Choosing a Basket of Stocks
We teach how to find the stocks in play. For Steve and me these are the easiest stocks to trade. However, trading the stocks in play is not for everyone. You may wish to trade a basket of stocks because that better fits your style or personality. Below we discuss some suggestions for developing a basket of stocks.
1) Choose stocks that interest you.
You basket should include stocks that are interesting to you. We all have different interests. There are just some things that we find more interesting than others. Choose stocks that are interesting to you.
2) Choose stocks that you trade well.
At the end of every trading day and intraday you should review your work. Keep track of which stocks are easier for you to trade. You will find that there is zone for stocks that you trade well. Stocks within a certain price range, volume range, and on a certain exchange will be easier for you to trade. Learn your zone and only pick stocks that fit your criteria.
3) Know your stocks.
Add stocks to your basket that you know better than most. Know the stock’s story. How do they make money and what is important going forward to the company? What will make this stock move?
4) Stocks that move or are about to move.
Chose stocks that will move. Do not pick stocks that move the most. A stock that moves the most is not necessarily a good stock to trade. You want a stock that will move and you will be able to read the tape when it is about to move. You want a stock that you can trade. Stocks that have between a 1 and 2 point daily trading range should afford you an opportunity to make money on a consistent basis.
5) Set Price Alerts.
Set your alerts for great longs and shorts, and important technical levels which you can trade off of. And write notes on our alerts as to why the alerts are important. You may forget why your alert went off if you do not make notes on our platform.
6) Diversify.
Chose stocks from different sectors and not just one sector so that if a sector is not moving you have some stocks to trade.
7) Choose a basket of stocks that you can cover.
Do not choose a basket of stocks that is too large. You must read all the news releases on these stocks daily. Read everything important that is written on these stocks. If you can’t follow all of your stocks daily then cut some from your basket. So pick the amount of stocks in your basket that you can follow.
8) Trade some news driven events.
Make a list of three setups for news driven events that you trade well. Trade a new driven set up with which you are comfortable if you are not comfortable with the opportunities presented from your basket. You will discover new stocks that you make money in. You will learn new stocks that are easier for you. Consider placing some of these stocks in your basket. And remove one’s for which you are not consistently profitable.
9) Talk with others on our desk who trade your stocks.
Talk with these traders about specific trading scenarios and the catalysts for these stocks. You will learn from talking with others on our desk about these stocks.
10) Pour over their charts everyday and every intraday.
When we first started trading the best traders were those who stayed the latest and read the most charts. You must review your charts consistently for those in your basket. Especially be sensitive to spikes in volume for your stocks. You should be an expert for your stocks.
11) Review your work and make sure you are making money in these stocks.
You will not trade every stock as well. Keep a record for which stocks you are consistently profitable. Add only the stocks that you consistently are profitable to your basket. And if you recognize that you are not consistently making money in one of the stocks in your basket then remove it. Eliminate those stocks that you are not making money in. Replace the stocks with stocks that fit your criteria, that are in your zone (price, volume, market, interest for you, that move, and that you make money in).
