It’s of import to intend of overtrading every bit a compromise of our best trading. Good trading is selective, putting gamble on opportunities that convey a positive expected value. When nosotros lose that selectivity, nosotros non solely courtroom losing trades together with periods inward markets. We likewise undercut our ain judgment together with compromise the footing for our success.
Today’s best exercise comes from reader Steve Ryan who describes his procedure for screening for promising stocks together with trades for the twenty-four sixty minutes catamenia session. Steve explains:
“My strategy is to detect stocks that volition motion the most fifty-fifty during a choppy marketplace day. Therefore, stocks amongst intelligence together with momentum stocks are 2 groups I merchandise the most.
Moreover, I am likewise concerned nearly liquidity. Primarily a twenty-four sixty minutes catamenia trader together with a swing trader, I cannot afford to permit the marketplace makers consume away my profits. Slippage together with huge spread are 2 soundless killers for brusk term traders.
Therefore I create a scan (using the complimentary FINVIZ version) below to run past times the stocks I desire to facial expression for the adjacent day. The stocks must be:
* Liquid, amongst an average book traded per twenty-four sixty minutes catamenia of i 1000000 or more;
* Volatile plenty amongst average truthful make of 1.5 or higher;
* Priced over $20
* Price is higher upwards SMA 50 (for momentum up) OR below SMA 50 (for momentum down)
* Simple moving average 20 is higher upwards SMA 50 (for momo up) or below SMA 50 (for momo down)
This scan commonly returns anywhere betwixt 150-210 stocks every night. From there, I facial expression at Daily, Hourly, xv minute, together with v infinitesimal charts to detect the best stocks to merchandise the adjacent day.
One tin alteration the average book per day, the cost threshold, or the ATR to run past times to a greater extent than stock results.”
The best exercise hither is having a robust procedure for separating greater chance from lesser opportunity. Once yous filter potential trades based on screening together with hence farther filter that list, yous convey helped avoid overtrading together with focused yourself on the trades that are best for you. Notice how Steve places both volatility/liquidity together with tendency inward his favor inward his screening, increasing the likelihood that he’ll run past times the magnitude together with direction of moves during the twenty-four sixty minutes catamenia session.
Further Reading: Quant Resources for Discretionary Traders