10 Tips on How to Specialize in a Stock Trading Style
I had a student write me, and here’s what he said. “Over the past few years I’ve been quite successful in my trading thanks to you (Martha Stokes CMT) and your (TechniTrader Methodology Essentials) course. About a year and a half ago, I was able to quit my job and now enjoy the freedom and quality of life that full-time trading affords. I thank you for that. In one of your emails, you noted that there are many trading styles and suggested that we “specialize” in one to maximize our effectiveness. I did exactly that…” This TechniTrader Student took my concept of becoming a Specialist, and created his own unique Trading Style.
A Specialist reaps higher returns because they are focused, and certain kinds of stocks behave in a certain way because a small section of Market Participant Groups dominate in that stock. In other words, certain traders trade certain types of stocks. If you learn to read a type of stock really well, you will be able to anticipate the patterns with far more accuracy.
Here are 10 Tips on how to Specialize in a Trading Style:
1. Choose a price range that you are comfortable trading. Do not look at every priced stock there is. Select a price range and study only those stocks. Keep the price range relatively narrow. Instead of looking at stocks from $2-40 narrow that range for example to under $5, or $20-40 stocks. Each price level of stock reacts differently, that is why we have different Buy Stop Limit Order price points for different price ranges of stocks.
2. Choose only a few Sectors that you track. All Sectors have cycles. Some are yearly cycles, some are 4 year cycles, and some are 6 year cycles or more. If you study and get to know a few Sectors instead of trying to learn all of them at once, you will better be able to see the action that indicates a certain kind of price move and the probable duration of that move.
3. Write down your Rules for trading. If you use Futures, then set a list of trading parameters around Futures numbers. If you do not use Futures, then set a list of trading parameters around Scan numbers. Stick to these Rules regardless of the few exceptions.
4. Avoid chasing exceptions or fixating on exceptions. Follow the body of stocks behaving the same way. Too many traders get all upset because a handful of stocks move outside of their Trading Rules. Ignore the odd ball moves. Instead study and learn to track the price action you can easily identify, and that has consistent results for you.
5. Determine your financial self-worth and try to constantly raise it, by setting higher goals for yourself. Too often, financial self-worth interferes with trading profits. Once a goal is reached, the trader unconsciously sabotages their efforts. I have seen it so often, and most of the time the trader is totally unaware of the fact that they have slammed into the brick wall and cannot make more money because internally they have literally shut down. Usually these traders blame everything from Market Makers to the weather, but seldom do they recognize the pit they walked into all by themselves.
It is hard to do this kind of self evaluation, but if you can overcome the notion that you feel it is worthless to try, then you will be surprised at the changes it will make for you financially. I have people who were making under $40,000 a year turning their financial self worth into 4 times that amount a year. It works, use it. Go back to the TechniTrader Methodology Essential Course manual and DVDs, and take the test. Set a higher amount that you want to make, tape a big sign onto your wall near your desk and look at it daily.
6. Ignore the News, because it is designed to invoke emotion.
7. Only listen to people, traders, and family who support your Trading Goals. Do not discuss what you are doing with those who do not believe in you. Do not try to convince them, and do not justify what you do. Simply do it. It is your life. It is your dream. It is your money, and not theirs.
8. Once you have established your Trading Style, Strategies, and Goals stick with them. Do not give up until you are convinced that something is not right for you. There is a cycle phase for success in any learned endeavor. First it is excitement due to the new experiences of learning, then there is the realization that it is going to be hard work to achieve your Goals, then the discouragement phase where you make a lot of mistakes, then finally if you are determined and want it bad enough the lights come on and you start having consistent success. From there it is a matter of sticking to what works, ignoring the Stock Market hype and gimmicks, and honing skills more and more.
9. Take time off and allow your mind to absorb what you have learned. The mind needs time to sort things out to find solutions to problems. Sitting at your desk hour after hour getting nowhere, is not the way to learn. A weekend away from stocks is a good idea.
10. People always think that the difference between successful and unsuccessful people is something huge, some unknown factor, some gigantic secret. But the truth is that the difference is tiny, often a small thing or a pivotal point of not giving up but pushing through a period of discouragement. Everyone has their happy days and their unhappy days. Successful people realize this and muster through knowing tomorrow will be better.
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The market is a vast and complex arena with a multitude of opportunities, actually too many opportunities. Most Traders run around trying to find the perfect stock. What I want you to do is to consider working toward perfecting your Trading Style, Trading Parameters, and becoming a Specialist of one part of the market.
Martha Stokes CMT
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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