The idea of this section is not to "pick stocks" but rather educate on how to pick right Stocks with appropriate risk management, so that we can benefit from gains as well as cut short our losses.
Lets look at few candidates...
Lets look at few candidates...
Does your stock scan identify below candidates!!!
Common pattern in above charts:
Is this a sure bet!!!
How did we find these candidates?
- Consolidation for few days/ weeks/ months - conserving energy and getting ready for next leg up
- Near 52 week HIGH - within 15% of 52 week high which has higher probability of making NEW HIGHs
Is this a sure bet!!!
- There are NO GUARANTEES in stock market
- Every position comes with a inherent risk, hence risk management is essential
How did we find these candidates?
- Stocks within 15% of 52 week HIGH (time frame daily) - this helps to narrow your search and search for stocks near their 52 week HIGH
- ADX is less than 20 (time frame daily) - this narrows the search further to find stocks in consolidation pattern
- Price is greater than 10 - we do not want to trade stocks with price lower than 10 rupees
- Average daily volume for 30 days is 1000 - liquidity is essential in case we need to get out
- Visual identification (time frame weekly) - it is very easy to visually identify potential candidates
Items you should focus on:
Things to remember:
Be disciplined and manage risk appropriately...
- Find out earnings date for stocks you have in your portfolio, so that you are aware of major events
- Understand current market direction and decide if you want to remain invested based on market scenario
Things to remember:
- No matter how great the company is and how stellar the earnings are, if market is in correction then the stock performance will be affected
- All boats rise in a rising tide, in short if market moves up then most stocks will also move up and vice-verse. If market is doing well then selectively chosen stocks have higher probability to provide good returns in short duration
- If a stock position does not work in your favor then get out, cutting losses is not easy but necessary, ONLY a disciplined investor/trader will be successful in long term
- Use trade size calculator to manage risk per position
Be disciplined and manage risk appropriately...