Stockscores.com Perspectives for the week ending May 5, 2014

WEEKLY COMMENTARY

Stockscores Market Minutes Video
Waiting for the news can leave you entering trades too late because the market tends to price in new information before it is made public. This week, Tyler shows two examples where this is the case before he provides his regular weekly market analysis. Watch the video by clicking here.

Trade to Win
Do you invest to win or to avoid losing? The latter has been infamous in great sporting breakdowns. Teams from any sport who played to defend their lead and avoid losing have so often given back their margin of victory, granting them membership status to the Chokers Hall of Fame, that hallowed institution of which Greg Norman is President.

Their emotional attachment to money puts many traders on the defensive, casting their trading decisions to avoid losses. If visualization lends to the achievement of results, then this negative form of myopia certainly leads to long term failure.

Are you afraid of losing money in the market? Do you find yourself making decisions to exit a stock on a minor pull back because you are worried you will watch the profit evaporate? Do you delay entering a position until the market has moved up significantly so that your entry decision is proven correct? 

If so, you are normal. Unfortunately, being normal is a sure way to be a loser in the stock market.

Here are some ways to combat fear and put a focus on making money instead of avoiding losses:

1. Have a plan – writing down your rules for entry and exit gives you something to check your emotional decision making against. Without a written plan you have nothing to guide you through dangerous emotional moments.

2. Don’t take too much risk – the more risk you take on a trade, the more you will feel fear. If you risk less money than you are willing to lose you will make better decisions.

3. Don’t judge your success one trade at a time – in trading, you can be better than your last trade. Losing money is part of trading so judge your performance over at least 10 trades.

4. Plan your losses – before you enter the trade, plan the point that you will exit at a loss. If the stock gets there, take the loss and move on.

5. Trade quality – make sure that you trade stocks that fit the criteria of a proven strategy. If you don’t believe in what you are doing you will go on the defensive and be a loser even before you enter a trade.

6. Think like a winner – be positive, aspire to be great and don’t accept anything less than beating the market. It is you against every other trader, destroy your competition.

7. Trade your plan – when you have a few losses in a row it is easy to start breaking rules and try to trade your way out of pain. When this happens, go back to your plan or stop trading until the emotion subsides.

STRATEGY OF THE WEEK

No feature stocks this week

References

• Get the Stockscore on any of over 20,000 North American stocks.
• Background on the theories used by Stockscores.
• Strategies that can help you find new opportunities.
• Scan the market using extensive filter criteria.
• Build a portfolio of stocks and view a slide show of their charts.
• See which sectors are leading the market, and their components.

  Disclaimer
  This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.