It’s hard for new traders to imagine having too many ideas for trading strategies, but that’s what happens when you create a process for yourself and follow it.
The best traders put themselves in a position every day to notice.
What are they noticing?
Trading strategies come from not just everyday market behavior, but from unusual market behavior.
The normal stuff is noise, but the unusual action provides the seeds that can turn into a trading strategy.
To notice the unusual stuff, you need to look at charts.
This will not come naturally to traders who come from an engineering or programming background, who prefer to work in a spreadsheet.
Creating a process to review charts is important.
You don’t need to scan the charts of every stock in the market every day.
So which charts should you look at?
Start with the stocks that traded unusually today.
Here are a few ideas for different scans to get started:
- Stocks that went up the most today (in terms of percentage or ATR)
- Stocks that went down the most today (in terms of percentage or ATR)
- Stocks that moved the most today (the largest ranges)
- Stocks that gapped up today
- Stocks that gapped down today
There will be significant overlap between stocks in those lists and stocks that appeared in successful trading strategies.
The next step is formulating an idea based on what you see in those charts.
That’s the topic for tomorrow.
-Dave
P.S. Do you have other scans that you look at regularly and would like to share? Hit reply and let me know.
