Let's get Zen up in here!
The Market is an easy game to play. It is just that we are hell-bent upon making it so complicated.
That’s how Zen in the Markets (one of my all time favorite books on trading) begins — and I couldn’t agree more.
Successful trading comes down to one thing — managing yourself. Making sure you stay disciplined. Making sure you stay focused. Making sure you stay consistent and working on the task at hand.
For me the task at hand is to notice (and accept) where the market is at all times.
Right now we’re blow the 20 day MA which is a huge red flag for me. It’s not enough to halt trading to the longside — that comes if the 50 MA is breached.
But it is enough to keep me alert. To not take risky trades. To make sure I’m following all of my rules.
Egoless sight is seeing things for what they are and not what our egos would like them to be. Edward Allen Toppel, Zen in the Markets.
With that said, here are my picks for the week.
And remember, my method is a very simple one. It calls for one of three things:
- Breakouts
- Continuations
- New highs
You can read more about it here…but in essence, what this means, is that every trade I have on my radar is either in the midst of one of these three actions, or looks to be starting one of them.
Because that’s what the charts of successful trades display.
As a reminder, here’s an awesome looking trade that were were lucky enough to catch a few weeks ago. $FFN.
How awesome is this...?
That’s an hourly chart, and the 44% move took place over one week. That’s exactly what we’re looking for.
You might also be wondering why I trade low priced stocks with all of their inherent volatility and shiftiness (sometimes I even begin to wonder!) — well, something I saw the other day reminded me exactly why I like to focus my efforts on the smaller stocks.
Here are two tables showing returns on a pretty good day a couple weeks ago. The first table shows returns in the top 10 or so big brand companies I follow.
Top 10 big brands.
Nice. Gains in the 3% range are nothing to turn up your nose at.
But here are the gains in the low priced stocks I follow on the exact same day.
Small company gains.
Wow. Do you see the difference?
The goal is to stay calm in the face of the volatility you are sure to experience trading low priced stocks. Stay calm, alert and aware of the market.
Okay, okay, I’ve rambled on enough. Here are…
This Week’s Charts
In the middle of consolidation here. Looking for a continuation to the $1.30's. A close outside of the box to the downside gets me out of this trade.
Fakeout on Friday looks tricky. But a breakout in the right direction can produce a hige run to the $1.90's.
This might seem like a ridiculous trade -- as we're up 95% Friday. These have been known to run huge on the 3rd day.
Looking for a breakout and a run to $1.90's.
Looking for a big breakout to the .80's...
Don’t forget to do your homework, and good luck out there.
This post was written by...
David John Hall – who has written 200 posts
David has been trading non-stop for 6 years. He lives in Redondo Beach, California (an awesome place to live) and is super stoked to be able to blog about his passion here.
i like the explanation up top. It really shows what we’re looking for. Some people might be content with 3% all their life, but I’m not. Especially knowing that there are big gains out there.
Here’s a question though: When I’m making my picks Sunday night, I use the “last price” as my basis to decide how many shares i can buy. In the simulator, I’m practicing with the an account of $5000. Each trade is 1/5 of my capital. So, i take $1000/ last price to the # of shares can buy. The computer’s conversion is always different though. Just wondering why. Here’s the example.
CBAK. Capital available $1000. Last price- $1.06. Equals about 943 shares.
In the preview though, when i buy 943 shares at market price, it has a value of $1009.58. It’s like it’s taking the highest price in the range rather than the last price.
Hey Nathaniel — thanks — I agree. 3% might do for some — but if you have the temperament to go for more and can withstand getting used to the volatility of low priced stocks — I say why not at least try for those gains!
And great question about the simulator. I think the simulator might be tacking on a commission cost of $9.00 a trade. So instead of factoring in your trade at $1,000 you might want to divide $990/last price. That way you cover commissions. I’ll check it out and let you know.
Looks like I was right, Nathaniel. They add a $10 commission on trades to make the simulation as realistic as possible — I’m assuming.
Here’s the location on their site that explains it.
http://education.wallstreetsurvivor.com/brokerage-commission
Awesome, thanks. Didn’t think about the commissions. I’ll adjust my numbers for next week then.