Stock Trading Strategies and Routine

Overview

This lecture covers practical methods for scanning, organizing, and maintaining stock watchlists, trade entry/exit strategies, technical indicators, and daily trading routines. It includes detailed Q&A on watchlist curation, indicator usage, scanner settings, and emotional management in trading.

Creating and Managing Stock Watchlists

• Maintain a master watchlist, reviewed every two weeks, culling uninteresting stocks.
• Use multiple watchlists (e.g., weekly, daily) filtered from the master list.
• Organize watchlists by themes or sectors (e.g., energy, tech, dividend payers).
• To start, use broad indices like NASDAQ 100 or S&P 500, then narrow down.
• Tools like Finviz allow filtering stocks by criteria (e.g., above specific moving averages, minimum price/volume).
• Regularly update lists to remove poor performers or add new opportunities.
• Use alerts on key price levels for stocks of interest.

Scanning for Trade Ideas

• Apply filters in scanners for criteria like market cap, price above moving averages, average volume, and beta.
• Further refine by trend alignment across timeframes and moving averages.
• Use AI or ETF component lists to identify sector or thematic opportunities.
• Scanners for pullbacks in uptrends: price above 20/50/200-day moving averages, down on week, up on quarter.

Trade Entries and Exits

• Prefer entries on higher highs above a flat/rising five-day moving average.
• "Pinch" patterns (anchored VWAP converging) are overrated and seldom used.
• Entries are typically all at once, not averaged in a buy zone.
• Exits often involve selling a portion at key levels (e.g., daily R2) or using a two-minute/five-minute exit strategy.
• Adjust stops according to recent price action and key levels.
• Avoid emotional trading; use predefined strategies to handle rapid moves.

Using Technical Indicators

• Key indicators: price, simple moving averages (5, 20, 50, 200-day), anchored volume-weighted average price (VWAP).
• Mathematically, price above VWAP implies a rising VWAP and vice versa.
• Focus on the direction (flat, rising) of moving averages, especially the five-day MA, for entry timing.
• Volume is less important at entry; often joins after the smart entry occurs.
• Ignore the slope of anchored VWAP for entry/exit; anticipate moving average direction.

Daily Trading Routine

• Start early by ensuring all trading platforms function properly before market open.
• Review open positions, then prepare coffee and assess the day's planned trades.
• Set alerts for key price levels and monitor headlines only for general market sentiment.
• During the trading day, manage alerts and positions; avoid too much news or social media noise.
• Use late afternoon to review and compile watchlists for the next day.

Emotional and Process Discipline

• Stick to strategies; avoid decisions based on emotions or external opinions.
• Don’t chase moves or blindly sell at target levels—have a process for managing partial exits.
• Skim news for sentiment, not for actionable trades.

Key Terms & Definitions

• Watchlist — A curated list of stocks monitored for trading opportunities.
• Moving Average (MA) — An average of closing prices over a specific period (e.g., 5, 20, 50, 200 days) to indicate trend direction.
• Volume Weighted Average Price (VWAP) — The average price weighted by volume, often anchored to a specific event or date.
• Pinch — Convergence of anchored VWAPs; considered less important than trend alignment.
• Two-minute/Five-minute exit — A trailing stop strategy using very short time-frame charts to manage risk.
• R2 (Resistance 2) — A technical analysis term for a potential price resistance level in a day.
• Scanner — A tool to filter stocks by predefined criteria for trade ideas.

Action Items / Next Steps

• Organize personal watchlists by sector, theme, or index.
• Try filtering stocks using tools like Finviz with criteria that fit your strategy.
• Set alerts for key price levels on stocks in your watchlist.
• Focus on understanding and anticipating the five-day moving average for better entries.
• Review and refine your daily routine to minimize emotional trading and react only to price action.
• Prepare for next month’s educational webinar with new concept questions.