Adjust your focus...
Newer and struggling traders must decide what they are going to focus on. After you’ve identified your areas of opportunity, you must prioritize. Put a list together and start with your largest area of opportunity. Tackle what’s on top of the list first and then work your way down. If you try to fix everything at once, you’ll likely fix nothing and continue to spin your wheels. Basically, you must decide what to focus on. In my opinion, too many struggling traders spend too much time focused on the wrong thing.
People are always asking us about our scans. They usually go something like this (with my quick answer in italics):
-What scans/screeners do you run? (It’s a long list but I have 3 favorites)
-What are your scan settings? (I could write a book but it really depends on the scan)
-Are you willing to share you scans? (Of course, but…(read below))
-Which scan(s)make you the most $$$? (Any one I use better make me $$$)
-What’s your favorite scan? (After chat, it’s my “shape into the 200sma daily” scan)
-Which scan should I use depending on the time of day? (Depends how you trade)
-Is Trade Ideas worth the $$$? (Absolutely, 100%, yes, but at the right point on your path to profitability)
We get these questions all the time. For me, they are my least favorite questions to get from a struggling trader. Often, I don’t answer the question right away. Instead, I ask a question in return: “Are you consistently profitable?” The answer I receive to that question directs the conversation in one of two ways.
1: If you are a consistently profitable trader and are trying to refine your craft, these are all great questions! We can have an in-depth conversation about the proper use of scanners and how to find more stocks to trade. Or we can discuss how to save some time and narrow down the list of stocks and find the ones with the most potential. I recently spent a great deal of time talking and back testing an idea with one of the members in chat. That conversation, along with some great back testing results, got me to change my “200sma” scan that I’ve been using for years. Since the change, the scanner has produced some great set-ups and it’s made me some $$$. By the way, thanks again RM!
2: If you’re NOT consistently profitable, I’ll still answer the question but briefly. Then I’ll try to convince you that you shouldn’t be worried about the scanners quite yet. I’m willing to bet you have way bigger fish to fry and we need to get to the bottom of that first. Rarely does a trader say “I just can’t find any or the right stocks to trade”. Yet, that’s what scans are designed to help you with.
Finding a list of the right stocks to trade on any given day is the easy part. Seriously, there are a ton of “canned” scans out there that will show you everything that’s gapping with volume, stocks moving on earnings and/or news. Heck, you don’t even need a scanner. Just follow the right people on twitter. Join the right chat room. I make the case all the time that the best scanner I have is GreatStockpix.com.
The hard part and what most traders struggle with is how to trade the stocks that are going to move today. How to trade the stocks is exactly what struggling traders should be asking about and focusing on: What must happen for the stock to set-up? What possible reasons (3 or more) could the stock show to cause you to consider an entry? When will you enter exactly? When will you exit if you’re wrong? When will you sell some if you’re right? How will you manage your emotions taking a trade in the first 15 minutes? The list goes on and on… Too often traders turn a blind eye to what his/her real issue(s) is and focus on something else.
These are the types of questions you should be asking if you’re not consistently profitable. These are the types of questions that you must have the answers to so you can become consistently profitable. Having another new scanner isn’t the magic bullet you’re looking for. I’ll bet you on that. Getting and/or adding a new scan just adds to the confusion and tends to overwhelm a struggling trader. Less is more. Worry about fine tuning your scans and finding even more trading opportunities once you’re pulling some $$$ from the market on a consistent basis. You must learn to take some $$$ from the market before you can start taking more $$$ from the market.
Let me put all this another way (or two):
I’ve yet to meet a struggling day trader who’s struggling because he/she is using the wrong scan.
I’ve yet to meet a trader who is NOT consistently profitable and the reason for the lack of consistency and profits has anything to do with scans they are or aren’t using.
Don’t’ get me wrong, scans are a VERY important tool and they will help you refine your craft. I couldn’t possibly trade without my scans at this point. However, you must learn to trade first. Learn some A+ Set-Ups and most importantly learn to control your emotions. It’s ALL about your emotions.
Adjust your focus and concentrate on the right thing. Focus on your areas of opportunity. You have plenty of time to adjust your scans later in your trading career. First, master the other more important tools and skills – charts, Level2, set-ups, position sizing, risk management and your emotions. It’s ALL about your emotions. Yes, I know, I said that twice. It’s that important.
Coming up next: My 2nd least favorite question: “When should I sell?”
Questions? Comments? Not sure what you should be focused on? Reach out!
Thanks for reading!