What to look for in good anticipation setup

The overall market has been range bound for over a year and YTD the S&P is up only .22% as of yesterday close. In this kind of market many breakouts do not have big follow through. So one must supplement breakouts setup with anticipation setups. That way you enter a stock quickly and can capture the breakout day gains also.

ACOR is an example of kind of stocks I look for in anticipation setups

What to look for in good anticipation setup

• series of narrow range days in pullback/consolidation
• orderly pullback with no 4% b/d during the pullback or consolidation
• low volume pullback
• low volatility during pullback
• linear first leg if looking as continuation setup
• Stock should go up smoothly and not in volatile manner
• 3 to 10 days consolidation/pullback
• not up 3 days in a row
• some immediate catalyst like earnings surprise or recent earnings acceleration

In order to find stocks like these you must develop a process to run after market close. Run scans on stocks with established  momentum and identify good candidates. Once you develop expertise in identifying these kind of setup it takes you 15 to 20  minutes to find good setup for next day.

Next day you can enter them as soon as they start to breakout. You can use price alerts to notify of a breakout or use pre set orders to enter these kind of setup.

AMZN is an example of recent trade like this which made multiples of my risk in just 48 hours. In this kind of market environment where moves are of few days that is a good setup to have in your tool box.

This is a trade I entered yesterday right at market open. The stock is up 7% for the day. Stock had very good anticipation setup pre breakout.

If you are serious about making money swing trading then you need to develop expertise in setups like these. Once you know how to find and trade these kind of setups you can find several hundred opportunities like these in a year.

OLED good example of anticipation setup

The big advantage of anticipation setup is t allows you to find very low risk trade ideas. If the trade works the trade gives you multiples of your R in just few days.

All that is required is 15 to 30 minutes of work in night identifying good setups and then entering early.

By end of the day it was up around 7%. For very little risk this is now multiple R trade.

AMZN is good example of what to look for in an anticipation setup

AMZN is good example of what to look for in an anticipation setup. As you can see it was highlighted in my list of stocks to watch yesterday before open. It was good buy in first few minutes. From that buy point stock is already up 10 points.

Anticipation Watchlist for today

TYL AOS MGLN LEA FB ALXN ELS JKHY MSFT RARE CNC RJF MYGN LNKD AVGO CEMP HD NVDA ALK ATVI NOW SFLY SQ VTL ADSK DG LDOS CSIQ SYKE SBUX CLI GE LB PLAY NGHC HOLI SFS IDTI SAAS NFLX IMMU ORBK OLED TTWO NEO ULTA VRA NOC MEET RTN JASO SWHC AEIS IRBT NUAN SCTY NTGR EXTR BDX CRAY PLAB RTEC HMSY MPWR SKYW NSA SMTC MXL TAP BZUN VA FNSR TEVA FONR AERI VLRS SGMO ACRS SEDG CAB LXRX IMGN SA AKBA RLYP SBH ATHM HA DAL SRG VLO NOAH PRTA OSIS

If you are serious about making money trading then learn how to identify and trade anticipation setups. You will find several opportunities with low risk in a year like AMZN.

Bullish Anticipation list for this week.

Weekend allows you to do your work and go through scans for stocks with various momentum characteristics and generate list of stocks ready to breakout. 

For someone like me it takes couple of hours of effort on weekend to generate the list after going through around 500 to 800 stocks depending on market conditions. 

The list typically will help you find 3 to 5 trades during the week in most market conditions. In bullish markets you will find 10 plus good trades. 

As you can see lots of stocks are setting up for breakout currently.  Any improvement in Indexes on high volume and breadth would have these stocks taking off.

As of now the market is still not really the kind where you get big swings of 3 to 5 days. Many breakouts are just one day wonders.

Personally I am still in cautious mode and capital protection mode . Most of my trades have been intraday kind.

Anticipation setups for this week

GOOGL GOOG ULTA NHTC AERI AMZN RARE PRTA MGLN SRG RJF CNC CAB NSA MYGN MSFT SINA FONR SFLY AKBA MXL SYKE PRAH VA ITCI ORBK NEO JASO VRA CYTK AVGO ELS PLAY RTN TAP JD VTL SEDG CLI SBUX GDDY LXRX NTGR ATVI OLED TOUR SAAS ENZ IMMU NCTY SBH SQ ALK WBAI VLO IMGN DG FNSR ALRM SFS MEET SGMO HA HOLI JKHY HMSY OSIS SWHC EXTR VLRS LSCC LXFT NUAN SRPT AGRO NGHC BZUN ATHM MPWR SA AEIS HD NOW TTWO TEVA NVDA NOAH AOS FB IDTI NOC SCTY TYL

Anticipation Setups for today

TYL DG HD OSIS FONR AOS LNKD RTN SQ ODC CRAY JKHY IONS TOUR TAP CPRT PODD NCTY MPWR RJF LSCC VRA EBS SEDG CAB FNSR STKL AMPH STRL IDTI HA NUAN TEVA NTGR ANFI GDDY CTRP NVCR PANW ULTA BIDU GOOG AMZN

Stocks setting up for breakouts

MNK BLOX LBIO FNSR CEMP HMSY TSLA NVAX DG AMPH LNKD IPGP SWM BABA TEVA SCLN ANF PODD GMED LSCC PANW HD GE RGR RTN ATHN TAP RTEC CRAY ULTA NKE TOUR NUAN HTHT EBS GOOGL IDTI ODC VRSN TYL NTGR AYI FONR ATVI MXL NTES HA AMZN CTRP STMP ITCI NCTY GDDY SQ NVCR

Stocks with  momentum setting up for possible 8 to 40% breakouts in next couple of days. 

How to find good anticipation setup

In order to find good swing trade opportunities using anticipation , work needs to be done after market close to identify stocks setting up for possible breakout next day.

Look for stocks with established momentum. That way you can narrow down your universe to few hundred stocks to look at instead of 7000. On the stock with established momentum you can run a scan for narrow range days that will give you 40 to 50 candidates to focus on for further analysis. From the 40 to 50 you can narrow down a focus list to 3 to 5 candidates.

The advantage of anticipation is you have time to research the  stock and only focus on stock with clear catalyst that can lead to big move.

For working people this method is good. You can identify the anticipation setups on weekend . Once you narrow the list you can  monitor that list for breakout during the week.

Here is a list I generated over the weekend for anticipation this week:

DG JBT MPWR JKHY RLYP NVCR FONR TOUR AMPH PODD IDTI LSCC ULTA ANFI SQ NCTY ALRM AOS VRA OSIS ATHN BABA TYL

If you are serious about making money swing trading a setup like anticipation setup is good starting point. 

Use earnings surprise to find swing trades

If a stock has surprisingly good earnings and it was not rallying in to earnings, it tends to go up post earnings.

Post Earnings Announcement Drift (PEAD)  is the name for this stock tendency. PEAD effect an be short term or long term. In long term stocks with history of continuously beating earnings estimate tend to go up.

You can use PEAD to find swing trades. Look for stock with big earnings surprise in recent quarters. They tend to rally on such surprise.

OME is an example of recent trade like that. OME had a 83% earnings surprise that resulted in gap up and 37% move in 19 days.

In order to find stocks like these you need to scan daily for earnings surprise and focus on stocks with constructive consolidation pre earnings that show positive reaction to earnings. 

I use  Marketsmith to scan for these kind of stocks. You can create a scan like this to find these stocks. 

 Many stocks in the scan continue to offer swing opportunities till next earnings season. If you do not have Marketsmith you can use free resource like Zacks to build your own list of earnings surprise candidates. 

Earnings growth and earnings surprise is one of the strongest catalyst for stock price going up. If you want to make money swing trading focus like laser on stocks with big earnings surprise. 

Anticipation setups for December 16, 2015

Stocks setting up for possible breakouts

ULTA
HA
W
AOS
RTN
NOC
SA
HAWK
PODD
AMPH
ANFI
ROCK
CSTM
AVAV
BCOV
PACB
NTGR
ZIXI
NCTY
IDTI
NUAN
ATR
STRL
WD
CCRN
AVGO

Look for low risk entry setups

You can not completely eliminate risk in the market but you can control and minimise it by doing better job of selecting the right stock, selecting the right time, and selecting the right place to enter it. This is part art and part science. 

As far as possible look for a entry where you become quickly profitable post entry and your stop is very close to entry. If that happens you have a very good setup.

The low range anticipation setup is that kind of setup. In this setup you have to identify a low risk entry point in an established trend. It involves some  elbow grease to find these kind of setups. 

The big advantage is you get very good entries and stops are in most cases less than 4% or so. As a result if the stocks make 8 to 20% move your risk reward is very good.

In order to find these kind of setups I focus on stocks with established momentum. That increases your probability of success. On that I scan for low open to close situations. This brings depending on market conditions 100 to 300 candidates to study. After that in first cut I eliminate the  extended and very volatile movers. That narrows the list down to around 10 to 20 stocks with linear trends and orderly pullbacks or sideways moves. 

On that narrow list then I look for some sort of catalyst like earnings surprise or earnings or sales acceleration or new orders or new drug trial . That gives 1 to 5 high quality setups or next day entry.

The focused list then I enter in my trading platform and set alerts on are in some cases create limit  orders at my buy points. For first 30 minutes I watch and enter them. Most of these kind of setups breakout early in first 40 minutes. Once in I put in a stop near low of the day or low of last 2 to 3 days. Once stock starts moving it attracts breakout buyers and once it is up 3 to 4% I move my stop up further to try and be as close to break even as possible. Once trade had 8% plus profit then I aggressively move stops t lock in at least part of the gains to ensure it does not turn to loss. As stock moves in my favor I move stops to lock in profits or sell in to strength.

 Not every stock sets up perfectly and acts according to plan but because the risk on these trades is very low you can have many shots at these setups. 

Using low range bars to anticipate entries is one of the ways to look for low risk entries. It can supplement other setups like breakouts and help lower risk. 

Stocks on my anticipation watchlist today

NCTY

HA

NTGR

STRL

IDTI

LDOS

CYNO

MAS

XLRN

SIX

ATR

ICLR

INTC

JNJ

MNK

ALRM

If you are serious about swing trading develop anticipation setups , that will help you find low risk entry points. Especially in market where many moves have been of smaller magnitude , anticipation is better approach. 

Control your risk

Controlling risk is No 1 job for a trader

Controlled risk taking is the name of the game if you want to make money and keep it in the market. If you do not have a good strategy for managing risk  sooner or later you will blow up. It is just matter of time.

The market has phases when risk is lower and you can be very aggressive and it has phases where you have to be way cautious. Best traders over the years develop strategies and tools to "anticipate" risky periods.

You have to anticipate danger while you are 25 miles from it not when you are few feet from it. This is where real skills in trading comes in. Traders who prosper for years develop indicators and tools to identify such periods and then reduce exposure aggressively  or change their trading approach to reduce risk.

Personally I use the Market  Monitor to control risk. It signalled this pullback ahead of time on 11/24/2015  when the number of stocks up 50% plus in a month climbed above 20. There was further confirmation when other indicators started turning negative and series of big volume days. By that time I was already in cash and only looking for short term intraday trades. As a result I manged to keep my account intact without giving up too much profits.

Market breadth is one of the ways to develop market timing tools , there are many other ways to do it also. Key is to have very sound risk management strategy, absent that you will lose big money. When you lose big money it affects your mood , your family , your health.

If you want to make and keep money trading remember your number one job is risk management. How you handle risky periods will determine your long term profits and survival.

Anticipation setup for today

My updated anticipation list for today

GOOGL ULTA KBIO SIX JBLU INTC CPRT MRCY MAS SQ LMAT ALRM IRMD BECN MNK FB ATHN LEA HD REGN

AXON is kind of setup you want to find

Today morning I highlighted some anticipation setups. AXON was one of them. It has the characters of what to look for in a good setup.

Here are some of the anticipation setups I am watching today:

PACB

NCTY

MRCY

AXON

SQ

ENZ

DLTH

INTC

WB

KBIO

ULTA

Once you do your homework on these you have to select 1 or 3 to focus on and enter right near open with close stop. AXON was one such setup. It is now already up 8.36%. If you had done your work you would be in already or even out with profit.

Breakout traders would be looking at buying it now. Which will be more risky.

Anticipating breakout  gives you good opportunities like these  if you learn to trade these. 

Look for narrow range days

Anticipation allows you to find very low risk entry points in stock. If you enter with very tight stop then the risk reward can be good.

FIVN is an example of such setup . It had 5 narrow range days  before yesterday. Tuesday  was the narrowest day of them.

It showed up in the Anticipation scan. Stock has established momentum , so this is part of a continuation setup. Out of few anticipation setup it was  the best. The entry was at open and it just exploded in next 15 minutes. It did pullback due to market weakness a bit but ended up 7% up for the day.

To find setups like this you have to run a narrow range day scan on stocks with established momentum and then individually inspect each candidate to further reduce universe to 3 to 5 best ideas. It takes at best 15 to 20 minutes to do this.

Here are some of the anticipation setups I am watching today:

PACB

NCTY

MRCY

AXON

SQ

ENZ

DLTH

INTC

WB

KBIO

ULTA

Organize yourself for trading everyday

Everyday do the same thing over and over in a systematic manner.

Once you have a well thought out method 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.

Situational Awareness

We know swing setups work, but overall market conditions can have impact on the % of trades likely to work. So SA helps you in controlling your trade pace. In good environment you want to be more aggressive. In bad conditions you want to focus on risk management.

Question you need to ask daily for SA:

What is your market bias today

Is there a plan to exploit it

Is there an alternative plan

Anticipation

Anticipation allows you to control risk and get in to setups early or as they are breaking out. Anticipation is also useful on current open positions. If you have thought through what you will do under different circumstances on your open positions you are in better position.

Question you need to ask daily for Anticipation:

What homework have I done to identify good opportunities ?

What are the 3 to 5 very high probability opportunities I must focus on today

What is my plan for existing open positions

What is working currently

Different phases of market favor different kind of stocks or setups. Some time beaten down stocks do well. Sometime stocks with momentum do well. Some time value or growth is in favor. Knowing what is working helps you focus on hot opportunities.

Question you need to ask daily for What is working:

What is working in the market currently

What stocks and sectors are leading the market currently

What style and setups are working currently

What kind of follow through is happening

The hardware and software

All our good plans or intentions or setups are of no use if our hardware or software fails or is not optimum for trading.

Are you setup for today

Is your hardware in proper condition

Is your software working without glitch

What is your backup plan in case of failure.

Your mental state

Your mental state affects your trading. If your are well organised and in proper frame of mind for trading you will be successful. If you are excited, harried, angry, disorganized you will find same thing in your trading.

Are you calm, excited, harried , or confused today?

Are there distractions likely to affect your trading today?

Continuous improvement

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

What is your plan for enhancing your market knowledge today

What is your plan for enhancing your trading skills

What is your plan for enhancing your trading mindset

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

Do I have resources to get there?

Do I have the burning drive to get there?

Everyday using this kind of framework will make you a better trader . If you rigorously follow these kind of checklist you will see improvements in your trading in 90 days.

If you are new to trading

As the year winds down and new year approaches lot of people start thinking about their trading or investment strategies. I get lot of emails from readers of this blog asking advice on how should they start to learn to trade. 

For a new trader the most important thing is to do proper setup selection. If you can get it right you will  have quick success, if you get it wrong you will spend months or years  flirting from things to things.

When you decide to trade you have a choice of setups to trade. Setup is complete set of conditions involved in trading a particular method.

A well defined setup will tell you :

• what kind of stock or etf or instrument to buy
• why
• where to buy it
• how much to buy
• where to put stops
• where to exit
• what kind of profit can you expect with this kind of setup
• how many trades can you expect with this setup
• what overall market conditions favor this setup 
• When should you not trade this setup
• when should you risk less or more

If you have a well defined setup idea you should be able to replicate another persons trade on your own.

If you are a beginner trader what you need most is a complete setup idea and template with detailed process flow and steps. If you find that early in your trading career it will save you time . money and frustration.

As a trader you have a big choice of setup ideas. There are hundreds of setup ideas in public domain. If you exhaustively study the books written by traders or about traders, read blogs written by traders and do some research you will come across hundreds of setup ideas.

Some of them are explained in detail and all details to trade them can be found if you dig a bit. In fact life for new trader is much easier today due to internet. Everything is available in public domain.

It is a different issue that as a beginning or struggling trader you may not even understand the importance of setup or a complete setup.

If you are a Stockbee blog reader you will see that my day in and day our focus is on trading specific setup. And if you are motivated enough and go through last six months of posts you will find all kinds of details to trade my kind of setups. It is all detailed here.

There are setup I currently trade. And all of those are detailed on this site and you will see several trading blogs trading similar or variation of those setups. Many trading blogger are Stockbee members or were members at some stage and now trade some of those setup ideas or have developed own setup.

There are setup ideas I have discussed here but do not actively trade. Does not mean those set up do not work but for practical reason I focus only on few setups. If you go through posts in sidebar you will see many examples of that. All of those setups work.

Besides the setups I trade I know of lot of them because of the Stockbee members site. There are many setups discussed by members that they trade, you will find at least 40 to 50 setup ideas traded by members discussed in detail and some share their trade real time.

There are some setup ideas that produce big winners. Episodic Pivots is one such setup idea. It finds big winners of 100% plus kind magnitude. But it trades infrequently as those kind of setups do not show up everyday. Trading a setup like EP requires you to understand that and accordingly be very selective.

Swing trading setup ideas produce frequent but small profit. The Momentum Burst kind of setups I trade is one of those kind of setup. It produces hundreds of trades. Advantage of setups like that is it allows you to profit with very little drawdown. The Anticipation setup that I have developed in recent years as my account has increased significantly find very low risk high potential non breakout opportunities.

Setup ideas should not be a problem for you if you are a beginning trader or struggling trader. What you might find difficult to find is detailed step by step process flow to make them work. But that problem is also not a serious problem if you are motivated trader.

The problem is not lack of setup ideas. The problem is lack of skills and fluency and confidence in trading them . Setup ideas work when you spend sufficient time developing skills to trade those setups and becoming proficient at them.

If you are a new or struggling trader hunt for detailed setup ideas and templates.

Market monitor signalled this pullback few days ago

When breadth becomes extremely bullish pay attention , it signals likely pullback. As you can see few days ago we had 23 stocks up 50% lus in month. These kind of extreme readings happen infrequently . 

But when that happens pay attention , it signals likely pullback ahead. If you know that you can proactively take steps to protect profits or step off the gas.

See my previous post on this. 

Anticipation Setups for today

Everyday I spend around 20 minutes finding good anticipation setups from stocks with momentum.

These stocks can make 8 to 40% move  in 3 to 5 days.

ANAC
JBLU
UIHC
ANGI
ASGN
TRVN
MCRI
AEIS
VLRS
CVT
OA
ENZ
FPRX
LITE
LXRX
VTAE
SLP
CRAY
DD
SRPT

To make money in the market think rationally

One of the big problem you will see in market is that there are lot of illogical things floating around based on some half baked ideas or assertions.

It is like folk medicine. All kinds of remedies are offered as cure and most of them are completely bogus claims.

Understand why stock go up and how they go up and what kind of buy points are ideal entry points.

You must and I repeat must have a rational understanding of stock moves. If that rational is based on actual market observed behavior and research you will have success.

Why do stock move up or down

What drives those moves

Why do funds buy some stocks and why sell some

Why are some funds more successful than others.

Why have certain buy points around for years and still work.

Why do underperforming fund do things they do

These things will give you some perspective and will help you avoid following wrong kind of setup ideas and help you avoid chasing methods which are not rational.

If you do a good job of anticipation you will catch some good fish.

Anticipation is good for people who want to be in control of your trading. Most of the work in anticipation is done during non market hours. As a result you have more time to plan your trade and research a idea. 

Once you have identified a stock as possible good anticipation candidate then you can research it to find if it has some immediate catalyst which can lead to it going up. 

Here are the stocks on my anticipation list today:

OZRK WTW SRPT UIHC TOWN EXTN CATY SWHC RTEC LITE CYTK PPBI CVCO ANGI BNCN IOSP WAL OA LEA STMP

If you are serious abut making money swing trading then build scans to find anticipation candidates and spend 15 to 20 minutes daily finding good 3 to 5 candidates. If you are working you can do this on weekend. 

Anticipation Setups for today

Anticipating a breakout helps you get an early entry and can improve your per trade profits. It can also lower your risk as your stop is close. It can help you profit from even smaller moves.

The Stocks shown below are stocks with above average momentum. These are the fastest moving stocks in the market currently. For swing traders they offer good 3 to 5 days opportunity

Stocks with above average momentum, move in sharp 3 to 5 bursts of 8 to 40%. Swing traders focus on these kinds of setups.

Anticipation Setups for today

LNKD STMP ASGN LEA PTLA OA IOSP GIMO BNCN NXTM PCTY CRAY MSFT LXRX LOCK LDL PPBI CYTK PAR IMMU ENZ TOWN EXTN ANGI PMC ATEN FIVN ERII LFVN CHEF PFGC OSIS UIHC

These are the stocks I am looking at currently for possible breakout in day or two.

How to anticipate a breakout on momentum stocks

Stocks with established momentum are the fastest moving stocks in the market. These stocks offer good   money making opportunities for swing traders who understand and develop expertise in anticipation setup on these.

Once a stock established momentum it seldom goes up straight. During its up move it will on many occasions either pullack or go sideways and rest for few days to few weeks. Then it will again breakout.

 If you can identify such stocks that are setting up for further breakout , then they give you a very low risk entry in to strongly trending stock.  If you do a good job of identifying a buy point on them and watch them closely and enter as soon as they are ready to breakout then you become instantly profitable and can  move the stop to breakeven.

The other big advantage of using anticipation setup on momentum stocks is that they allow you to plan your trade and avoid emotional trading . All the work involved in anticipation setup is much before the market opens. You identify the stocks when market is closed, study them and identify 4 or 5 best setups that have good technical setup and also have some sort of catalyst or fundamental reason to propel them forward.

For working people anticipation offer a better trading opportunity than buying breakouts. To buy breakouts you need to have access to real time scanning or intraday scanning , but that is difficult for most working people. However they can trade anticipation setups by doing 95% of the work after market close or on weekends. If you spend 2 to 3 hours identifying good anticipation setups and researching them on weekend then you have a set of candidates that  you just need to enter during the week.

This weekend I spent 2 hours going through around 600 stocks with momentum to identify the following anticipation candidates:

LNKD TPX ULTI CHDN OTIC FB CRM TRU CRAY GNCMA OC WIRE PMC WNC EEFT XIN TTI SBUX BNCN OZRK PTLA CEMI NXTM MSFT JBLU USCR RATE CHEF AUDC ATEN MCRI LFVN NGHC SYKE HSII FBIZ EDAP RTEC LEA DGII PEGA PFBC NVDA PFGC LXRX ERII OSIS EXTN HA AEIS ASGN GIMO ULTA MATX GDDY SIMO LII AAAP TYL GOOGL NVR

After that I  researched and prioritised these ideas based on recent earnings surprise, or catalyst and now have around 5 stocks that are my focus list for the week. 

If you are serious about making money trading then you can setup a simple  momentum scan to identify say top 200 stocks by momentum and then focus your attention on that. Those stocks wioll give you enough opportunities to make meaningful difference to your returns.

Anticipation Setup for today

NVR ULTI WIRE LEA LII CRAY LFVN FF HBNC CHEF SIMO SBUX OTIC ULTA ERII RTEC DGII XIN AEIS NGHC CRM LXRX CEVA MCRI CEMI NVDA PEGA GNCMA RATE AUDC OZRK ATEN FCPT OC FBIZ GIMO EDAP TRU WNC ASGN PFGC TPX MATX PTLA PMC NXTM PFBC BNCN ANIK GDDY CHDN JBLU HSII EXTN MSFT HA AAAP USCR FB TYL ADS LNKD GOOGL

High self efficacy beliefs are key to trading success

"Learning would be exceedingly laborious, not to mention hazardous, if people had to rely solely on the effects of their own actions to inform them what to do. Fortunately, most human behavior is learned observationally through modeling: from observing others one forms an idea of how new behaviors are performed, and on later occasions this coded information serves as a guide for action."

-Albert Bandura, Social Learning Theory, 1977

The most important determinant of your success in trading or in your personal life is your self efficacy beliefs.

People and families with high self efficacy beliefs build successful life and are happy.

If you talk to successful traders and interacted with them on regular basis ( and many are members of Stockbee site), one of the most compelling reason why they are successful is they have high self efficacy beliefs.

Because of their high self efficacy beliefs they figured out profitable ways to trade. No one gave them a 1000 pages manual on trading or held their hands when they were taking baby steps in trading. They figured out things for themselves.

Almost every successful trader I know of has developed their unique style because the changed their self efficacy beliefs.

The days, the months , and the years they spent trying out different things and failing at it or losing money further enhanced their beliefs in their own capabilities.

When you commit to certain thing and surround yourself with like minded people your self efficacy get enhanced.

People's conceptions about themselves and the nature of things are developed and verified through four different processes: direct experience of the effects produced by their actions, vicarious experience of the effects produced by somebody else's actions, judgments voiced by others, and derivation of further knowledge from what they already know by using rules of inference. (Albert Bandura)

This you will find to be true in all walks of your life. If you surround yourself with highly motivated and high self efficacy belief holding people you will find your own belief in your own capabilities get enhanced.

If you work in a group dedicated to enhancing self efficacy beliefs you will often be surprised at how much you can accomplish in short period of time.

The most important determinant of your trading success will be your self efficacy beliefs. It might take some few days to understand that and some years. But once your self efficacy beliefs about trading change things start to happen.

Once that is in place your self talk will change to "hey I can do this", "hey I don't have all the answers but I am confident of finding the answers", "hey I know how to bounce back from setbacks" .

When you attempt trading some find early success and some find early setbacks. That experience sets your self efficacy beliefs.

Some people give up believing markets are too difficult or manipulated or beyond my understanding . Their self efficacy beliefs dictate their behavior.

Self efficacy beliefs are task specific. In trading implication of that is your self efficacy beliefs are setup specific. that is why you will find a trader successful in one style or time frame can often struggle on another setup or style.

Once your self efficacy beliefs specific to trading a setup change you will start experiencing success. That does not mean you will not have setbacks. If you have high self efficacy you will find a method. If you don't have it, even the most profitable method will not work for you and you will keep finding faults with methods.

Self efficacy beliefs is the biggest determinant of your trading success. Unless you work on self efficacy you will find many inhibitors and will be constantly dissatisfied with any method, guides, videos, or instructions, or site. You will constantly chase new methods, new scans, new claims, new gurus, new newsletters, and so on.

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

Profitable trading involves all these challenges. You need to put in lot of effort to understand and internalize key concepts like equity selection, entries, exits, risk, risk/reward and then put it all together. In the process you will have several setbacks and false starts. If you have enhanced self efficacy beliefs you will persist in face of such adversities. If you have high sense of self efficacy beliefs then you will spend time mastering trading software, and mastering trading setups and make them work. Absent that you will abandon your effort at first hint of failure.

The research on self efficacy belief shows that self efficacy beliefs can be quickly enhanced by vicariously experiencing others perform a task. This is very important thing to understand in group settings. If you find like minded group you can save years of experimentation and struggle by watching others do things successfully.

Everyday think of how you can enhance your trading related self efficacy beliefs. Surround yourself with people with high self efficacy beliefs. Cut ties with whiners and low self efficacy belief people.

This works for trading as well as for personal and family life.

This Thanksgiving think about this and work on increasing your own and your families self efficacy beliefs. The greatest gift you can give your child is high self efficacy beliefs.

Vehicle selection and setup selection

Selecting right vehicle substantially increases your chance of success. If you select a vehicle capable of big move the probability in in your favor. Let us say you give a serious thought to your vehicle selection strategy and decide to focus on right kind of stocks, that in itself may not guarantee your success if you buy them too late or at wrong price or wrong time or in wrong amount.

After vehicle selection comes the next major decision : setup selection. Setup selection answers the critical question of entries, exits, stops, risk and trade management. Selecting right setup on right stock will help you make money.

Growth stocks and momentum stocks show certain types of setups during their move . If you select those setups as your primary setups then you further increase probability of success.

Unless you understand vehicle selection and setups selection  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.

What is you vehicle selection strategy

The kind of stock you buy or sell is very important if you are looking at making money in the market. If you select a vehicle capable of powerful move , you are putting yourself in good position. If you select dodgy vehicles you are not likely to make much money.

If you are looking for explosive returns you must select a vehicle capable of making explosive move. In order to do that you should know what are the common characteristics of stocks (vehicles) that make big moves historically. And then use those criteria to find similar stocks in current market conditions. 

Historically momentum and growth stocks have made biggest moves in the market. A stock that has great growth happening currently or has in recent quarters had earnings acceleration or surprise are one of he categories of stocks you can focus on if you are looking for big winners. 

OME is a example of stock that has recent earnings surprise and acceleration and that is why it made big move.

 As  you can see this stock in recent quarter had 83% earnings surprise. That triggered the  big move. And that was the bur signal for this stock.

VLRS is another example of stock which we recently bought based on earnings surprise and acceleration and good anticipation setup.

As you can see below the stock had big earnings surprise recently. The stock doubled from its first big surprise of 571%.

One of the recent  buys for me is CRAY, which had 362% surprise. 

The tendency of stocks to make big moves post earnings surprise is called PEADS (post earnings announcement drift). It is a very well researched market anomaly. Stocks that have surprisingly good earnings tend to move in direction of the surprise for next few months to quarters. If you are serious about making money search for all PEADS post on this site. I have written about this in detail several times for many years. 

Momentum stocks are another category of stocks which make big moves. If a stock doubles, it is a very good candidate for doubling , tripling or going up 1000% plus. Momentum stocks every year dominate the list of biggest movers or the year. It is relatively easy to scan for these.

Sometimes a turnaround kind of situation can also lead to big moves in stocks, in the case the real big move happens only after the turnaround started and buying in anticipation is not the best of the strategy. If there is real turnaround you will see earnings surprise and big earnings jump. 

If you do good job of vehicle selection , you put probability in your favor, if you always buy stocks with negative earnings surprise and then expect to make money, then you have no vehicle selection strategy. 

If you want to make money trading do damn good job of selecting the right vehicle. 

What is your vehicle selection strategy?

If you can not answer that question, then you do not have one... and you might as well stop trading ....

How to use the 4% breakout scan to make money

OME is an example of 4% breakout that made 25% move in last 10  days.

If  you want to make money swing trading and find stocks like OME learn about a simple range expansion scan that can find you hundreds of such moves in a year.

4% breakout is a range expansion scan which works best on small and mid caps and lower priced stocks. It allows you to get in to a 3 to 5 days momentum burst kind of move of 8% to 20%

What is 4% breakout scan

c/c1>=1.04 and v>v1 and v>=100000

The scan gives you stock up 4% with 100k volume and with volume surge today.

You have to run it on US Common Stocks in Telechart

Select best setups from the scan

The scan gives you many candidates but you must only select the ones where there was orderly pullback or consolidation before the breakout day.

Stock should not be up 3 days in a row prior to breakout day

Stock should have narrow range day prior to breakout

Stock should have a period of range contraction prior to breakout day

Stock should have orderly first up leg prior to breakout

All in all the quality of setup is important for selecting the best sock to enter.

When should you run the scan

Scan should be run from market opening onwards and once a good setup shows up should be entered as soon as you identify it. That will help you capture rest of the days move. You can also use it for end of the day scanning and enter next day. 

How to manage the trade

The only reason to buy a 4% breakout is that we expect immediate follow through on the move.

That logically makes our stop the low of entry day.

Once you are in the trade either the stock will follow through or fail.

If it fails your stop will take you out.

If it follows though but the follow through is weak then by 3rd day you can be out.

If the stock follows through then you must start planning your exit at right time and also ensure once you have profit you do not give it back.

As soon as stock goes 4 to 5% above entry you should move stop to break even. This should be done intraday itself. Our first objective is to at least not lose money.

Once stock is up 3 to 10 days in a row exit in to strength again it is best to do this intraday as many big gains can fade by end of the day.

In this case of OME once stock had profit the position was sold in to strength and 25% was retained with tight stops yesterday.

How can you use this scan to make money

In order to successfully trade you must setup the scan in software you use and develop guidelines to manage the entire trade from entry to exit.

In order to trade this setup you must have the ability to identify good setup immediately as they start showing up in scan. 

One easy way to develop that skill is to build your own examples of past winners and failures from 4% breakout.

Go  go through and document at least 100 good examples of this setup from past one year and study them carefully , so that you know exactly what a good setup looks like. Make a book of ideal setups

If you are serious about making money swing trading then develop setups like these and trade them. Stop wasting your money or time chasing tips from others or listening to CNBC , develop an expertise in swing trading. 

What is Market Monitor?

What is Market Monitor?

The Market Monitor is a market breadth indicator that tells you about the buying or selling pressure in the market.

Once you understand it you can find high probability turning points in market and anticipate possible risky areas. That can allow you to lower your drawdown.

Market breadth studies look at participation level of stocks in market moves. There are many breadth indicators. MM is one of the ways to use breadth.

MM uses different time frames ranging from daily to quarterly to calculate market breadth. It can anticipate likely turning points and tells you when the market is in a confirmed rally stage. And when it is at bullish or bearish extremes.

It was developed around 2001 to help me manage drawdowns and avoid certain risky periods on long side.

What does Market Monitor track?

Number of stocks up and down 4% or more on high volume today.

Number of stocks up and down 25% or more in a quarter.

Number of stocks up and down 50% or more in a month.

Number of stocks up and down 25% or more in a month.

Number of stocks up or down more than 13% in 34 days

What do those Market Monitor numbers tell you?

Like any other breadth indicators they tell you how many stocks are participating in market moves.

If say market is up 1% and you have 500 stocks up 4% plus , it tells you there was broad based buying .

If say market is up 1% and you have 80 stocks up 4% plus , it tells you there was narrow based buying .

If you see numbers like say 120/130 on 4% it tells you both buyers and sellers were active on that day.

Everyday you have to look at that days numbers to see what they are telling you and then look at them compared to historical benchmark.

If you look at history you will see 300 plus days are rare occurrences. So when you get one it tells you there is above average buying or selling.

Market Monitor signalled this pullback few days ago

Extreme readings on stocks up 50% plus in a month lead to market pullbacks. The following image chart you that.

yellow arrows show when 50% is => 20 stocks

red / green histogram is the primary indicator difference ( difference between column 6 and 7 in Market Monitor.)

As you can see the readings lead to a pullback in few days or weeks. So when readings get above 20 you need to calibrate your trading accordingly.

The readings on stocks up 50% plus in a month went above 20 on 10/29/15 as you can see below:

Being proactive is better with this indicator as things look extremely good when the readings are near 20 and then a pullback develops.

Breadth can help you lower drawdowns and improve your returns once you understand how to use it.