In order to excel an athlete must find a sport that fits their personality, abilities, and rhythm. Markets are like sports, in that the trader, as the player, must find the instrument/stock that fits their personality, abilities, and rhythm. Some stocks are great for day trading, some for swing trading, and some are great for long term investing. Which style fits you?
We all know people with whom we have a great rapport. We love them and they love us and everything is great. Conversely, we all know people we cannot stand to be in the same room with. Stocks much like people have individual personalities and rhythm, and so traders must find the stocks that they have an affinity for. There will be stocks that a trader can practically do no wrong trading in and then there will be stocks where every move appears to be a loser. In the latter case, wise traders will put the stock(s) that they consistently lose money on in a ‘Do Not Trade’ list, as those stock(s) are best avoided for them personally. Again, we want to do more of what is working and less of that what is not working.
In a similar manner, traders must find the time period for trading that fits them best. For some, it is day trading, others swing trading, and then again others the long term trading of trending stocks.
With day trading, the object is to find those stocks that not only the trader has an affinity for but also have plenty of volatility and a daily trading range that allows for the trader to capture 50-60 + percent of the day’s move.
In swing trading, the holding period can be a few days to a few weeks. The best stocks for this method have identifiable reliable rhythmic movements of 10-15% or more from low to high and high to low over the cycle. How do we identify the best stocks here? Hunt for chart patterns that look like they have a rhythm. One can visually screen for stocks over the past year that have clear sharp turns of two to four times per month where the moves are 10-15% or greater. For example, some of the crude oil exploration and production stocks have exhibited numerous swings of 10-15% or greater over the past year alone.
Long term investing is by definition less active and if the investor is fortunate enough the stocks they own can be with them for a lifetime.
Tracking daily the stocks that are up the most and down the most, new highs and new lows will bring to light groups and individual stocks that are showing promise in all three styles of trading and investing.
Another helpful activity is to keep a detailed trading log in which the reasons why a trade was put on are kept and also the reasons for the exit. A daily planner is good for short notes but a notebook for end of day careful ‘after action’ reporting/analysis will instill a discipline and aid the memory of the trader. Everything should be neatly entered from important high-impact economic and political news, to earnings releases, and to the thoughts of the trader during the day that affects performance.
Good luck and stay safe.
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