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ChrisW

Only trading a few stocks to really learn their behaviour

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So I'm a new trader, a few months in on SIM. I've been focused on a morning trend strategy that's been showing some promise and suits my psychology. One of the things that has crossed my tradedesk a couple times is the idea of only trading a limited number of tickers so you really learn how they behave. I've heard of anything from just 1 ticker for months to maybe half a dozen. 

I can see the potential benefit from understanding how a specific stock's price moves if it  shows similar intraday patterns over the days and weeks, particular if you're interested in it's intraday trends. Right now I have a bucket of about 50 stocks I trade as they show up in the pre-market show or on my screener, so it'll take me awhile to know any one in particular, if that is indeed of benefit.

The other potential benefit I see is that I'm heavily long biased, and keep reinforcing that because it's easier to recognize right now as I move from stock to stock. But focusing on a few stocks and taking the opportunities that present means I'm more likely to practice short positions as well.

Would love your thoughts on sticking to just 1 to 6 stocks for learning intraday trend trading.

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seems not legit to me.

you can end up with stock which is only machine traded and the only thing you will learn there are the imporant levels for that stock and once they break you are in an unexplored space starting from scratch.

i think you have unrealistic expectations of what trading is. the way a stock price moves is not the attribute of the stock but the attribute of the market=people and machines trading it. if there is no interest in trading that stock, there will be no nice moves to catch. You as a person can be sure only of its randomnes and unpredictability so i do not believe that if you pick one stock you will find the holy grail of trading. Looking only at one you are limiting yourself in education and experience as it is said (i think it is statistically proven) that the stock is moving sideways most of the time so it can be a lot of time lost trying to study during the "not interesting" times.

there are no shortcuts and quick wins, do not try to invent anything when you are starting (yet)

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Thanks peterB for responding. I believe you are correct that statistically stocks tend to move sideways more than trend - I think I heard Dr. Reid says stocks only trend 15% of the time. So the point about lost study time during non-trending times is poignant. 

Maybe I need to use a different word than "trend." Maybe it's more "momentum" plays? Basically, I'm using Jarad's "maximize trend days" webinar and Dr. Reid's "trend following" webinar on the 1-minute chart to catch directional moves that usually last 15 to 30 minutes. If after 30 minutes, the price heads the other direction and over the day it's generally moving sideways, I usually still find a trade or 2 if the range's time period is longer than my time-in-trade.

I'm not looking for a holy grail, just to see if there is an educational or profit edge to practicing on a limited numbers of tickers. And I don't think I'm inventing anything, it's something that I've read in a few blog posts or seen in videos, although the credibility behind them I can't speak to, hence me asking the question.

It got me thinking about:

- why moderators say "I don't trade that stock because I can't trade it well"? - that seems to imply that they're being choosy based on experience with a particular stock.

- why Peter (I assume you are a different Peter) always has AMD on his watchlist? - is it because he has some intuitive decision-making or strategy edge on it born out of experience with it?

- some stocks appear - or more correctly as you point out, the people and machines behind them, cause them - to be choppier while some stocks tend to be slower directional grinders (as an example, maybe TSLA vs MSFT) so it seems some would work better with my strategy while others wouldn't.

Happy to hear your further thoughts on these points or anyone else's who jumps in. Again, thanks for taking the time to respond.

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I only scan a core selection of 25 stocks for particular behaviours, with a secondary list of 75 that may hit something interesting. I prefer to be familiar with the stocks and scan them for my setup, and I'm happy to watch a stock grind all day, or quick scalp a HOD/LOD break. 

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Thanks Roberto for responding. Do you believe your preference "to be familiar with the stocks" have led to an edge? Or forgetting that leading question, why do you prefer to be familiar with them?

I see the benefit of adding a second strategy that suits the chop better so I have one for those ranging times as well.

Cheers, 

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Possible edge. I'm back to paper for a bit while I work out which platform I want to trade off, and I'm somewhat new to trading.

I think the worst instinct is following the open crowd. I tune in, but turn down the volume because listening about NIO all day is not helpful to me. So in that sense, I'm not a fan of the same stock all the time, but I consider NIO more of a meme event too.  I've been influenced a bit by former day traders who have turned to more trend style trading.

My feel is that running my scanner against a core group of stocks allows me to judge them quicker and make less stressful decisions. 

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1 hour ago, ChrisW said:

- why moderators say "I don't trade that stock because I can't trade it well"? - that seems to imply that they're being choosy based on experience with a particular stock.

- why Peter (I assume you are a different Peter) always has AMD on his watchlist? - is it because he has some intuitive decision-making or strategy edge on it born out of experience with it?

- some stocks appear - or more correctly as you point out, the people and machines behind them, cause them - to be choppier while some stocks tend to be slower directional grinders (as an example, maybe TSLA vs MSFT) so it seems some would work better with my strategy while others wouldn't.

the first one is just personal feelings and stats but not rational

Peter trades AMD also for that reason perhaps but behind both the points is something different like the daily volume of that stock its average true range and from the experience you just see/feel that certain stock types might suit you well or not suit you well. People are superstitious.

1 hour ago, Roberto said:

think the worst instinct is following the open crowd.

actually if you know what the crowd is thinking you already have an edge. like if you know that now everybody would take this long for an ABCD even though you do not intend to trade it as ABCD. following the crowd is not as bad as you might think. keep it simple. you have a great service in the BBT room to pick the stocks to trade so you do not have to think about scanning on what to trade. you just pick the one which you think might work with your strategy

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Scanners are designed to make trading easier by applying my logic to the market. The BBT chat does the opposite more often because you need to decide who's throwing out legit info.

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Thank you both for continuing the discussion.

I see the value in understanding the crowd, somewhere along the line, someone in a video said that the common patterns are self-fulfilling prophecies as everyone knows the pattern so they all behave as if it will manifest and lo and behold therefore it does. I also do turn off the chat once the market opens, I currently find it distracting while I'm trying to make my own decisions and since I'm not scalping the opening. My work-day keeps me from tuning in later in the day but I expect after some more experience I will be able to background listen while still making my own decisions. 

I find Jarad's Morning Brew and Norm and Carlos Premarket Show quite useful in choosing a watchlist. I also look through my usual 50 pre-market to see what might be setting up according to the guidelines Jarad and Dr. Reid laid out in their webinars. I did also set up a scanner for my usual 50 with my rules that I use sometimes and it has found me setups that didn't make it to the morning shows but I need to track those better to see if scanner calls statistically lead to profit. As i write that out, it does seem like a lot of focus on finding the right stock and I guess with the "stocks only trend 15% of the time" that's why I was focusing on that aspect. In fact, that might be why I was asking about going down to the same 6 every day, because I was feeling overwhelmed by analyzing 50 everyday. Ah, we might be honing into something there!

I've just started to diligently track where the stocks I end up trading are first mentioned so hopefully over time, I'll get the stats to back up if the morning show watchlist or the scanner or the analysis lines up better with my strategy. And in fact if any particular stocks line up as well. 

And thank you peterB for speaking of the superstitious nature of people - this early in my journey I may be thinking there is some statistical edge for people when there is just their human psychology at work.

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1 hour ago, ChrisW said:

I was feeling overwhelmed by analyzing 50 everyday

it is as new everyday. the stock symbols are the same but the market conditions are different. maybe similar to what you experienced already but different. nobody i know analyses 50 stocks everyday. anyway, anything that works for you but as you also probably noticed, the experienced traders like Andrew do not spend much time with analyzing stocks. they see a setup and trade it whatever stock it is. There is nothing wrong with your process the only problem is that you have only one lifetime to make it so you better be as efficient as possible 🙂

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Well, that's interesting timing. In today's opening, Andrew mentioned he and Peter were working on a presentation about only trading 1 stock. I'll have to keep my ears open for that. But after chatting with you two, I'm not going to narrow my list down to only a few stocks. Today's winning trade was on a stock that would not have been on my short list but was on the gappers scanners and I saw for a possible breakout on the daily.

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i was just about to write it here that he mentioned a webinar about this topic 🙂

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