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How to make money trading

First step if you want to make money trading is to learn the language of setups.


In your trading journey you will have significant breakthroughs once you learn the language of setups. Profitable traders think in setup language while novices think in individual stock term.
Novices dream about holding stocks forever. Novices think in terms of killing it in market without knowing how. Novices are suckers for stock picks.
In a day you will see several posts by members about individual stocks. Something catches their fancy and or they know about a particular stock and they are enamored by it and want to know whether it is good buy or not.That thinking is not much of help.
Setup oriented thinking is about finding a basic strategy with significant edge. Setup oriented thinking is about timeframes, holding periods, size, risk management.
Setup oriented thinking is process based thinking. It is how do I find this kind of stock again and again kind of thinking. It is about ways to catch fish.
Setup selection is key to successful trading. Setup selection allows you to condition your behavior. It allows you to develop your procedural memory. It allows you to automate your thinking. Setup selection will bring clarity to your thinking
When it comes to setup selection your time frame is very critical. A setup that is good for day trader may not be good for swing trader. A swing trading setup may be extended setup for position trader.
First step in setup selection is to decide your timeframe and then look for setups in that timeframes. If you want to be position trader , then study position trading setups.

What to look for in earnings

We are in the middle of earnings season and here are some of the things to look for in earnings:

  • During the earnings season hundreds of companies announce earnings.
  • Most of those earnings are of no use.
  • What you need to look for is a game changing earnings.
  • Only 1 or 2% of the companies will have earnings which are really worth jumping into immediately.
  • Also you must look at where the earning is in its earnings cycle.
  • Your primary objective to is to find stocks in early phase of their earnings acceleration cycle.
  • In the stock has been rallying and this is the third or fourth earning acceleration then it has been already priced into the stock.
  • Prior price neglect is extremely critical when looking at earnings.
  • Ideally you should be looking for stocks with 3 to 4 months or more of neglect.
  • When you look at the company earnings look at the magnitude of the earning surprise.
  • On a day-to-day basis, many companies beat earnings by one or two cents.
  • Those companies are not worth a second look.
  • Also when looking at the earning look at it whether there is the analyst estimate on it.
  • Primary look for companies with no analyst estimate or only 1 or 2 analyst covering the stock.
  • If the company doesn't have analyst estimate it tells you that it is a neglected company.
  • If the company has analyst estimate then you should look for consensus earning numbers or Whisper numbers.
  • If a company beats consensus earnings estimate by a wide margin then it is attractive candidate.
  • You also made to look at whether company preannounced earnings or guided higher.
  • In such cases, the real earnings announcement does not move the stock.
  • How you look at earnings also depends on your trading style.
  • If you're primarily a daytrader, then any earnings beat is worth looking at.
  • But if you're looking for a longer duration move then you need to concentrate on extreme earnings. Extreme earnings growth of 100% plus from a big base.
  • Companies over the years have become better at managing their earnings.
  • So, they skillfully manage investors expectations.
  • They preannounce or guide higher or lower the guidance ahead of the earnings so that there is no earnings shock.
  • In spite of such earnings expectation management, earnings surprises happen.
  • That is where the opportunity is

Struggling traders need to change big things

Posted on 4/19/2017

If you are new to trading or struggling trader or spent several years with not much success, just doing little bit of tinkering  will not help you.

You need to make a substantial change to your trading .

That kind of change is not easy for that person because his current situation of being stuck in mud prevents him or her from even imagining or understanding that he needs to make big changes or completely rework his approach.

For that person the task  is to jump from lower orbit level to next higher orbit level in terms of understanding of markets, trading method, your own self efficacy belief, and your profit levels.

Significant  amount of energy and effort is required to jump from one level to the next in terms of trading success. Most of us who have been in market for decade or more and have prospered have gone through such orbital changes.

If you read the market Wizard book or biographies of successful traders , you will see that it took them anywhere from six to 10 years to jump orbits and reach level where they gained consistent success.

In the process they drastically changed their approach several times till they arrived at an optimal recipe that works for them in terms of instrument like futures, options, stocks , etf  and they also fund optimal time frame that suits their personality.

Many times that process of trader development is hidden to the world. That is the period no one wants to talk about when they achieve success. During that phase they try things which they would be even embarrassed to think about.

In process term that phase is important at it helps us crystallize our thinking and reject several approaches to trading mix like equity selection , entry, exit, stops, risk. For successful trader there are many settled issues like which stocks to buy, where to put stop, where to exit and so on. But for new trader these are daily struggle areas.

How can you avoid that learning curve and compress your learning cycle, by interacting with successful traders at any given opportunity. When you interact with them you learn a lot through the two way interaction.

How to find bullish breakout anticipation setups

Posted on 4/05/2017

Bullish Anticipation Setups For Today

WD MGPI PENN TDOC TEAM KMB WIFI CCE ALB RPXC LGIH PTLA NEWR DXPE CERN WYN TGNA FLEX MXIM SAFM FBHS NTCT TGTX VSAR ORCL WTW QSR BLD HRS MU MSCI DHI POOL CTRP VAR GDOT SNPS JBL VRSN TFX ABCO MDT LEN LOW MXL VEEV SNAP CNCE SEDG BITA INAP

Finding anticipation setup requires a well thought out process and then one needs to stick to it daily.

To anticipate a breakout look at stocks currently not undergoing momentum burst.

Stock should be in extremely low momentum phase for anticipation .
It can be a shallow pullback or consolidation in established momentum phase.

To anticipate look for stock with extremely low volatility

A stock with low volatility in last 5 to 10 days is ideal candidate as part of a continuation setup.
Look for series of low range bars in last 5 to 10 days
Look for stocks with bollinger band squeeze.

Avoid Anticipation setups on extended stocks

First or second anticipation setup in established trend is best
Extended trends needs to be avoided for anticipation as failure is high on them

Look for early entry on anticipation candidates

Anticipating a breakout helps you get an early entry and can improve your per trade profits.
It also can lower your risk as your stop is closer.
It can help you profit from even smaller moves.
For that entry without waiting for breakout is best.

Anticipation requires more pre planning and effort than buying a breakout.

You need a process flow to do that.
The process should be efficient and done daily after the market close.
The suggested process flow is a template you can develop your own process.

Only 3 to 5 quality ideas should be tracked

"A" grade pre Momentum Burst setup should be your first priority
Once you have list of anticipation setups narrow them down to 1 to 5 for next day action.
Quality is more important than quantity

In order to find Bullish Anticipation setup use DT and TI 65 lists in Telechart

Double Trouble Scan

US common stocks
c/minl252>=1.8 and minv3.1>=100000
Price % change Today between 1 to -1%

TI65

US Common stocks
avgc7/avgc65>1.05 and minv3.1>100000
Price % change Today between 1 to -1%

MDT Above 1.19

US Common stocks
c/avgc126>1.19 and minv3.1>100000
Price % change Today between 1 to -1%

After running these three scan merge them together as some stocks will be common.

Go through the list to find setups that are setting up for possible b/o

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
This entire process once setup tales just 20 minutes daily. 
You can find 5 to 10 good set ups using this process daily. In good market conditions these setups can make 8 to 20% in just few days. 
So if you are serious about making money swing trading setup these scans and practice finding good setups.
You can find your own stock picks daily once you master this method and perfect it. It will help you develop your own trading skill  and you will not have to depend on anyone.

How to profit from the coming earnings season

Posted on 4/04/2017




Studies after studies in stock price behaviour have confirmed the existence of Post Earnings Announcement Drift (PEADS).

When a company announces earnings and they are surprisingly good or bad, the stock price continues to drift in the direction of the surprise for weeks or months. In simple language a stock with "significant" earnings surprise is like to go up for weeks or months.

The earnings season is now starting. Keep an eye on stocks that beat earnings by a mile. If pre earnings they were not rallying and consolidating for long period, the earnings can often start a big rally.

The information for finding big earnings surprise is freely available on most sites. Zacks has lot of free earnings information and charts that show earnings surprise history.


The earnings surprise information is also available on Zacks under earnings tab.



Earnings are released after market close or before market open and if you focus on the surprises you can find 3 to 5 good trades in e very earnings season.



How to get in to Anticipation setups quickly

Posted on 4/03/2017

Once a good anticipation setup is identified the real work starts aimed at getting in to it as soon as it starts to breakout.

For example I had VIAV as candidate for possible entry for today.

viav.png

In this stock I want to enter between 10.80 to 10.95  if it starts to breakout and put stop at 10.50 after entry risking 25 to 30 cents in hope of making 1 dollar or more on the trade.

So I will transfer this sticker to  Interactive Brokers and then create orders at various levels like shown below.

order.PNG

Like this I will have orders ready for entries at predetermined levels for 4 to 5 stocks. The market order is in case it starts going above by predetermined entry and I want to get in because I like setup. The limit sell order is in case it starts tanking post entry.

So before open I will have my orders ready . Then once the market opens I am intently focused on figuring which one is showing signs of breakout and then quickly press the right order. As soon as order is filled after few minutes I will start putting stop. In many cases stop will be higher than the stop shown above based on low established in first 30 minutes.

This kind of preparation helps you get in to anticipation setups quickly and put very close stop. Which is the objective of doing anticipation anyway. The more work you do pre open it then just simplifies the process. All you need to do then is to press the right order button.