process has evolved over last 14 years and every year it becomes simpler to do . 

this is just one of the ways to do it. Various traders use various other setups like these to do this day in and day out.

For beginner trader it is difficult at first to do this with same speed and efficiency. It also depends on when you start trading methods like these. If you start trading them in right market conditions you find trades after trades working , in range bound environment you find smaller moves. Near reversal zones you can have trade failures. So overall market filter is used to calibrate trading using this process.

This is a simple process template. If you are new to trading you need to develop your own process flow. Once you do that you can fine tune it over number of trades. 

Why constant wins are good for beginning trader

Posted on 7/29/2014
We do things that we are successful in or are winners in . We avoid things where we are losers or not successful. That is the inherent nature of human beings. As  a beginning trader learning to trade or someone who is frustrated with his trading it is very important to first learn method that will involve frequent wins.

Frequent wins give you positive feedback and motivate you. Frequent losses sap your confidence and energy. Learn methods that will give you frequent wins early in your trading career. It will help you a lot.

One of the reason swing trading methods are so popular among active traders  is because they give you frequent winners when done right. That helps you stay motivated and focused on trading.

Stockbee Swing Trading Method 

A swing trading method that gives you 60% win rate and average wins are double the size of losses is psychologically make you feel a winner and also build your account.

Stockbee Working People Method

A method that trades infrequently and has only 37% success rate is psychologically difficult to trade for many. Even though it might produce bigger profits.

If you do not quickly find success in trading it is most likely you will give up trading. There are very few human activities where humans persist if they are constant losers. that is why the often given advice of best thing that can happen to you at beginning of your trading is to lose all your money or to learn to lose first is wrong advice.

If you make money in first year of your trading you are more likely to continue with it. If you struggle it is most likely you will give up.

Do not underestimate the power of winning trades to motivate you. If I had not found a winning trade that more than tripled my account in few months right at the beginning of my trading career I would not have stuck around for next 14 years and grown my account multifold.

That is why it is important to have positive strokes from winning trades for traders to be motivated.

So if you want  to learn to trade learn methods which will lead to frequent profits and not methods which do not have immediate feedback.

How to find stock with big catalyst

Posted on 7/28/2014
While there are thousands of small moves in the market of 20% kind magnitude, in a year there are also 100 to 300 big moves where stock make 100 to 1000% move. Finding big moves of 100 to 1000% in a year requires a  different kind of approach compared to swing trades.

Big moves tend to have big game changing catalyst. Your ability to understand the impact of that catalyst is important skill needed to trade the big moves.

The work of finding big game changing moves starts after market close. After market closes for the day , many companies start releasing earnings or other kind of news impacting their earnings or sales growth. 

If the news is surprisingly good or bad then the stock gaps up in after hours and trades with volume. Your starting point for finding big movers is scanning for after hours movers. 

Many free resources are available for this. One of the better one is on Wall Street Journal site
After hours movers  In this focus on stocks up 4% plus or 5 dollar plus in after hours with 50k plus volume. 

For those stocks you have to find if they had big earnings surprise. Earnings surprise is basically compared to analyst forecast. So if a stock has say 300% surprise it means it did 3 times better than analyst expectations. Stocks with big earnings surprise make big moves (if they were not rallying in expectation of such surprise)

Information about earnings surprise is also easily and freely available. You can find it here: Earnings Surprises 

Once you combine the two information of stock up big post market and its earnings surprise, you have possible list of candidates for further analysis. Then the next task is to get in to details of these stocks earnings and see if it is first or second big earnings surprise. First time is real charm. A first big earnings surprise on neglected stocks can produce a 300 to 500% move if that earnings surprise signals start of a new growth phase for that stock.

Once you do further research then you have potential candidate. For my further research I use Marketsmith and theflyonthewall. These are paid services and give you a snapshot of stocks earnings trends and news history.

They are expensive and cost around 100 dollar for Marketsmith and around 65 dollar for theflyonthewall. For me that is not a big expense as the total capital I trade is in 7 figures. But for small trader it can be big cost. You can use free tools like Zacks, Finviz, Seeking Alpha to do same thing . That requires certain compromise and requires more effort. 

Same things you can do in the morning. Some stocks announce earnings pre market. If earnings is good they start rallying. To find stocks up pre market, I use Interactive Broker Scanner. It gives you stock up on 50k volume in pre market.

Another tool I use is Trade Ideas scanner. I scan for Biggest Gainers in pre market you can find stocks up on volume using the above scan.

If you do this daily you will generate some ideas in after hours and before market open , if they are high conviction ideas then you need to decide when to enter and with how much size. I often enter good high conviction trades in after hours or pre market  itself. If a stock is going to make big move entering it as early as possible is best as you can benefit from the days move and you can have stop right near breakout point. 

The primary focus for pre market work should be to find such big game changing earnings or other catalyst stock. In a year chances of finding such big ideas are 1 to 20 but just one such big trade can make significant difference to your account. For that you should have conviction to risk big on these ideas.

When looking for Game changing catalyst stock in pre and after hours I am always looking for situation that is likely to result in explosive move in short period of time. During peak earnings season there is always a temptation to look at every earnings, many of them are just day trade or few days swing trades. They are not real game changers.

A genuinely surprising earnings in most cases leads to big gap up and huge pre market volume. A stock up in pre market on below 50k volume is not what you want to focus on. Similarly a large cap up on 50k volume is also not important.

The objective of finding game changing catalyst stock is to find a stock that will increase your overall account by 25 to 100% in one trade. Which essentially means the stock should be capable of big move and you should risk sufficiently big on it. I often risk big on such rare opportunities.

If you have IBD subscription you can use it to find such find big game changer candidates. Big catalyst stories show up on front page. If you do nothing but just focus on stock highlighted on front page on earnings day and research them you will probably find 3 to 5 big winners in a year. In some market conditions you will find 20 to 30 good winners.

If you are motivated and genuinely serious about making big money in the market focus your efforts on big movers in pre market and after hours.

Simple secret to trading success

Posted on 7/25/2014

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.

A good swing trader is driven by procedural memory. He looks at above stock and instantly procedural memory kicks in. It helps him instantly decide whether this is good setup or not, where to enter, where to put stop,  where to exit and so on.

This is why when you read about a setup in a book, it does no mean you will be able to trade it immediately. Because most trading books do not provide you procedural template.

If you read a book Trade Like Market wizard you will intellectually learn about setups used by market wizard but it does not develop procedural memory. To develop procedural memory you need to do same process as the market wizard does.

Same way knowing that the 96 million man uses Episodic Pivots as a setup is just one part of the equation but developing same process as he does is the key. Unless you develop similar procedural memory you will not find same stocks. He looked at this stock and bought it as EP, because he has developed procedural memory to find such stocks. He has well defined process he follows day in and day out. If you do same thing , you will find same thing.

There is no pill for developing procedural memory. Only significant effort can develop it b doing same process again and again.

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

Procedural memories are implicit memories. They allow us to lower cognitive load. They are learned intuitions. 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.

A Episodic Pivots method once you develop procedural memory for will be stored in your brain as one sequence of events. It gets triggered once you see a EP candidate. same thing applies to any breakout or pullback setups.

Once you develop procedural memory it helps free up the brain to do other things. That is why once you develop procedural memory on setup you find trading becomes easy.

Developing procedural memory frees  the brain by reducing cognitive load. We know which stock to select, where to enter , where to exit, how much to risk. Beyond that it is adaptive so if we see change in market condition we slightly change our process instinctively.

Successful traders develop thousands of procedural memories about thousands of decisions or processes involved in trading. They make our life easy as a trader. If you watch a novice trader he or she spends so much time on things which trained trader does effortlessly and without much thinking.

When we are new to trading , we do not have many procedural memories. But as we develop as trader we quickly start building procedural memories about trading tasks.

You see the above stock in your anticipation scans what happens.. Few months ago if you were new to it, you did not have procedural memory for it, but through constant practice you see CHTR you know what to do. But now many members  have develop a procedural memory for it and it takes then 10 to 12 minutes or less to find good candidates. In the beginning they were consciously doing the process, now they don't need to do it as step by step sequence. As soon as they run the scan the entire set of memory of the process is triggered and you start looking for good setups.

Same thing happens to the Range Expansion setup once you start using it daily. You can be talking on phone or eating and you see good range expansion candidate shows up and you enter it while continuing to do your other things.

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.

In order to develop procedural memory at first you need t have a process template and then after repeating the process template hundreds of time it become automatic. While doing that you develop your own process and might develop process different from the template I provide.

You will see hundreds of examples of that on this site. Members have taken setups like EP or STIB or Momentum Burst or Anticipation and develop their own process flows or modified them to develop new methods.

For discretionary trading it is all about procedural memory development on a specific setup. For mechanical traders machine does that job.

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.

If you want to make money trading focus on developing procedural memories and developing process loops. 

Focus your energy on finding good setups

Posted on 7/24/2014
What do successful trader do that makes them successful. They trade specific setup ideas. Some trade only one kind of setup while some trade a bunch of setups. If market conditions change they change the setup or make minor adjustment to setups.

All successful traders have through research , empirical observation , setup templates from other traders have arrived at their own setup.

If you read How to Trade in Stocks by Jesse Livermore it details bunch of setups he discovered after trial and error.

If you read How I made 2 million in the stock market by Darvas it details how he developed his setup idea of trading high momentum and high growth stocks.

If you read How to make money in stocks by William O'neil it details the setups he uses to trade momentum and growth stocks.

If you read One up on Wall Street by Peter Lynch it details his setups to trade various situations.

If you read You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblatt you will see bunch of setups for value investors.

If you read Trade Like A Stock Market Wizard: How to Achieve Superperformance in Stocks in Any Market by Mark Minervini you will discover what setup he uses. 

Traders specialize in setups and their thinking and behavior is driven by their understanding of setups. If they don't find their setups they do not trade. 

They know a vast amount about their own setups and why they work but they do not necessarily are experts on others setups.

If you talk to lot of successful traders you will find they had real breakthrough once they discovered a setup and focused on it. During the Stockbee Advanced Bootcamp many successful traders presented how they arrived at their setups. Before that they were also struggling. Once they discovered their setup  it allowed them to focus their time and effort and organise around it.

If you do not understand the concept behind setup selection you will struggle for many years. You will flirt from ideas to ideas. You will curse the market. You will say market is rigged. You will say everyone is out to get your money.

Unless you understand setups as key to profitable trading you are unlikely to make much money. Learn setups. Setups give you complete set of rules for every element of a trade for a particular timeframe or style of trading. A well thought out set up for swing trading will give you everything you need to do to trade that setup successfully. Once you understand it you will be able to trade it on your own without needing help. Most people who have very well defined setups have taken 5 to 10 years to arrive at it.

The trader who ran up his account to 96 million uses Episodic Pivots as his basic setup. If you know that then you don't need to know what color underwear he wears. If you understand the Episodic pivots setup you know what to do day in and day out. It has been detailed in significant detail multiple times and extensively discusses in every Stockbee bootcamp.

If you have well defined setup , you would be able to instantly recognize good opportunities and enter or exit them.

If you have well defined setup, you will be able to prioritize ideas and not waste time on marginal stocks or others ideas.

If you have setup oriented mentality you will ask everyone who posts trade idea to find out what setup generated that trade.

If you have well defined setup you will know instantly your entry, exit stops rules and not be a clueless person post entry. You will not be asking others what you should be doing or what is the target on this stock.

If you have well defined setup, you will not be easily influenced by any and every new tactic people talk about or sell as the new new thing.

If you really understand the language of setups you will not waste your time on all the macro discussion and end of the world scenarios.That is not a tradable setup.People who write those scenarios do not have tradable setups so they spend time creating fiction.

Focus your energy on finding good setups and mastering them, once you do that trading is enjoyable activity. That is the focus of this site since it started and you will see extensive discussion on various setups. Many successful traders tell me they remain member because of the focus on setups and not picks. They find new ideas from setup discussions.

 And as the 96 million man has shown , a good setup idea can change your financial future forever.....


Big moves and small moves

Posted on 7/23/2014
In the market there are small moves of 3 to 5 days  and then there are big multi month moves of big magnitude.
I focus on both kind of moves. For Active Trading Portfolio I look for  momentum bursts moves of 8 to 40%. For Working People Portfolio I focus on bigger moves. 

In a year you have thousands of momentum burst  moves of 8 to 40% magnitude. Swing traders generate profit by trading hundreds of such moves. Per trade profit might be just .5 to 2% of  overall equity, but sheer number of these small trades add up at end of the year to give you good returns.

More trade signal a method generates better it is as for such momentum burst swing trading methods as it allows you to manage risk aggressively. I can catch many with small risk and do not need to depend on just big moves to make a year. there is always next train arriving at station, so if I miss few trades it does not matter, if your trade stops you out it does not matter.

But when you focus only on big moves  missing the few big moves in a year can be a problem. If your system relies on few but big moves you need to risk big to make money (Episodic Pivots). Which is what I do when trying to capture big moves. But when you risk big you need to have higher skill and conviction.

In order to become good at trading the big moves first you need to master the small moves. Because of higher frequency of the small move that is relatively easy to learn in shorter time frame. To become good at trading only big move with higher risk it takes you years to develop that kind of expertise and conviction. 

To become good at trading small moves study thousands of small moves daily, if you want to become good at trading large moves study thousands of big moves.
Investors often "dream" of catching big moves and sitting in stocks for months or years . The question they must ask themselves , do they have skills to identify and enter those moves at right time.

If you do not have those skills efforts should be focused on building those skills. All traders were beginner at some stage and they have no god given gift , they learned these skills  because they wanted to make money.

More buy setups showing up

Posted on 7/22/2014
Few weeks ago market had extremely bullish breadth. That resulted in a bit of selling. The selling lasted only few days and has not had a follow through.

Breadth trends continue to show very gradual improvement with very low level buying pressure. Big moves are not happening as you can see on the Market Monitor.

But as there was no big follow through on selling stocks have started to bounce back. Some of those bounces are weak bounces.

From trading point of view however lot more opportunities have started to show up and many stocks are again now setting up for possible breakouts. If you see the anticipation scans we run , lot more stocks show constructive pre breakout activity.

Earnings season is creating lot of good breakouts and some pre earnings breakout. Today there were at least 10 good setups.

Look for big earnings surprises

CMg: Chipotle Mexican grill
Earnings season is best time to find big explosive moves. Big earnings surprise start big moves.

CMG had positive earnings surprise last night. It has potential to make 50 to 100 dollar move from open price today. Big earnings surprise leads to start of big moves lasting one to 2 quarters.  

Everyday hundreds of stocks release news before and after hours. These news releases can lead to stock making big move for just a  day or weeks or months. If you develop a skill to understand which stock to focus on from those earnings breakout, you can figure out which is likely to go up for few months or quarters.  What you have to look for is extreme surprise or growth.

When the earnings news is released either it is already discounted by the market or the market is surprised by it. If it is a big surprise then the stock discounts that news over next few months. A earnings surprise also tells you a lot about underlying trends in the business. If the underlying force contributing to earnings are sustainable then longer duration rally happens and stock  continues to surprise for few quarters.

Earnings surprises on heavily shorted stocks can often lead to big  short squeeze and offers very good opportunity.

Announcement related to earnings in either as guidance or actual earnings have potential for starting or ending multi month moves.This phenomenon is called PEAD or Post Earnings Announcement drift. It is considered a market anomaly. 

If you want to make big money focus on big earnings surprises. 

Working People need to be more selective

Working People who want to make money trading and investing face logistical problem due to their job.  Many of them do not have access to trading accounts or trading software during the day. With widespread availability of mobile phones that problem is no more a big issue.

Realistically many working people can not swing trade actively unless they have a job where company does not care what they do.

For working people more selective approach involving only 10 to 15 trades in a year is more realistic. But if you want to be that selective then you need to be very good at picking right stocks at right price. That kind of skill requires some experience and ability to invest serious time and effort in learning about markets.

On the Stockbee members site I run a Working People portfolio for members interested in only selective trading. It uses the Episodic Pivots method to find big explosive moves. It is very infrequently traded. Last year it had only 16 trades and 71% of them were winners giving 42% return.

This kind of trading approach requires extreme selectivity and very good risk management skills. If you are a working person and interested in developing this kind of expertise , read all the posts on Episodic Pivots method.

If you are motivated to make money there are always ways. 

One day and one trade

Posted on 7/21/2014
The challenge in trading comes down to doing the right thing everyday, controlling risk everyday, not getting carried away everyday , and putting a bit of effort everyday to develop new skills and expertise. If you do that successfully everyday in a year it adds up.

Same thing applies to each trade. Each trade stands on its own and the past does not matter. If you do each trade right then over hundreds of trades things add up. Getting stock selection right on each trade, getting entry, exit , stops, position size right on each trade is the day to day challenge of trading.

Controlling the controllable part of trading is where we must put our effort as traders. We do not completely control the outcome of a trade, it depends on number of factors outside our control. Wars can suddenly breakout. Companies can pre announce bad earnings after we enter. Analyst can upgrade or downgrade a stock. But that is all not our control. We must strive to do the controllable things right on each trade.

Everyday do the same thing over and over again on each trade the right way. Once you have a well thought out method this becomes easier task. After that the  the day to day challenge is largely about implementing your plan. That requires setting up a daily routine and adhering to it as far as possible.

But we do not need to do same thing again and again blindly irrespective of market conditions.  We know our swing setups work, but overall market conditions can have impact on the % of trades likely to work. So situational Awareness (SA) is important. It 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.

SA also helps you tactically change your entries, or exits or profit target. If market is range bound you do not expect big moves accordingly your target must change.

SA also helps you to understand market phases. 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.

If you want to make lot of money trading focus on one day and one trade....

How to find the next big mover

Posted on 7/18/2014
When market enters correction phase some traders tend to take their eyes off the market and focus on other things. But this is the ideal time to focus on next set of big winners likely to go up in next six month. Correction period is ideal time to identify these kind of stocks and research them and then wait for them to breakout. they often breakout way ahead of market turn.

When market enters correction not every stock corrects. Some go up , some resist the correction and spend time going sideways or having very shallow pullback on low volume. During correction some stocks get decimated and go down a lot or they are unfairly punished. both kind of  stocks are likely to burst out once the selling pressure in the market is lifted.

During corrections the big speculators like mutual funds , hedge funds, pension funds do not sell some stocks that they believe have further upside and often add to their holding during this period. This dynamics of reluctance to sell and  accumulation of stocks during correction creates good setups on big winners.

During corrections many stocks are aggressively sold. Sometime many stocks get punished more than they deserve. These stocks get cut in half or more during correction. For example during recent correction FEYE went down 70% from its high. Once the correction was over it bounced back 50% from that level. In recent years these kind of beaten down stocks have lead bounce attempt more than stocks that hold up well.

How can you find these kind of stocks during correction.

If you setup good scans you can easily find these stocks during correction. The starting point for finding these stocks should be a momentum scan. We want to find stocks that are in uptrend and that don't go down much during the correction. This can be done in number of ways.

Personally I run two scan to find these kind of stocks. One scan looks for stocks that have gone up at least 80% from their 52 week low (which indicates they have above average momentum , only around 5% of stocks in the market meet that condition) and that are within 20% of their high during their 80% move. So let us say a stock has 52 week low of 50 and it goes to say 120 in last 4 months  and during correction it does not go below 96, then I am interested in that stock.

The second scan I run is 65 days Trend Intensity scan which looks for ratio of 7 days moving average to 65 days moving average. Which finds stocks in uptrend. Trend Intensity measures how fast a trend is or as name suggest it find intensity of trends. Again key is to find the stock that has trend intensity above 105 and that has corrected less than 20% from high established during the high trend intensity periods.

In order to find stocks that have gone down a lot and might be good bounce candidates I run a scan that looks for stocks down 40% plus from 52 week high and that have sales above 300 million. The filter of sales above 300 million eliminate many small and speculative stocks that do not bounce back.

All these scans can be easily setup in Telechart or any commonly used software and the effort involved in going through these scans is around 30 minutes everyday.

The correction period gives you ample time to research these stocks and find those with big catalyst. Sector moves also become very clear during these periods. For example currently oil and gas and railroad supplier stocks are holding up well.

If you are serious about making some serious money trading use the correction to aggressively find next big set of opportunities. 

The market was weak and a bit of selling tipped the scale

Posted on 7/17/2014
Breath trends were deteriorating for last 8 to 10 days , so the Malaysian Airline shooting was not necessarily the reason for the selling today. The market was weak and a bit of selling tipped the scale.

Breadth trends deteriorated further as you can see in the Market Monitor . 176 stocks were down 4% on high volume. The breadth indicators like number of stocks up 25% in a month and number of stocks up 13% in 34 days are in negative territory. That shows the damage from last few days of cumulative selling. If you are up 5 times the YTD S&P gains like I am my objective is to build on it and not give up a penny . Coming in to today I was positioned for weakness.

The objective of swing trading or position trading is to make money and keep it and add to it. It is not to make money and give up lot of it during corrections. To do that you need to do proactive risk management. You have to be slightly ahead of the curve and become defensive at first hint of likely trouble. Breadth gives you ample warning ahead of time, if you acted on that you would keep your profits.

Corrections in this market so far have been shallow, so we will see how far this goes. At some stage the market will again setup on the long side and there will be ton of opportunities. In the meanwhile extremely selective approach on both long and short is what my focus is.

If you want to survive and prosper in this game you have to do extremely good job of risk management. 

Stockbee-50 stocks tell you the story

The Stockbee-50 list is published on most trading days after the close. The three lists put together give you the momentum leaders on long term, intermediate term and short term. These are the fastest moving stocks in the market for that time period.

If you combine the stocks in the list you will get these stocks today:


Have a close look at these stocks. Are they in rally mode or in pullback mode. Do large number of them in downtrend after establishing momentum high few months or weeks ago. Are lot of stocks setting up for breakout. How are breakouts on them working , are they having follow through or breakout failure, and so on.

If you do that you will understand what is happening in the market.

Deteriorating breadth

Posted on 7/16/2014
Breadth trends show deterioration. 

The Market Monitor is updated daily after close and you can see the trends on the MM tab.

Rising markets are characterised by rising breadth. Currently we see deterioration in breadth after hitting breadth high few days ago. 

Stocks had 4 big down days in last 8 days. The number of stocks up 50% in month has deteriorated from peak. Number of stocks up 25% in month has sharply deteriorated which tells you big moves are not happening in the market. Stocks up 13% in 34 days is also deteriorating and might turn negative any day. 

For momentum burst kind of methods overall market breadth matters as weak trends indicate lack of follow through on breakouts. Periods like this can be frustrating and sap your confidence. 

I personally play very cautiously and selectively in these kind of environment. I hate draw downs and always try and make money with minuscule draw downs. 

If you want to make money with little draw downs pay close attention to breadth and make it daily habit to track it. It will save you a bundle.

Good trading template will save you years

The challenge for new trader entering the market or someone struggling in the market is different from someone who has been around and successful. 

The new trader needs to find an idea that is structural in nature and is fundamental to nature of market. He or she must find a market anomaly that has historically proven to work. After that the real difficult task of actually making it work starts.

If I have to give one piece of advice to someone starting out in trading it will be to first find something that is structural in nature of the market. As a trader your  first and most task is to find some structural phenomenon to build your edge around. If that step is wrong for obvious reason no matter how much you try you will not find much success. 

But finding successful structural phenomenon alone will not ensure your success unless you can develop detailed trading method around it. While this task is easy for established trader (they can take a concept and convert to trading system relatively easy), for beginner to make that leap is challenge and requires persistence and ability to innovate.
It should exists in the market and not figment of imagination.

What are some of the structural things in the market:

1 Market moves in momentum bursts

2 Momentum stocks outperform non momentum stocks

3 longer term momentum is mean reverting

4 Surprisingly good earnings leads to rallies

5 News leads to immediate moves

6 small cap/small float outperform larger stocks

7 lower priced stocks outperform higher priced stocks

Now if you know any of these you can build your trading around it. But that is just starting point unless you have a template to convert any of the above things in to setup you will struggle.

Let us say if you know market moves in momentum burst. Fine what next. To trade something like that you need to know which stock to buy today, where to buy, how much to buy, where to put stop, where to exit and more importantly when to not trade this method then you can actually convert the structural edge.

The kind of details to trade any structural edge are important for trader development s it helps you see "how it is done in real life profitably". Ultimately you may not trade exactly like that template and will develop your own trading template.  

I was lucky to find some good templates right in first few years after I started trading and that saved e years and a bundle of money. Eventually I adopted and modified those templates to fit my personality. 

If you are motivated serious about making money in trading hunt for good trading templates. It will save you years and money.

Where do trade ideas come from

Posted on 7/15/2014

If you develop a well oiled trading machine, you do not need to worry about new trade ideas.

If you have well designed scans to find what you are looking for , you just need to run them daily throughout the trading day and then select trades.
This process starts by setting up everything to catch various kind of opportunities. Some scans you need to run pre market, some during the day, some at end of the day, and some after hours.

From your scans you get possible candidates and then you can act on them. 

If  you are anticipation kind of trader then you will have various scans or ways to generate anticipation lists and then the task becomes easier as you just have to look for your signal on those stocks.

Everyday I run one scan pre and post market looking for big volume movers. From that I generate trading candidates for entry. 

During the day I run 3 scans to find other kind of stocks. The scans throw wider net , and if I find stock meeting my requirement in them , I enter them immediately.

In order to anticipate breakouts I run 2 scans after hours and from that find 10 to 12 candidates for anticipation entry. 

Together these scans offer me sufficient candidates day in and day out. I don't look at what others are doing or look for picks from others. 

If you have your own well thought out setups  you don't need others picks.

If you spend time developing your own edge , you will find same trade that others find through your own scans.

You do not need to rely on others picks to become a good trader. Develop your own trade factory and become a self sufficient trader.

How to profit from short term momentum bursts

Posted on 7/14/2014

UAL 10.90% in 3 days

Stocks move in momentum burst of 3 to 5 days. This is a short term phenomenon exhibited by thousands of stocks every year. 

To profit from this you need to enter on any breakout or gap up and exit on 3rd or 5th day.

Some stocks make 8 to 40% move in just a matter of 3 to 5 days. Some time the entire move happens just in one day. Lower priced stocks and  low float stocks tend to have bigger and more explosive moves.

Some of these moves happen due to some short term news as was the case in UAL. To quickly find these kind of stocks you need to scan for stocks up in pre market. 

I scan for stocks up 1% plus on 50000 plus volume in pre market. On that set of 10 to 12 stocks I look for stocks with good setup.

This kind of momentum burst method is relatively easy to learn. As the method produces lot of trades you can quickly learn. The method makes money by catching hundreds of trades like these in a year. Some trades give you just few % gains while some give you big gains.As long as you control the risk well on losing trades it is not a problem. 

This is one of the ways to make money swing trading. I use this kind of method along with other longer term methods. The longer term methods do not frequently produce signal while momentum burst gives you steady stream of trades.

There are hundreds of variations of this  kind of short term swing methods. If you are motivated trader , keen on making money swing trading,  you should study and master the mechanics of these kind of methods. 

Always look for methods not picks

Many traders are looking for picks. They trade others picks.

If you want to build long term edge look for methods and not stocks picks.

Stock picks may or may not make you money. But if you become dependent on picks you will have no edge.

But if you know method and do your own scans , develop your own way of finding trades , it will stay with you.

Find step by step methods explained well with clear logic . Understand each element of the method. Understand when it works and why . Understand how it makes money. See if you can run same scans and follow same steps and if you can find same trade and make similar kind of profits. 

First step to becoming successful trader is to stop following someone else's picks.

How to become good at swing trading

Posted on 7/11/2014

Swing traders try to capture short term explosive moves in stocks. Stocks move in explosive 3 to 5 days momentum bursts. Swing trader either use anticipation or breakout to profit from these explosive moves.

If you are serious about your trading and want to profit from swing trading you can do things that will make you a better swing trader.

Study everyday stocks up or down 8% or 5 dollars in last 5 days. These are the stocks that this week are making big explosive moves. Study them everyday and note down your observations. 

If you look for stock above 5 up 8% or 5 dollar in last 5 days you will see these stocks:


As swing trader you want a scan or method to find these kind of setups daily. In order to do that you need to observe how they set up, how they breakout , how they progress and everything about them. 
Based on those observation you know which is a good setup

Based on those observation you know whether to buy stocks with prior day low range or negative day

Based on those observation you know whether to buy stocks up 3 days or not

Based on those observation you know where to put stop and why

Based on those observation you know where to exit and why

Based on those observation you know whether to focus on all time high , 52 week high , 52 week low and why

Based on those observation you know how high priced stocks move and how low priced stocks move

Based on those observation you know whether p/e matters or not

Based on those observation you know whether EPS growth matters or not

Based on your actual observation of these moves challenge every wisdom you hear or read about swing trading.

Every secret you need to swing trade successfully you will find if you daily  study  these explosive stocks.
Do this daily for 90 days and everyday your trading will improve and on 90th day you can burn all the books on trading ....

If you want explosive returns study explosive moves...

How to stay out of trouble

Posted on 7/10/2014
Last 3 trading days the market entered correction phase and many momentum leaders faced selling . You should not be surprised by this. That is the nature of market.

Excessively bullish breadth tends to be unsustainable and leads to corrections. The question is how to define excessively bullish breadth?

I track a very simple number for this. The number of stocks up 50% in a month. If you study this number you will find the number remains below 20 most of the time. When it reaches above 20 you will see market corrections in next 3 to 15 days time frame.

Every Time you see the number go above 20 you have to get cautious. You will discover sooner or later in next few days heavy selling occurs. 

This is a very simple tool which will allow you to stay out of trouble and be warned in advance. Accordingly you can take profit , tighten stops on existing positions or reduce open risk. If you do that you will not be surprised by market weakness.

On June 30 I posted a video on members site pointing out this number and warning them to be cautious and not get carried away by excess bullishness. Those who acted on it are in happy camp. 

The secret to making and keeping your profits in swing trading is to identify good and favorable periods for swing trading and ahead of the time identify likely risky periods and change your strategies accordingly. If you do that you do not suffer draw downs, you do not suffer from psychological problems and you are happy trader. 

If you do not do that you will go through up and down cycles where you will make profit and give up profit. If you do not do that you will get aggressive in your trading at exactly the wrong time. If you do not do that you will be making fun of short sellers and bears at exactly the wrong time instead of protecting your profits. 

If you are a motivated trader who really wants to make lot of money trading and prosper for many years learn about market breadth and how to use it to find turns in market.

It will help you stay out of trouble.

What to look for in an earnings play

Posted on 7/09/2014
The earnings season has started and you will see many companies releasing earnings. many will beat earnings . That is the game companies have skillfully mastered over the years. Some will miss. Some will go up 20 to 40% in few days post earnings.

Those are small moves.  More suitable for swing trades.

But then there are explosive moves like BOOM which can make your year...

If you see this stock pre earnings it had no liquidity, no analyst coverage , and no meaningful % gain in 8 to 10 years prior to breakout.

And then it announced earnings and they were blowout :

(Boulder, CO - November 11, 2004) Dynamic Materials Corporation, (Nasdaq: BOOM), "DMC", today reported third quarter income from continuing operations of $1,135,275, or $.22 per diluted share, versus income from continuing operations of $358,568, or $.07 per diluted share, for the third quarter of 2003. DMC's third quarter 2004 sales were $12,070,114, a 24% increase from third quarter 2003 sales of $9,724,125. For the nine months ended September 30, 2004, DMC reported income from continuing operations of $2,106,667, or $.41 per diluted share, versus income from continuing operations of $1,367,312, or $.27 per diluted share, for the first nine months of 2003. Reported sales for the first nine months of 2004 increased by 27% to $34,215,328 from $26,930,181 for the comparable period of 2003.
For the three months ended September 30, 2004, DMC reported net income of $833,902, or $.16 per diluted share, compared to a net loss of $679,393, or $.13 per diluted share, for the third quarter of 2003. For the nine months ended September 30, 2004, DMC reported net income of $537,130, or $.10 per diluted share, versus a net loss $130,281, or $.03 per diluted share, for the first nine months of 2003. Reported net income for the three and nine months ended September 30, 2004 reflects the negative effect of a loss from discontinued operations of $301,373, or $.06 per diluted share, and $1,569,537, or $.31 per diluted share, respectively, including operating losses of $133,373 and $782,537 for the respective periods and a $787,000 loss for the nine-month period relating to the previously announced divestiture of the Company's Spin Forge Division under a transaction that closed on September 17, 2004. The net loss for the three and nine months ended September 30, 2003 included losses from discontinued operations of $1,037,961, or $.20 per diluted share, and $1,497,593, or $.30 per diluted share, respectively, relating to the combined 2003 operating losses of Spin Forge and the former Precision Machined Products ("PMP") division, which was sold on October 7, 2003, and a loss on the sale of PMP in the amount of $710,309 that was recorded in the third quarter of 2003
Once you see earnings growth like that in neglected stock like this you don't have to be Einstein to figure out what is going to happen. The stock will triple or more. 
Eventually this stock went all the way up to 45 or so in a year after this first earnings acceleration. 
These are the kind of opportunities to focus on during earnings season. For that you have to find out which companies are releasing earnings before open or after hours and then look at the outliner in earnings or sales growth on extremely neglected stocks. 
You just need one or two trades like this in an earnings season to make your year or change your financial situation forever. And all it takes to find these stocks is 15 minutes of systematic work of going through earnings and stock that gap up after hours or pre market. 
Related Posts

Few good earnings trade can change your life

Posted on 7/08/2014
Of all the methods I have traded so far in 14 years, the method that has made me the most money in absolute dollar terms in shortest period of time is Earnings based Episodic Pivots. The method can double or triple your account in just few weeks. It infrequently produces good candidates but those good candidates can make your year or sometime they can make you 3 to 5 years worth of profit in few weeks.

The starting point to developing the earnings breakout method was one big trade in USLB. In the beginning of 2001 I found a trade that helped me decide to become full time trader and since then I have never looked back.

During the earnings season I found this small stock with multi month neglect that had triple digit earnings. It gapped up on that news and I bought the position with entire capital I had at that time plus some margin. Subsequently I added to the position around 9 and liquidated the position between 14.50 and 14.

In 11 weeks I made 4 times more money than I was making in a 100000 a year job. Once I closed the trade I made up my mind, never to work again for someone else. If I can make 4 times my salary in few weeks all that I have to do is find 4 to 5 trades like this in next decade was the thinking. And that decision has paid of.

On an average I find one good trade like this in a year. Some years you find 10 to 12 such trades , some years you find only 1 or 2. The trick is to wait for all stars to line up for these kind of trades and then risk sufficiently big amount to make a difference. Last year FB made lots and lots of money for me and my friends for whom I help manage money.

Unless you really find a big earnings trade like these you will never be convinced of the power of these trades. The kind of explosive moves. In 2007 in September I saw a Chinese company announce earnings and they were blowout earnings with triple digit sales and earnings growth. I bought big on margin around 14 price . In 13 days I sold the stock for 38 as it gaps and started reversing.

Over the years I have developed structured method to find these kind of trades during earnings season. And over the years after catching some of these big moves and systematically studying some past big movers and talking to others who also trade similar ideas I have a much better understanding of what to look for in these kind of candidates.

Big moves start during earnings season and if you track them you can find some real big trades that can forever change your life....

Big game hunting season starts this week

Posted on 7/07/2014

Big earnings surprise leads to big moves. The earnings season is starting this week and it is time to hunt for big opportunities of 50 to 300% profit potential.

During the earning season if you get eye popping earnings surprise that might be big money making opportunity.

Big surprise leads to big moves. Everyday hundreds of stocks release news before and after hours. These news releases can lead to stock making big move for the day. What you have to look for is extreme surprise or growth.

When news is released either it is already discounted by the market or the market is surprised by it. The stocks can either go up or go down.

A heavily shorted stock on good news can lead to short squeeze. A heavily favorite of fund stock similarly on surprisingly bad news can tumble.

Announcement related to earnings in either as guidance or actual earnings have potential for starting or ending multi month moves.

This phenomenon is called PEAD or Post Earnings Announcement drift. It is considered a market anomaly.

In a perfectly efficient market a news should get discounted immediately and there would be no way to profit from it.

So let us say a stock releases significantly better earnings. If such earnings is going to lead to doubling of the stock, then at open it should gap up to the double price and there would be no way to profit from the new information.

But markets are not efficient. What happens is the new surprise gets priced in over time. This is what the PEAD phenomenon is about.

When companies announce earnings, if the earnings are significantly better or worse than market/analyst expectations then the company stock goes up or goes down for next couple of months.

That is what happened with FB last year in July earnings. It surprised the market big time. I bought it in pre market around 33 and sold it after 6 month between 60 to 70. Using options the gains were even better. One trade made significant amount of money as the amount invested in it was big and option created further leverage.

Post Earnings Announcement Drift

Post Earnings Announcement Drift or Pead is 40 year old discovery. Ball and Brown in 1968 first documented the PEAD anomaly in their ground breaking study that challenged efficient market hypothesis.

What does the study show. it shows that if you form 10 portfolios of stocks ranked by their earnings surprize then the portfolio of stocks that are in top 10% by earnings surprise outperforms the 9 other portfolio and similarly the bottom decile portfolio under performs the nine other deciles.

This is the most researched topic in financial field. Every year at least 50 new papers are published on PEAD and is persistence.

Stocks react vigorously to earnings acceleration.

If you understand that you can make lot of money if you find these acceleration at the earliest.

After a few quarters of earnings acceleration, every one notices it and the reaction is more muted as the earnings get discounted.

While there is a vast effort by many speculators to anticipate such earnings acceleration and take positions in anticipation, even if you react to earnings and enter after the earnings announcement, you still can catch bulk of the move.

Typically first earnings acceleration is followed by more earnings acceleration or the improved earnings continues.

The structural factors which contribute to earnings acceleration do not disappear in one quarter. That is why earnings trends persist and price trends persist.

PEAD phenomenon is more pronounced in thinly traded stocks.
PEAD phenomenon is more pronounced in stocks with no analyst coverage.
PEAD returns persist even after one quarter.
PEAD is more pronounced on stocks with revenue surprise in addition to earnings surprise

While day traders look for one day moves on earnings day, for position traders or swing traders the PEAD phenomenon can offer longer duration picks.

After the day trading frenzy is over in these stocks , in many cases, they pullback and setup and go up after a breakout.

PEAD was relatively unknown phenomenon among retail traders around 6 to 7 years ago . Now everyone is aware of it and as a result many PEAD stocks tend to move big on earnings day often going up 20- 40% and then spend several weeks pulling back .

Buying after earnings is less risky as the news risk is out. However companies use the good news to time secondaries and this can lead to stocks with good earnings dropping after few days of rally after earnings.

Secondaries for growing stocks are not a big problem as long as the money is used for expansion. Secondaries where the owners sell aggressively can be rally killer for a stock with excellent growth.

Buying after earnings is good strategy for position traders. Good example of that was FB in working people portfolio which we bought after the earnings.

In a market driven by growth , you will find small companies offer best PEAD opportunities. In inefficiencies are greater on them.

When looking at earnings news, you also need to look at guidance. If the guidance is not in line with expectations, stocks can drop on earnings even if earnings are good.

Same way a stock with bad earnings will make big move if the guidance is good.
Larger companies are masters at manipulating investors earnings expectations through forward guidance and pre announcements. Genuine surprises on large caps tend to be rare. But when they happen they can signal significant shift in underlying business dynamics. FB is recent example of that.

Best opportunity related to earnings is in small unknown company that suddenly starts growing rapidly.

When a small company with say below 50 million revenue starts growing suddenly in increments of 250 millions per quarter then you get explosive situation. This kind of growth happens in new segments or consumer products.

For example NTRI , CROX and HANS (now MNST) during the 2004 to 2007 periods became billion dollar plus companies in span of 4 to 6 quarters and correspondingly the price of their stock went up milti fold.

For a consumer product company with hot product , it is easy to grow rapidly as US has 300 million plus hungry consumers and if a product becomes hot must have product , it is easy for the companies to just plug in the product in existing distribution channel. Besides that most consumer products tend to have high margin.

For position traders finding such extreme growth situations should be top priority. A hot growth company if it takes off can make very explosive moves.

While such moves are not common in this market, there are market periods when such stocks dominate the market. This happens when new industry is being created.

 During the intenet expansion from 1990 to 2000 you had several hundred such companies. In the bull market of 2003 to 2007 the growth in BRIC countries and in commodities created hundreds of such extreme growth situations.

During this earnings season look for:

Look for extreme earnings growth on a company starting out to grow

Look for extreme sales growth (just starting out and of magnitude likely to make the company a billion dollar company)

Look for extreme price strength ( just starting young trend with explosive first leg)

Look for extreme neglect (multi year , low float, low volume
You have to be first to find them as early as possible and not when everyone knows about it…

That is where big opportunity is in earnings season….

Right beliefs lead to profitable trading

Posted on 7/03/2014

Our beliefs about economy or economic policy or market or a stock or sector or growth or value or momentum drive our behavior.
If you believe (rightly or wrongly ) that only low p/e stocks are worth buying and high p/e is dangerous, your behavior is dictated by that . As a consequence you will focus on particular type of stocks.
If you believe market is manipulated (rightly or wrongly) you will spend time and effort propagating that view and explain any failure in your trading by saying the game is manipulated and you can see several popular blogs dedicated to such beliefs and thousands of ardent believers lap up every new conspiracy theory on these sites.
If you believe growth stocks is the way to make large fortune in market based on your study of traders who have built big fortune starting from small account you will act on your belief and learn everything about growth stocks. As a result of your beliefs you will develop and trade growth stocks.
If your belief is all the people trading stocks are wasting their time and only instrument worth trading are triple ETF , you will build your entire trading around it. And you will be the one eyed king in the blind kingdom of etf believers.
If your beliefs are that only way to trade is using mechanical strategies, your entire empire will be built around that belief and you will develop your beliefs about market based on testing and backtesting.

Right beliefs lead to profitable trading

Our first starting point should be to examine our own beliefs about own trading if we want to change our trading.
The trading blogosphere is a good indicator of overall market and kind of traders you will see in the real market. Go through thousands of trading blogs and you will find common beliefs patterns and that attracts similar thinking readers.
If your trading is profitable for long period of time and it is working for you, it is likely to be because you have correct beliefs about the market you trade and the methods or indicators you use.
As against that if you observe carefully you will see the big problem for most struggling traders is that they have beliefs about market which are not necessarily based on market structure or behavior.
Or are gullible and believe anything or everything and flirt from beliefs to beliefs. They easily get influenced by others belief.

Right beliefs lead to profitable trading

How do we develop our beliefs, by education , by scientific examination or by experience.
As A child we have several beliefs that once we grow up know are not true and we replace those simplistic beliefs with more sophisticated and nuanced beliefs as a result of education, reading , life experience and so on.
One of the problem in trading is there is no established education path which will inculcate right beliefs in people.
In any other profession you undergo a 4 to 10 year education or professional training before you start practicing that profession. During that period you learn the right things to do in that profession . You acquire a thorough theoretical grounding and right kind of beliefs are inculcated in you. As a result when you practice that profession you behave in certain manner.
As against that in trading you are mostly on your own with no formal established belief system. All kinds of weird beliefs are propagated as holy grail and some slice of people believe it. If those beliefs are wrong they lead to loss.
Let us say you want to become a doctor and you believe a person's heart is in his ass or people have black blood and green blood in their body, or the brain is situated in your knees it is unlikely you would be allowed to practice medicine. You will not pass the medical exam, you will not get licence. But in trading no one will stop you from trading with all kind of such wrong beliefs.

Right beliefs lead to profitable trading

If you want to build a long term enduring edge then you must base your beliefs on science and structure of market.
Mankind made more progress in last 300 years than in any of the past millions of years once the system of scientific beliefs was established.
The scientific revolution was the emergence of modern science during the early modern period, when developments in mathematics, physics, astronomy, biology (including human anatomy) and chemistry transformed views of society and nature.
According to traditional accounts, the scientific revolution began in Europe towards the end of the Renaissance era and continued through the late 18th century, influencing the intellectual social movement known as the Enlightenment.

Right beliefs lead to profitable trading

Same kind of approach we should take to our trading. We must base our trading beliefs on empirical evidence. We must challenge wrong beliefs and replace them with correct beliefs.
In last 50 to 60 years markets have been studied using scientific methods and now we know based on overwhelming statistical evidence certain anomalies exists in the market.
We know momentum is one of the best demonstrated anomaly in the market.
We know PEAD (post earnings announcement drift) is another persistent anomaly in the market.
We know several anomalies and why they exist. If we study them we will be basing our views and trading on right beliefs.
If every study shows momentum is the biggest and the most persistent phenomenon in the market then you will base your trading on it. You will develop methods to exploit momentum.
Within that people have studied how momentum works on various time frame and as a result two kinds of methods of trading momentum have evolved. One buys in direction of momentum while the other buys on mean reversion.
Now if you believe momentum does not matter or it is wrong to trade momentum or high p/e stock are bad for investors then you are like a doctor who believes your heart is in your ass in spite of overwhelming evidence that it is in the chest.

Right beliefs lead to profitable trading

Every method we trade is based on some market study.
Stockbee Momentum burst is based on momentum
Stockbee Double Trouble method is momentum based
Stockbee Trend intensity method is momentum based
Stockbee Lemonade Strategy for 401k is momentum based
Stockbee Episodic Pivots method is based on PEAD (post earnings announcement drift)
You can go and verify it yourself. These anomalies exist and well documented and researched.
There is nothing that I trade that is based on irrational beliefs or far fetched scenarios or some manipulation theory or super secret sauce.
I would encourage all of you to follow similar approach. And if you take that approach you will thrive in this community because several people will help you test your beliefs will tell you 10 nuances about it that you may not have thought about .
Get rid of your irrational beliefs and replace them with right beliefs and money will flow.

Right beliefs lead to profitable trading