While the markets haven’t given us much to smile about lately… there is a lot to be excited about.
You see, I was on the bench during the financial crisis of 2008… leaving the tough decision making to my broker… who carelessly lost half my account.
Whether the trade war escalates to something worse or not… I’ll be ready this time.
In fact, I’m always ready for the trading day… it’s what has helped me reach over $2M in trading profits ever since I took control over my trading account.
(I credit my success to a strong work ethic and a disciplined approach to risk management. If you’re not client, click here to join.)
When I first started trading I thought it was good to dabble… and be in as many trades as possible to strengthen my odds of success.
Well, it didn’t take long for me to realize that logic was flawed.
That said, regardless of what the day throws at me, I’m prepared. I have a watchlist ready of stocks I’m potentially going to trade for the day. In addition,
I have a plan laid out that includes where I am trying to enter, exit, take profits, and cut losses if I’m wrong.
You see, without a plan you’re left hoping and guessing. You let your ego get in the way, and instead of taking a small loss it ends up getting worse… we’ve all been there before.
That said, today I want to talk to you about the power of preparation. I’m going to share with you a simple scan that you can use to find potential trades.
Now, I use TC 2000 for my charting scans… but there is a subscription fee. However, there’s a free tool out there you can use to scan for stocks to trade – Finviz.
For the most part, I like to find exchange-traded funds (ETFs) first… and there’s a heatmap on Finviz that you can use to find potential trades.
Basically, whatever ETF catches my eye… I’ll delve deeper and look into stock-specific plays using my chart patterns.
For example, let’s say you see SMH – the VanEck Vectors Semiconductor ETF is strong today, relative to the market.
However, when you look at the daily chart… semiconductors have been weak… but there could be a pattern forming if it starts to catch a bounce off the support level (the blue line).
So you could keep semiconductors on your radar. You see, if this ETF starts to rise next week… that means money is flowing in, and it could be the start of an uptrend.
Thereafter, you would look at some of the components of the ETF. You can do that by going to the ETF’s website.
Now, generally, you would go under the “Holdings” tab and see something like this:
Thereafter, you could look at the charts to see if you like any setups.
For example, maybe you looked at the daily chart in Applied Materials (AMAT) and noticed how it bounced off support and is forming a “W” pattern – which is often considered bullish.
Now, you could develop a trading plan for this trade… writing down your thesis, chart pattern you’re watching, entry price, stop-loss price, and target areas.
Pretty simple right?
How I Scan for Potential Trades
Well, I do this regularly… scanning for ETFs and then looking for chart patterns that catch my eye. For the most part, I look at ETF sectors each week to get a feel for who the leaders are or where the money is currently flowing.
Thereafter, I’ll scan the components of the ones I like… not only that, I’ll look at how the overall market is doing.
After I do that… I’ll scan for my chart patterns.
With the rounded bottom breakout (RBB) pattern, the hold time can be up to three weeks… while the hold time for the pinball pattern could be three or four days.
I do most of my scanning outside of market hours… and plan my trades on the charts that I like. Now, you might be wondering… if you plan a trade, does that mean you have to trade it?
Not necessarily, I plan a lot of trades that I never execute… but I am prepared each day and ready to make moves if need be.
For example, last month… I was able to spot trades in the oil sector… I planned and I was ready once I saw a clear signal to buy. Now, I liked the way oil ETFs were acting, and at the time… they were leading and some money was flowing in. Thereafter, I found a stock exhibiting the RBB pattern.
I got a little bit lucky with this one… I spotted the pattern and bought shares of APC… not too long after that, there was mergers and acquisitions (M&A) news around the stock… and it gapped up 30%.
However, sometimes… like when the market is volatile… I’m okay with planning and not executing. You see, I know when the overall market is shaky… it’s best to stay on the sidelines.
However, I wasn’t too active just because the market was selling off.
So when you’re scanning for stocks to trade… look for ETFs and the overall market, as well as the charts in stocks. If all the conditions are right, you can plan those trades and execute.
Now, if you’re looking for more trading tricks and lessons, make sure to check out my 10 Must-Have Trading Tips.