“A stock trader focuses on price action, while a stock investor focuses on the profit and loss statement of the company.”
“A trader believes a stock is overbought when the price has gone up too far too fast. An investor believes a stock is overvalued when the price is higher than the future value of the underlying company.”
“A swing trade for a stock will typically last from days to weeks but rarely lasts for an entire month. Most sustained swing trades on a chart will only go three to ten days before reaching overbought or oversold levels.”
A day trader may spend minutes in a losing trade & over an hour in a winning trade
A swing trader may spend a day in a loser & a week in a winner
A trend trader may spend days in a loser & weeks in a winner
A position trader could spend a month in a loser & months in a winner
“Swing trading stocks should backtest well for 5-day EMA / 20-day EMA crossover entry and exit signals to verify that the moves are large enough to trade. A swing trader just wants to capture one of the waves in a primary trend or a strong move off resistance or support.”
Rule of 30 for finding the top growth stocks to trade on fundamentals with stock screeners.
Current earnings +30% higher than the previous quarter
Annual earnings per share are up +30% YOY
Stock price is within 30% of highs
30 million share float
Price > 30 RSI
ROE 15-30%
“A complete trading system has 8 essential parameters that give traders a process to make their trading decisions: a watchlist, entry signals, exit signals, position sizing parameters, maximum risk exposure, correlation guidelines, volatility filter, and performance expectancy.”
What is an edge in trading? An edge in trading is simply a process that allows your winning trades to add up to more than your losing trades do over the long term.
A thread🧵👇
Research historical chart patterns to understand what is possible in the market and how markets change from uptrends to downtrends, and from volatile to range bound. Use this insight to structure profitable trading systems using price action signals.
Backtest your trading signals to see if they had an edge in the past. See if the signals create a positive expectancy model over different market environments.
Ten key lessons from my book “The Ultimate Guide to Swing Trading”
A thread 🧵👇
“Over the long-term, holding overnight has been where the bulk of returns have historically come from in the stock market versus open to close movement.”
Overnight risk is rewarded over the long-term.
“Swing traders should focus backtesting on shorter-term moving moving averages combinations like the 5-day EMA, 10-day EMA, 20-day EMA, and 30-day EMA crossovers to capture moves in price.”
Moving Averages 101: Second Edition: Incredible Signals That Will Make You Money
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“The 10-day EMA is a good moving average to keep a trader on the right side of a major market trend, and this was a favorite strategy of legendary day trader, Marty Schwartz. It’s typically the first line to be lost before a trend reverses in the opposite direction.”
Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones by James Clear:
A thread 🧵👇
“Every action you take is a vote for the type of person you wish to become. No single instance will transform your beliefs, but as the votes build up, so does the evidence of your new identity.”
“You do not rise to the level of your goals. You fall to the level of your systems.”
10 lessons from “The Psychology of Money” by Morgan Housel
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“Spending money to show people how much money you have is the fastest way to have less money.”
“Someone driving a $100,000 car might be wealthy. But the only data point you have about their wealth is that they have $100,000 less than they did before they bought the car (or $100,000 more in debt). That’s all you know about them.”