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Fresh news creates fresh moves

Stocks that release news pre market can often make one day big moves. Many of them start with gap up open. Some of them are up in post market or pre market session.

You can find such stocks by scanning for pre market moves of 2% plus on 50000 volume. Many free broker scanners allow you to do that.

Stocks release news post and pre market. Analyst upgrades tend to happen in the morning. In earnings season lot of news is released post and pre market.

Such news often leads to one day move on day of news. Sometime if the news is significant it can lead to multi week or multi month rally.

For day traders and short term swing traders news catalyst can offer a range of opportunities.

Such stocks with fresh news are called stocks in play or story stocks.

News that can affect price:

  • Earnings
  • upgrades/downgrades
  • govt policy change
  • FDA decision
  • Natural disaster
  • Political instability
  • Insider buys
  • CEO/CFO change
  • New product launch
  • New order

There are many free sources of news. If you want to catch intraday moves you need to build process loop for tracking news .

At first you will feel every news is important , but soon you will figure out what is consequential news and what should be ignored. This kind of skill building requires months of regular practice.

There are several sources of news. Some like are paid and some like seekingalpha are free. Some paid sources like Bloomberg are ultra fast but are beyond the cost realms of retail traders.

Many of these kinds of news catalyst lead to just few hours rally , some lead to longer term trends.

Those stocks tend to be neglected and then have significant catalyst. That is the kind of move to focus on if you are looking for longer duration swing moves or position trading moves.

Study of 8% moves if you want to improve your swing trading results

Posted on 5/26/2017

Daily study past winners and losers on various time frames and note down your observations.
If you can develop this habit you will see steady improvement in your understanding of market moves and it will be based on your own efforts.

What should you study for short term swing trading

Study stocks up 8% plus in last 5 days c/c5>=1.08 and c>=3 and minv3.1>=100000
Study stocks down 8% plus in last 5 days c/c5<=.92 and c>=3 and minv3.1>=100000
Study stocks up 5 dollar plus in last five days c-c5>=5 and c>=3 and minv3.1>=100000
Study stocks down 5 dollar plus in last five days c5-c>=5 and c>=3 and minv3.1>=100000
Those are the kind of stock moves that swing traders are interested in. By studying them daily you will understand what works and what to look for in momentum burst swing moves. Where to put stop. Where to exit. What to look for on day one of move.
If you do this for weeks and months or years you will be expert in 8% plus moves. When you study these moves over and over again you start finding small nuances to look for in successful breakouts.
A study like this will make you question some of your own guidelines for selecting trades or will make you question commonly touted market rules based on your own study.
One of the best reason for doing this is it is based on actual past winners in immediate time frame. It gives you lot of information on what is working currently.
Most days it takes only 10 to 15 minutes to do this. Some days while going through them you find something and then it can trigger a deeper study.

What should you study for longer term swing trading

Study stocks up 100% plus in last 1 year c/c252>=2 and c>=3 and minv3.1>=100000
Study stocks down 50% plus in last 1 year c/c252<=.5 and c>=3 and minv3.1>=100000
Study stocks ranked in top 25 by MDT ranking c/avgc126 rank by it and study top 25 or 100
Study stocks ranked in bottom 25 by MDT ranking c/avgc126 rank and study bottom 25
Study stocks ranked in top and bottom 25 by YTD moves
Longer term moves have different characteristics and studying them will help you find buy points as the move progresses.
A study like this will also help you debunk lot of myths like should you only buy stocks near 52 week low or high, with only low floats, or only with IBD EPS ratings above 85 , or with growth or value characteristics, or IPO in last 2 or 3 years only and so on and on.
Get in to habit of building your own market and setup. No one else can do these exercises for you.

As everyone knows if you want gains of an exercise you need to do it yourself and not outsource it to others.

How to setup IBD style Relative Strength Ranking for stocks

IBD relative strength ranking is a momentum ranking of stocks. It uses o ne quarter , 2 quarter, 3 quarter , and 4 quarter data to find weighted ROC and then Ranks stocks by it.

IBD relative Strength ranking can be duplicated in Telechart very easily and can be used for creating your own scas or sort columns.

there are better ways to sort stocks than by using  IBD relative strength rank. In this video I show a way to rank stocks by 6 month and one quarter relative strength.

To find big winners focus on stocks with momentum

Posted on 5/15/2017
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As you saw in the video yesterday the single best indicator of likely outperformance in stock is momentum.

If you want to find stocks likely to make big move then narrow your trading universe to stocks with established momentum. Relattive Strength is just another name for momentum.

Momentum investing focuses on stocks going up or down faster than other stocks in the market. It allows you to eliminate slow movi ng or non moving stocks.

Momentum has been extensively studied and studies show that stocks with the best price performance over the previous 3-12 month period tend to continue to outperform the market over the subsequent 3-12 month period while previous losers tend to continue underperforming. The most celebrated study in the academic literature which documented this phenomenon was by Jegadeesh Narasimhan and Sheridian Titman in a study titled "Returns of buying winners and selling losers
Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
This paper documents that strategies that buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over three- to twelve-month holding periods. The authors find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years.

If you are convinced about need to focus on momentum then the next task is to operationalise it as trading strategy. The Stockbee Trend Intensity Breakout method detailed on this site shows you one of the ways to do it.

Look for close stops

When you enter a trade you are taking a speculative risk. That risk is your entry minus your stop.

Let us say you entered a 100 dollar stock on a breakout of 5% where your entry was 105. You put a stop at 100 because violating that point indicates breakout failure. Then your risk is 5 dollar. 

The closer is your stop to entry lower is your risk. 

Breakout setups are inherently higher risk setup unless you get in to breakout quickly as they are happening and can move your stop to breakeven soon after entry. 

If you want to lower your   risk then you have to trade non breakout setups where you can enter with very close stop. 

Anticipation setup that I have talked about a lot can help you do that. Similarly the low threshold breakout setup video I posted last night offers you similar opportunities. The $ breakout scan also allows you to do same thing as many higher priced stocks breakout with less magnitude moves. 

Closer is your stop to your entry you will be in a position to put in more capital on a trade. That means you will need less number of trade to make money.

Closer stop also means stock need to make a small move for you to make money. So with 2% stop even a 6% move is 3 times your risk.

But always remember a close stop is no guarantee an unusual event will get you out at your stop. So to protect yourself against catastrophic loss you still need to limit your position size to some % of your equity.  

Put your energy in to developing setups where entry-stop is low..... 

Related Videos

Profitable traders have high self efficacy beliefs

"If I have the belief that I can do it, I shall surely acquire the capacity to do it, even if I may not have it at beginning." Mahatma Gandhi

The most important determinant of your success in trading or in your personal life is your self efficacy beliefs.
In last 16 years I have talked to several successful traders including many very well known traders and interacted with them on regular basis and some of them are now personal friends.
One of the most compelling reason why they are successful is they have high self efficacy beliefs.
It is not their unique setup or scan or entry or exit or position sizing that can explain there success.
One thing that clearly separates traders who succeed and sty in game for decades is their strong self efficacy beliefs.
Because of their 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. And they continue to tweak their approach to date.
Almost every successful trader I know of has developed their unique style on their own.
Which is true of most Stockbee members also.
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.
Yes they borrowed from some other traders ideas or books or courses but that is not the key to their success. Thy are self made traders.

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.
In the beginning year I spent almost 18 to 20 hours trying various things going through hundreds of trading books, testing hundreds of ideas.
The intense effort ultimately started paying off as more and more market and setup clarity started to show up and then I put my own method together and over the years modified it.
The same story repeats for most successful traders.
If you read the Jesse Livermore book it details how he developed his unique style after several efforts.
The Darvas book again details his struggle to develop his own method.
Every trader goes through same phases as Livermore or Darvas or any other market wizards or successful traders like George Soros, Paul Tudor Jones, Stanley Druckenmiller have also gone through same learning curve and figured things on their own.
In the Stockbee Advance Bootcamp several traders presented and it is same story for Stockbee members.
Once your self efficacy beliefs specific to trading 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.
Learning to trade is not an easy task. It is one of the most challenging task you would handle in your life. Some are lucky and they find success instantly. For rest it is a big battle.
People with a strong sense of self efficacy beliefs approach difficult tasks as challenges to be mastered rather than as threats to be avoided. They have greater intrinsic motivation. That helps them to engage for long periods in activities and helps them overcome repeated obstacles. They do not have discipline problem.
People with high self efficacy beliefs set themselves challenging goals and maintain strong commitment to them, and heighten and sustain their efforts in the face of failure.
People with high self efficacy beliefs quickly recover their sense of efficacy after failures or setbacks, and attribute failure to insufficient effort or deficient knowledge and skills that are acquirable rather than external circumstances.

Your self-efficacy beliefs also influence your thought patterns and emotional reactions.

This is critical in trading. You should not be overly excited by profit on single trade and same way not get depressed by loss on single trade. At the end of the day trading is probability game. High self-efficacy helps create feelings of serenity in approaching difficult tasks and activities and activities where outcome is uncertain.
If you have low self-efficacy beliefs then often you believe that things are tougher than they really are. As a result this belief that fosters anxiety, stress, depression, loss of discipline, over trading and a feeling of being lost. You are unable to solve your own trading problem.

Psychologists believe that self-efficacy beliefs influence the level of accomplishment that one ultimately achieves.

Self-beliefs can also create the type of self-fulfilling prophecy in which one accomplishes what one believes one can accomplish. This further enhances self efficacy beliefs. This leads to higher performance this in turn leads to higher effort and higher accomplishment which in turn further enhances self efficacy.
The goal of this site is to constantly challenge you to enhance your self efficacy beliefs. To constantly goad you to keep working on your self efficacy beliefs. To challenge your existing beliefs. To provoke you to examine your current beliefs. To offer you a template for enhancing your self efficacy beliefs.
If you do that then you will achieve your trading goals. And you will not need this site, or alerts, or alerts with sound effect.

Everyday think of how you can enhance your trading related self efficacy beliefs.

And if you have kids work on their self efficacy beliefs, that is the greatest gift you can give your kids... no amount of money can buy high self efficacy beliefs.

Invest in a setup idea if you want to make money trading

If you find a good setup invest time and effort in to perfecting it. More effort you invest higher will be your returns.

It means go in to significant detail of the setup idea. In order to make a setup work you need to really internalize the setup and make it part of you.

That means studying historically how the setup worked. Studding 1000, 5000, 10000 past instances of the setup ideas. And then from that derive leanings. That process is what is the key to building a long term edge in trading a setup.

When Livermore had a setup idea, he would go back in to his price records and see how it worked in past. He would always have a pad and pencil next to his bed according to his biography. If some setup idea hit him in the night , he would write it down and then next day he would research it.

If you want to trade a range breakout setup on growth stocks (which is popular and proven setup idea) then go  in to significant details about that setup . 

If you want to trade momentum burst setup  then go  in to significant details about that setup . 

If you want to trade anticipation setup  then go  in to significant details about that setup . 

If you invest significantly in setup idea you will find unique patterns and nuances that others have not found.

The effort makes you expert on that setup and when trading the same setup in current market they can instantly in their mind compare the setup to 20000 or 50000 past setup.

This is like chess grand master. Scientist have studied the brains of grand master and what they found is a grand master when making a move can compare the current state of the game to 50000 or more past games.A grand master in his mind instantly can look at a move of opponent and see how the game will unfold over next 20 to 30 moves, while novice looks at only 2-3 possible moves.

As against that most novice traders will abandon a setup if it does not work for 2 to 3 trades. Instead of investing in one setup idea for long period of time they flirt from setup to setup.

Significant investment in setup ideas is a recurring theme in every successful traders biography.
Most of us are not born traders.There are some who can instinctively get a setup idea in few minutes or weeks but most of us are duffers when we get in to trading. The solution to us duffers is to put in significant effort and then our game will improve.
So if you are serious about trading setups discussed here or any other setup, invest significant effort in to understanding and internalizing that setup.

There is no other short cut to that....

Unless you understand that you will continue to chase others ideas or recommendations and never have confidence in your own setups.....

A good setup idea can make you millions

If you do not understand the concept behind setup selection right at the start of your trading career, you will struggle for many years. You will get frustrated and will have repeated failures. 

Once you find a profitable setup your trading journey will start. Then the challenge is to perfect the process top trade it  and its executions.

A software tool by itself , or a subscription to stock picking site is not going to make you successful trader. Scanning for stocks is not going to help you much if you do not have good setup. . Preparing elaborate watch lists is not going to help you either. 

Unless you understand setups as key to profitable trading you are unlikely to make much money. This is the most important first challenge in trading.

After doing this for close to 19 years full time and making very good money, if I have to advice a new or struggling trader, what should they do, I will tell them to first define their setup. If they can not do that , it explains their struggle. 

All the  successful trader have well defined setup and then they exploit it day in and day out in favorable market conditions. They have spent years developing these setups and have mastered the nuances of those setups.

If you have well defined setup , you would be able to instantly recognize good opportunities and enter or exit them without thinking. It becomes a automatic task.

If you have well defined setup, you will be able to prioritize ideas and not waste time on marginal stocks or others ideas. Given the number of stocks that trade in the market, this is very critical to success in stock trading.

If you have setup oriented mentality you will ask everyone who posts trade picks or sell trade picks, to find out what setup generated that trade. Find out details about their setup, that way you can generate those ideas yourself.

If you have well defined setup you will know instantly your entry, exit stops rules, risks and not be a clueless person post entry. You will not be asking others what you should be doing. This is very important skill to master.

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. Most successful traders I have studied have stuck to their few basic setups for decades. They create variations of them but they do not completely abandon the basic ideas.

If you have well defined setup you don't need CNBC, Cramer, Stocktwits, Stockbee site, or any other distraction. All you need is your software to generate your setup idea and your own guidelines and you can be a hermit.

Setup selection is the only way to eliminate the problem of cognitive load involved in trading.
Sooner you understand that the better it is. Key to "profitable" trading is setup selection.

In the beginning master just 1 or 2 basic setup. It will take you 3 to 6 months to perfect it. Most people who have very well defined setups have taken 5 to 10 years to arrive at it. You just need one or at best two well defined setup ideas to make lot of money in the market.

Spend time finding good setup ideas that work. There are many setup ideas in public domain that work. In the beginning build on others setup ideas, that will help you shorten  your learning curve. 

A good setup idea can change your financial future forever.... A good setup idea can help you make millions....

Daily Market Analysis May 04, 2017

Posted on 5/04/2017

The markets were fractionally up today . The Indexes like S&P , DJ30, and Nasdaq continue to hold their gains.

However  under the hood there is steady breadth deterioration. For last 5 days the number of stocks above 40 day moving average have declined. T2108 is now at 50% level.

The video also highlights few buy and sell idea based on breakout scans.