Spotting trade opportunities

Discussion in 'Trading' started by foible, Jan 11, 2008.

  1. foible


    In "The Master Swing Trader", Alan Farley says two things which surprised me and I wanted to see what others thought.

    First, he says "Pick only one or two issues and follow them exclusively if trading time is limited to a couple of hours per week. Several hours per day presents the minimum commitment to successfully swing trade a variety of stocks. Increase the watch list size as dedicated time expands. Success comes more quickly trading 2 or 3 well-analyzed stocks than chasing 20 or 30 poorly understand ones."

    Does anyone agree? I've heard of traders that stick to a handful of stocks and trade in and out of them exclusively but it sounds daft to me. Why not find stocks that are moving or fit into a few patterns and trade them instead of limiting yourself to stocks which may not be doing much?

    Second, he says "Swing traders have two ways to locate good setups: find the stocks themselves or have someone else do it for them. Chat room picks and website scans offer great opportunities when they match individual trading styles and pose serious dangers when they don’t. Always perform a personal analysis and never rely solely on someone else’s opinion for any stock pick. Long-term success will not come from setups identified by someone else."

    Despite the hedging, I'm surprised to hear him mention stock picking services at all. Isn't much of the trick locating these opportunities?

    Does anyone think that new swing traders (such as myself) could subscribe to one of these services and still grow or will the service deteriorate the trader's skills?

    I've seen some good traders use newsletters like HighChartPatterns to supplement their watchlist, but each time it was a trader that was already good to begin with.

    What do you think?
  2. foible


  3. Those who stick to only a few stocks are usually day traders who know how the orders are worked on those specific stocks. They become very familiar with how the stock moves so they can profit from those "patterns" that occur intraday. As far as these services, they are all a waste of time and money. Good luck.
  4. wuvetwo


    It's a good point and I have a theory on it:

    in the beginning if you can get the help of someone sharp that knows the ropes like hcpg or zanger, then it can really help you and save you from blowing your acct and countless losses.

    But then you have to go thru a stage where you cut out all the newsletters/services and stand on your own and try to see if you have the skills.

    After that, once you gain confidence, then I think paying 50 bucks a month to have another pair of sharp eyes help you find movers is not a bad idea. And I'm saying 50 bucks not 5000 for some stupid options course, or 400 a month for some chat.

    of course what is key is that they share your style-- which is exactly what your quote from alan farley was saying. Once you have a successful style, you have to make sure that any chat/newsletter is in synch or else it's going to be an impediment instead of a help.

    I'm in the last stage now. I just left my prop firm and am trading without all the noise from the office at home, with IB. And btw, I freaking love IB, why all the bitching about it? Of course it has been only a week :)
  5. Personally I would focus on all the stocks in play, preferable making all time highs and/or in strong up trends or if shorting very strong downtrends. You can look at IBD on weekends to see what stocks have a Rel Strength in the 90s or have some other filter or service you like .... I think having more choices is better. Wait for your favorite setups and trade away. My only problem is often you will get buy signals on the same day for many stocks. Obviously you need to have some filter like focus only stocks making all time highs or whatever so you don't get 200 buy signals on one day. When daytrading you can only focus on so many stocks and the advantage is w/ swing trading you can look at hundreds of possibilities..... including forex and futures. my 2 cents.