Building a Stock Trading Portfolio Wednesday, September 3 rd, 2014s

Transcription

1 Building a Stock Trading Portfolio Wednesday, September 3 rd, 2014s Jeff M. Roth Co-founder, SimplerStocks.com 1

2 Table of Contents Intro (1 min) Picking the right stocks for your portfolio (5 mins) Trading Psychology (5 mins) 12 Most Common Mistakes (5 mins) 1 Simple Strategy (20 mins) Best opportunities (5 mins) 21 EMA Trend (5 mins) Q & A (15 mins) 2

3 How to Get the Most Out of This Class In a nutshell... Kick back and listen. This is a well laid out presentation. You don t have to frantically write down everything. This is being recorded and you will get a copy of all the slides and notes. Sit back and soak it in. There are hundreds of people in this class and I won t have time to answer every single question, but I will save time at the end for some questions. 3

4 Let s Do This! 4

5 Picking the right stocks for your portfolio Everyone comes into trading in different ways, but everyone has the same objective: To make money. Yet most people who take up trading lose money and throw in the towel early on in their journey. It comes down to a couple of factors, the first being, Fail to plan and you plan to fail. 5

6 Picking the right stocks for your portfolio Not understanding your own personal risk tolerance is the number one mistake I see traders make. Buying a stock based on a stock tip, CNBC, or a Yahoo article is not the building blocks of a successful portfolio. If you plan ahead of time you can avoid giving into the psychological factors that break most traders. 6

7 Trading Psychology Bernard Baruch, a successful trader, once said, The stock market is human nature on parade. What works in the stock market is contrary to the way normal, intelligent people think. This is what trip most traders up because the folks that have money to invest in the stock market are like you lawyers, doctors, engineers, ect. Successful professional who are normal intelligent people. 7

8 Trading Psychology The market operates on two basic primal emotions fear and greed. The best way to take emotions out of trading is to have a rules based system. I m going to give you one simple rule based strategy to follow today so you can make decisions on facts and not options. 8

9 12 Most Common Mistakes Predicting Our thinking is fragile in the market. I also like to think of this as interpretation. There is what is actually happening and there is an interpretation of what s happening. Make sure you re differentiating the two. Not consulting a chart spot on the chart with the lowest risk, highest probability of success. 9

10 12 Most Common Mistakes Thinking you can NOT time the market you will rarely buy the low tick and sell the high tick, but there are good and bad entry points. Not cutting losses quickly enough Not selling It will come back, I am long term investor attitude. Selling too soon you must be able to hold for the bigger move. 10

11 12 Most Common Mistakes Diversifying your portfolio will protect you Dividend paying stocks are safe or selling covered calls is safe. Moving too much money in the market too fast. Emotional transactions buying or selling based on primal emotion rather than facts. Averaging down losers Trading against the market trend 11

12 The ONE Simple Strategy 12

13 1 Simple Strategy It all begins with a quiet market 13

14 1 Simple Strategy A quiet market is building up energy to either explode up or lower nothing happens until price moves 14

15 1 Simple Strategy The squeeze indicator makes these situations really easy to find. 15

16 Squeeze Notes and Questions Now we understand the squeeze setup and what to look for. That said, there is still an important questions to ask, and that is: When do we get into the setup? How do we get an edge as to which way the squeeze will trigger (i.e., is it going to trigger long or short?) How do we know when the squeeze is about to end? Let s dive in 16

17 How do we get an edge? 17

18 Waves 101 All I use the waves for, is a heads up on which way the squeeze is likely to fire (when I say fire that means trigger i.e., the first green dot after the series of red dots). C wave = longer term trend on whatever market and whatever time frame you are on B wave = intermediate term trend A wave = short term trend 18

19 Waves 101 What about the different colors in the waves? I DON T PAY ATTENTION TO THEM AT ALL. All I care about is if the B and C waves are above zero (which means the squeeze will most likely trigger long) or below zero (which means the squeeze will most likely trigger short) 19

20 How This Looks in TOS old (but still relevant) combo wave 20

21 ABC Waves for TOS Yes, the ABC Waves are available for TOS as an add on and not part of the licensing agreement we have with TOS. But not necessary for this particular strategy 21

22 Moving Averages 22

23 Moving Averages Strongest trends will bounce off the 8 EMA this indicates you are in a good trade so HOLD ON TO THAT TRADE! Sit on your hands as long as it is above the 8 EMA! It s ok if during the week if the stock probes below the 8 EMA but it shouldn t go beyond the 21 EMA, AND, it should not CLOSE the week below the 8 EMA. 23

24 Hanging on for the Ride 24

25 Money Management On weekly charts, the stops can be managed once per week. In fact, it s better to not stare at this chart. Just check it at the end of the week, if that is possible. HINT this is why I like to do some of these trades in what I call hard to access accounts. Meaning some kind of older clunker bank related website. For example, I use Fidelity. You don t have to do this but it can be easier to manage big trades if you aren t looking at them all day. 25

26 How to Hang Onto Winners If you are in a play off a weekly chart, then do not, under any circumstances, stare at a 5 minute chart of it all day long. You will never be able to hold this trade in that circumstance. Instead, just look at the weekly chart and the key moving averages, and it will keep your panic attacks in check. It s down today? It s crashing on the day? Oh, never mind, on the weekly chart it s just pulling back to its 8 EMA. Example: LEJU 26

27 Best Opportunities? I ve found that the best opportunities are as follows: Smaller market cap stocks ($1B to $10B range) Smaller priced stocks (ideally under $60 - not a deal killer if they aren t!) At or near 52 week highs, or, even better, ALL TIME HIGHS (within 10%) I like companies that are less than 5 years old not absolutely critical but they are generally in a faster growth phase than better, well established companies Bonus: Also, have high short interest. Even though all the above is true there s a large percentage of shares short 27

28 21 EMA Stay with the market trend by using the 21 EMA Rule of thumb price is above the 21 EMA the stock is in an uptrend and below the 21 EMA the stock is in a downtrend. How to spot a trend reversal? A closing week below the 21 EMA or 2 closing daily bars below the 21 EMA (if the pullback is only to the 8 EMA on the weekly give it the benefit of the doubt). 28

29 Is there a scanner for this? We ve been getting this question for years and the answer used be either no or sort of depending on your platform you may be able to get pieces that you could put together. We finally have an easy to use all in one place scanner and best of all you don t even need a trading platform to use it. 29

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31 Time for Questions 31