How to Choose Stocks to Trade
Selecting the best stock picks can be a simple process if you avoid the most common mistakes traders make when choosing stocks to trade. Using a stock pick process can help you speed up finding stocks to trade, AND improve the quality of every stock you trade for consistent success.
Here are the 5 common mistakes traders make picking stocks to trade:
1. Relying on others to find stocks for you.
2. Not calculating the Risk versus the Reward before entering the trade.
3. Not correctly determining the proper Stop Loss placement, which affects risk calculations.
4. Choosing stocks that have risk which exceeds your personal Risk Tolerance.
5. Trading against the Buy Side Institutional sentiment and their trend direction. These Institutions invest Mutual and Pension Funds in giant lot orders.
Today we will discuss the first most common mistake in more detail. Everyone wants trading to be easy. It can be a whole lot easier than what most Retail Traders experience. All too often Retail Traders are expending a huge amount of personal time and more energy than they realize. This is a COST to your trading. Remember that when you are trading for profit and income, your time has to be factored in as a cost. So how much are you worth? Write it down.
The mistake of relying on others to find stocks for you is very common. Most often gurus and stock recommendation services, already have a vested interest in the stocks they are recommending.
They have purchased the stock before they recommend it. Naturally if they can convince hundreds to thousands of their followers to buy the stock too, then the price will go up.
So now you are thinking that would be great. You could buy the same stock and it will run up.
Martha Stokes CMT
TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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