I don’t pick stocks, the stocks pick me

Bull in Tallinn Estonia
A bull in Tallinn, Estonia

First off, I do not choose stocks based on fundamentals or narratives. It doesn’t matter which company is making money in my portfolio. Nor do I care about the reason why it’s happening.

The only reasons for my portfolio to make money are the share price going either up or down, and wins being larger than losses on average. I could remove the ticker symbols and numerate charts in my watchlist without having to know the company behind a chart. Welcome to the world of no human discretion!

Well, one would ask how the stocks I trade come to the radar. There is no guess work involved trying to predict the future winner. There’s no need to be right. The only question is if the winners can pay for the losers. Stocks that fit my predefined rules of trend, swing or momentum will make it to the list. Some lists may rank stocks based on the parameters used or spread risk over more names if too many candidates pop up at the same time.

So I don’t wake up thinking what to trade that day. I have a long-term game plan always ready. I know what I’ll be doing the next week, month and year. It’s all a process of trading the markets and not the account balance. Profit is the inevitable result of a good process of managing losses. I want to be the best loser!

The same stocks are being traded each session by market participants. Stocks go “from hand to hand” creating price moves up and down. Most traders are probably better off watching a basket of 30-50 stocks and trade the similar swings happening over and over again, rather than trying to figure out the next big winner. Your intuition may hit a winner from time to time but how likely is one going to have consistent success in stock picking for the next 20-30 years?! I think that concentrated stock picking is an overrated activity. It leads to so many flaws of human nature that will come inbetween the trader and consistent returns.

Decide on the universe to trade. Which market, sector, size and liquidity is going to make it to the portfolio. These filters already narrow it down to fewer names to choose from. Next, a predefined set of rules can help the trade setups to find you. No need to overthink it, just follow the price!

Share this post

Leave a Reply

Your email address will not be published. Required fields are marked *

This website uses cookies and collects visitors' data. By continuing to use the site, you agree to Privacy Policy

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.