Planning the Trade Based on Scanners
Once I find my Stocks in Play, I start to look for the individual trading patterns in them. I usually select three Stocks in Play and monitor their charts separately on three of my screens. When I see a potential strategy, I plan my trade. This is a fast decision-making process. Sometimes you have to plan a trade in a few minutes and at other times in just a few seconds. This is why you need months of training in simulator accounts to well understand the decision-making process.
I focus considerably on quality versus quantity. There are many, many traders out there and there are hundreds of strategies out there as well. I had to find the strategy that worked best for me, my personality and my account
size. I’ve found a strategy that works really well for traders in our community as well as for my own personal trading. This strategy involves taking only the best setups and waiting, and not trading, until we see something that is actually worth trading.
Day trading can be a boring profession – most of the time you are just sitting and watching your list. In fact, if day trading is not boring for you, then you are probably overtrading.
If you require a reminder of the importance of patience in trading, here it is. There are plenty of traders out there who are making the error of overtrading. Overtrading can mean trading twenty, thirty, forty, or even sixty times a day. You’ll be commissioning your broker to do each and every one of those trades, so you are going to lose both money and commissions. Many brokers charge $4.95 for each trade, so for forty trades, you will end up paying $200 per day to your broker. That is a lot. If you overtrade, your broker will become richer, and you will become, well, broker! As Dr. Alexander Elder writes in his book, Trading for a Living
, “Remember, your goal is to trade well, not to trade often.
Another problem with overtrading is risk. While you’re in a trade you are exposed to risk, and that’s a place you don’t want to be in unless you have proven that there is a setup in the strategy worth trading.
Here is my next golden rule:
Rule 8:
Experienced traders are like guerrilla soldiers. They jump out at just the right time, take their profit, and get out.
The stock market is controlled by machines and highly sophisticated algorithms and, as a result, there is considerable high frequency trading. High frequency trading creates significant noise in the price action and is specifically designed to shake out retail traders like you and me. You must be smart. Don’t expose yourself to them. Profitable traders usually make only two or three trades each day. They then cash out and enjoy the rest of their day.
As I mentioned earlier, scanners, especially real time scanners, are generally expensive. New traders, or even experienced traders who want to keep their costs down, can use scanners that are usually shared by communities. In our community, we show our scanners and share our Stocks in Play watchlist publicly every day with traders on our YouTube channel at
https://www.youtube.com/BearBullTraders/
In order to save some money, there’s really no need to invest in a scanner when you are just beginning. You should wait until you are absolutely certain about pursuing this career.