My Stock Trading Methodology
How do I select my positions from an approximate universe of 3,000 US stocks (Note with my “extensive” 60 months trading stocks my system is evolving on a steady basis as I continue to educate myself)
Stock Market Shows and Programs
I watch financial shows and some of my stock trading ideas and learning come from the shows: CNBC-Fast Money, CNBC-Mad Money, CNBC-Squawk Box, and Bloomberg News.
Tip Ranks
Tip Ranks is a company that ranks financial analysts and provides their targets for stocks along with their success rate and their overall rating. Tip Ranks also provides information about insider buying, hedge fund activity, and an overall stock score. I compile these metrics into a positive or negative view of a stock by the professionals. www.tipranks.com
The Dark Pool
The dark pool is a secondary exchange for trading stocks which allows institutional investors traders such as Morgan Stanley, Merrill Lynch, and Goldman Sachs to buy and sell large amounts of shares without showing their trade on “lit markets”. Lit markets are the ones we know: The New York Stock Exchange, Nasdaq, and Shanghai stock Exchange. These are called “lit” because the price and quantity of the stock is “lit” up. I specifically look for stocks with heavy dark pool activity. We never know if the institutions are buyers or sellers, we only get to see the volume of the transaction. We use the rest of our tools to determine the direction of the trade. The terminology is called a “splash”. I use Stefanie Kammerman, better known as the “Stock Whisper” and the decoder of the dark pool, as my guide into the activities in this special market. www.thestockwhisperer.com
Seeking Alpha
Seeking Alpha is the world’s largest investing community. Powered by the wisdom and diversity of crowdsourcing - millions of passionate investors connect daily to discover and share new investing ideas, discuss the latest news, debate the merits of stocks, and make informed investment decisions. Unlike Tip Ranks, Seeking Alpha articles are written by Retail Traders(people like you and me) and give insights about the company. Additionally, it allows me to see if their is a consensus among the community. www.seekingalpha.com
SeasonX
SeasonX is a software used to identify seasonality based trades. Seasonality is a recurring pattern that has a tendency to occur every year. Some known seasonal patterns can include harvests, weather, timing of interest payments, tax deadlines, etc. The most common seasonality phase is, “Sell in May and go away!” From 1950 to 2013, the Dow Jones has performed, on average, only 0.3% druing May to October. From November to April the Dow Jones performed, on average, 7.5%. You can now see the power of seasonalty and its ability to provide winning trades. SeasonX uses seasonality to provide trades that win over 80% of the chance!
www.seasonax.com
My diligence & protocol
Per Mr. Buffet, “Rule #1 is never lose money. Rule #2 is never forget rule number one. If you invest 1 dollar and lose 50 cents, you will need to generate 100% return on your remaining half just to break even.” Therefore, I chose stocks where my risk to reward is favorable. Most of the stocks that meet this criteria are oversold, have deep value, or have significant momentum activity(dark pool, insider, or hedge fund buying). Secondly, after I selected a stock I examine if the stock is at any supports or a Fibonacci retracement levels(the Fibonacci retracement and other technical trading studies in my “TradeCraft” section). I aggerate all the data from my resources listed above for a macro consensus on the stock and then proceed to map out my potential profit targets and stops(exit price). For information on supports, resistances, Fibonacci retracement, and other technical analysis studies please visit my “TradeCraft” section.