If you want to trade the market find the "big" basic and structural tendencies of the markets and build your setups around them.
A structural tendency of market is some kind of observed behavior of stocks that repeats .
For example stocks with surprisingly good or bad earnings tend to go up or down for several days post announcing such earnings . It is called PEAD (post earnings announcement drift). This is proven phenomenon across world market and has persisted since market came in to existence.
Now knowing this can give you big edge if you can convert it in to tradable setups. Doing this alone can make you millions.
Find similar structural tendencies of stock market and you will have found key to making money in good or bad time.
The structural tendencies of stocks give you a process oriented solution to finding opportunities. If you select the right kind of market structure to focus on you increase probability of success in the long run (there still will be periods when your structural phenomenon may not work due to some change in market structure or your own failure as a trader to exploit that , but in both cases it is a fixable issue.
Sooner you find an exploitable big ideas in your trading career better it is as it will save you time , frustration and money.
Here are some "big structural tendencies of stocks"
Momentum
It is the inherent tendency of stocks to move in direction of pre established momentum. Study this in detail and you will find many ways to make money. Over last 18 years momentum has made me millions. It is one of my favorite big idea.
TI 65 MTD DT TI30 Anticipation $ and 4% b/o are all based on momentum
Earnings
Earnings are the lifeblood of any enterprise. Stocks with good earnings outperform in short term as well as long term. There are many exploitable trading setups you can build around earnings. Earnings Episodic Pivots is one such setup I have traded very successfully for last 18 years. In last few years I have added more earnings related setups to the mix.
NTRT and EP setups are based on this
Volatility cycles
Stocks go through phases of volatility contraction followed by expansion. During volatility contraction period stocks have series of range contraction days. If you can identify and exploit such periods it gives you very low risk entry in a explosive move. The anticipation setup I trade is based on this :big " idea. There are many other ways to trade same thing.
There are many many ways to trade this structural tendency. Once you study this you will find ways to make money with very little drawdowns.
Anticipation is one way to use this
Mean Reversion
Extreme strength or weakness tends to mean revert in short time frames. This tendency of markets is used by several mechanical traders to design automated strategies.
In all backtests these kind of systems work well.
BTFD Country in trouble RSI2 are some examples of mean reversion setups
Growth investing
Growth stocks make some of the most explosive moves in the market. New businesses , new ideas, new segments are constantly created in the world. Stocks with above average growth in profit and sales can make dramatic moves in short period of time. As a trader if you develop a setup to exploit this tendency you can grow your account aggressively. The IBD based scans and setups I have shared are based on growth as "big " idea.
Value and turnaround
Stocks that are cheap for variety of reason can often make big moves once market perception about them changes. Value investors have exploited this structural tendencies for centuries and this is proven structural tendency of market. If you research this approach you will find many ways to make money from value stocks. I do not trade any value based method or setups as I find enough ideas in momentum and growth.
Technology stocks
Ever since markets were invented one sector has always stood out : technology. Nature of technology changes but new technology stocks outperform all other sectors in any market cycles. Focusing on technology stocks and especially getting early on to a new technology will help you make big money. If there is only one industry or sector you want to focus on . focus on technology.
Biotechnology
Some of the biggest winners every year are biotechnology stocks. Investing in biotech is risky but highly lucrative. Biotech stocks have highest probability of making 300% plus moves in shortest time period , sometime in days or weeks. There are special skills and knowledge required to trade them , but if you can build that skill you can make ton of money.
China and Latin America
These two sectors tend to produce big winners . Tracking them separately can help.
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