How to sucessfully trade the stock market
Having the Right Mindset
Determining if a stock is a good trade
Determining when, where, why, and how much to buy of a stock
Learn to survive, then learn to profit
Someone who is scared will not be a successful trader be rational when you think about trades.
Trading is fun, addicting, a son of a bitch, and your best friend. Its stressful
The stock market can be a fantasy land
Don't let the fantasy overtake you!
A disciplined trader is a happy trader!!!
Emotionless trading: plan execute. Profit
Hope is for losers, take the loss! Don’t be scared to take a loss you will regret it.*
Defensive Trading.
Balancing risk/ reward
Executing a planned trade is a win. Whether or not you made money
You can raise your profit level if the trend is still working don't lower your stop loss
Buying Vs Selling a Stock
Fear and greed settle in
It is harder to sell a stock then to buy it.
you don't have profit or loss until you sell it
Bag Holders are Retarded
Figure out what your profit target is.
The importance of confidence and mental state. Trading in fear won't work
Revenge Trading
**DONT make high risk trades if you are already losing for the day. It'll make it harder for you.
Holding a stop and hoping for it to come back is stupid
Playing the field (diversify) vs. over trading
If you are making a trade that you are just like ehh lets see if this will work then this is over trading
Trade among several different stocks because some trades wont work out so you can cut losses short on the bad ones and bank on the good stocks
Fundamental Analysis
Technical Analysis
The Study of the internal financials and operations of a company with the goal of deriving a valuation for the company.
Not a must have as a technical based swing trader. But a key variable to consider when choosing the right stocks.
Use a combination of Technical and fundamental analysis
Shares Outstanding
Stocks currently held by all investors, including restricted shares owned by the company’s officers and insiders as well as those held by the public
Market Cap
Mega Cap = market Cap of $200B or greater
Large Cap = $10b or greater
Mid cap = $2b to $10b
Small Cap = $300m to $2b
Micro cap = $50m to $300M
Nano cap = under $50m
typically only trades micro to mid cap stocks
Earnings per share(eps)
Shares outstanding x Current share price
How much profit a company makes per share outstanding
EPS = (Net Income - paid dividends) / average outstanding shares
News
Good News
Bad News
share buybacks
increase share holders value
Own a bigger % of the company's stocks
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Dilution
Causes people to sell
More shares are on the market and the company is most likely hurting for money
It decreases a company's EPS
Price to earnings
p/e ratio
Valuation of a company's current share price to its EPS
One of the most important fundamental comparison tools
Compares on stock ability to report profits in comparison to its competitors
Forward price to earnings
Share price/ forward earnings estimate
The stock is trading at 10$ per share and has an EPS of .75 and next year the analyst say that the stock will have an EPS of 1.25
Trailing P/E or current pe ratio = 10/.75 = 13.3x earnings multiple
Forward P/E = 10/1.25 = 8x earnings multiple
Valuation ratio of a company's current share price in comparison to its forecasted earnings per share in the future usually derived from analysts or the company
The stock has a lower earnings multiple so it is an attractive buy
Future Fair Value
Stocks forward estimates x industry average p/e ratio
The best small cap stocks have attractive FFV’s
Attractive FFV’s are 1-5x current share price
Not an actual short term price target
Who cares if estimates are even close to correct. HYPE!
Goals for the stock market
Things that I want to study
Support
Support is the level at which at which the demand for a stock is heavier than its supply
Resistance
Resistance is when the sellers are higher than the buyers if a stock goes past this then there are more people who are willing to buy then there are to sell
Uptrend
a stock that keeps hitting higher resistance levels
Downtrend
a stock that keeps hitting lower lows and if it breaks out then it could be a possible buy
Technical indicators
Moving Averages
Candlesticks
13 EMA
Short term is more important than long term trends
stocks may trade around 13 ema and either go up or go down
Buying/Selling with 13 EMA
Selling with 13 Ema
13 ema it is not perfect
Small cap stocks tend to follow the 13 ema really well
identify if the stock is trending the 13 ema *if it's not then try to stay away from this stock
It should trend after it crosses the buy indicator
Following a breakout pattern small cap stocks commonly trend along the 13 ema for weeks to months *if it's not holding above the 13 ema it could be a false breakout
Buying with 13 ema
If it crosses 13 ema it could be a buy or sell indicator
Dipping to the 13 Ema
dip to 13 ema is a very strong support level where new buyers typically come in.
- best place to buy into a stock or buy more of a stock. He usually buys on the first test of the 13 ema
Bouncing of the 13 EMA
if price bounces strong off the first test of the 13 ema it is typically a sign of a new trend or at least another spike in price action
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Breaking 13 ema
If no buyers start coming in near the 13 ema and it continues to breakdown it's very possible the trend may be reversing
He only considers buying on the 1st dip to the 13 ema Highest risk/ highest reward or prefers to buy on the first dip if he didnt get in the stock already
Dipping to the 13 EMA
Any second test of the 13 ema im looking for support to hold or possibly sell if price breaks down the 13 ema
The more times price tests the 13 ema and the higher it gets from the initial breakout. Higher probability 13 ema will break = trend reversal or slow down.
SUpport areas are very fragile. Frantic trading.
Stop Losses
Setting a perfect stop loss is VERY DIFFICULT.
13 ema is an exact number at all times. Price may dip and trade very closely above and below the 13 ema in a range before continuing a rally
Sometimes price will cross below 13 ema
breakouts indicate possibility of new short term trend
-if breakout fails to hold the 13 ema in which the stock fall and crosses below the 13 ema then its a sell
13 ema can determine if it is a bullish or bearish trend
Using the 13 ema as a trailing stop helps simplify the question of when to sell
YOU ONLY USE 13 EMA AFTER A BREAKOUT
A Stock can go as long as its above the 13 EMA
Breakouts
Can be the beginning of something big
Buying a breakout #
Certain criteria must be met for it to be bought even if it is a breakout
Just because it meets your criteria still doesn't mean it could be a win it still might be a loss
Selling on weakness #
Breakouts commonly return 20 to 100%
Buying a stock on a strong market day the chance of success will be higher
Chart dow jones with 13 ema to chart the market
When market is riding above 13 ema you can be more aggressive
If it's below you should more conservative
Take profits earlier and take smaller positions
Breakouts 3 phase formation
Phase 1
Phase 2 Consolidation
Phase 3 breakout occurs
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Large price move accompanied by heavy volume
Sometimes triggered by news released
Unpredictable to buy the stock
chart pattern forms resistance and support areas
Forms highs and lows
Creates a triangle and highs and lows
Buying before a breakout can lead to higher profits but it raises your risk
breakout occurs accompanied by a surge in volume
This is a conformation
Want to see a strong candle into the close of the day
Want to see significantly higher volume
We should expect a new up trend
Actually forms the buy trigger
The phase where you actually buy the stock
Charts
Force 
Gold
Revival
Survival
Force is his go to pattern
It's very consistent
Highest profits of any charts
Criteria to be considered a force chart
Leading trend is bullish so people are more likely to buy
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Forms a resistance line
First rise in price action plus volume
Buy on the pullback
Very potent pattern to play
Least predictable
Could be a sign that the once bearish stock could be a good buy
Could mean the bottom has been hit
3 phase breakout can create a shortsqueeze
New buyers come in
Picking the bottom of a bearish trend is hard to do
Current sentiment is negative
If the stock market is bearish then it could mean more shorts could bet against this stock
Most common pattern to come across
Trade with smaller positions
When they do work out they can lead to big returns
Criteria to be met for it to be considered a Revival Pattern
Trend is bearish into the pattern
Forms a resistance line
Breaking above the resistance line can create a short squeeze
Spike in price action with volume
Increased volume
Can be a gap down to form a revival pattern
Steps to take before executing a trade
Criteria to be met for it to be considered a survival pattern
Formed after huge rally on a stock
Lead in trend is bullish large profit taken yet another bullish triangle forms
Price must hold above the levels where the the first spike started aka survive the bullish move
Short term 3 phase triangle forms
Survival and revival look similar
It's a mini revival pattern in a upward movement of a stock
First profit target is the initial spike point
If it doesn't stay above the initial breakout point then it didn't survive the move
Ussually formed after another chart like Force Gold or Revival
Largest consistent giver
20 - 100%
Don't get greedy
Criteria to be met for it to be considered a gold pattern
Occurs after stock has been trading 9 months to 2 years under 1$
Buy after it breaks 1$
Short term forms a triangle into the breakout
Fairly common for it to run from 1$ to 2$
Extremely volatile can lose 10 - 20% quickly
Cameron Fouses favorite pattern to trade
Most rare pattern to find
Very exciting to find one of these patterns
Set stop losses can lose a lot of money quickly
Better if stock hits $1 mark several times
You need to be diligent when locking in profits
Creates a mini force pattern into the breakout above $1
Not always but its better if it does but most of the time it does
Where
When
Why
Catch the stock at the breakout point
Where is the breakout point?
Breakout Line
The higher you buy the higher your risk
If it's a false breakout its higher risk
If it's 15-20% green on the day bet small positions
When to buy
You can bet larger positions
Midpoint of the breakout candle
Middle of the long white candle of the day
can also be used as a stop loss
Dip Buy the 13 Ema #
Stop loss should be tight
Very strong support level
Make sure price stays above the line
Dip buy that retests the support level of the breakout
Hardest point to buy into
Dip buy that retests the support level of the breakout
When not to buy #
Buy later in the session above breakout if you missed buying the breakout point. Higher risk consider buying small position
If the stock is not in one of the windows of opportunity
Unpredictable
Unfavorable risk reward
If you miss the chance to buy then move on
Don't get greedy and buy stocks later in the move
#
Doesn't matter if it's for a profit/loss
Be disciplined enough to hit the sell button and take the loss
Must take your profits
don’t expect every stock to be a home run
Must cut losses short
you can do damage to your portfolio
You will have losses and accept it
Holding onto losing positions is counterproductive
stupid people hold stocks that aren't working out
Woulda shoulda couldas! Get used to it
You're not going to make the perfect trade. Don't stress it take what you can get.
Strength Selling
Selling when things are still hot
at a 20% gain start thinking about some or all profits
sell on large % moves or multi day rallies
Important to take advantage of stocks making big moves
Big moves are followed by huge profit taking
Humans aren't always satisfied and want to take more money
Don't give up money that you could have taken
Sell at a resistance point/area, Whole #'s and descending resistance lines
Don't set unreasonable goals
Areas that are feasible
$1 is most significant psychological number
The lower the number the more significant above 10$ individual whole numbers become less significant
5-10$ each number can be easily be ran through
the importance of psychological support/resistance and whole#’s
2-5$ each whole number becomes a significant number
5$ whole markets become more significant so 10$ 15$ 20$ etc
What is the next whole number that it could hit
What is the last resistance number?
Mainly focus on stocks trading under $5
Sell the stock if it goes against you
Agressive
Passive Agressive
Passive
Midpoint of breakout Candle
if you bought higher in the move
if a stock closes below midpoint of other candle it's known as a bearish cloud cover
Dark Cloud Cover
if a stock closes below midpoint of other candle it's known as a bearish cloud cover
*See Candle sticks
may miss out on profits
Breakout point
This becomes a strong support area
No one was convinced that this stock should be trading above this breakout level
Selling at the 13 EMA #
Can sustain a bigger loss
Does Not reccomended setting a stop loss on the 13 ema unless it's above the breakout point
Using candle sticks to predict reversals #
Shooting Star
Doji
Bearish Engulfing candle
Intraday Charts
Flags/pennants
Its bearish because the black candle forms below the midpoint of the candle
Indication of a reversal if the stock open below the close of the cross candle
It basically says higher prices were rejected by the market
Upper shadow is twice as long as the body
Opening of the candle was above previous day
Closing of the candle was below the closing other the other day
Possible reversal candle
Books
Steve neison good person to read on candle sticks
Sell on bearish top reversal candles
Sell all or most gains to lock in profits
Selling on breakdowns of short term consolidations. Flags and pennants
An exact breakdown does not always mean a trend reversal as the market is not perfect
See if stock is strong on the day
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Add more on a bull flag if it keeps going above the pennants
Sell if it breaks below these or lock in gains
News that could be good or bad
Earnings
They come out every 4 quarters
Earnings Call
Unstable
If stock beats earnings stock will usually rise. If stock misses earnings then the stock will usually fall. If earnings are met less volatile moves. A stock will act differently under all circumstances.
Earnings are release after hours and the gap could hurt your portfolio
You could win big or loose big just not worth the risk
Positive earnings sentiment can lead to 3 phase breakout formations. Or trigger a focus pattern to buy into
Trade lighter during earnings season due to high volatility and risk
Major companies will affect entire sector. Which affects entire market. Ex: Apple, Goldman Sachs, Pfizer
Check your stocks earnings dates so you don't hold thru earnings: Jan, April, July, Oct
Easiest time to lose money
OTC stocks don't have to forewarn you about earnings
Avoid: High Risk Gambles and heavy bets
Goal: Survival and steady gains
10% max capital in each position
Diversification is essential to survival
Determine where you are going to get out of the trade
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What the goal is for making/loosing money
Reward must be double that of the risk
Profit goal avg +20% gain
Loss goal avg 5 -10% max loss
Loss 50$-100$ per trade
70% losing strategy breaks even
50/50 ratio is good
Portfolio Management
Passive Account
Aggressive account
Hybrid Account
Lowest Risk
Max 10% into any stock
Conservative 5% opening positions sometimes 10% if you buy at breakout point
Consider buying more on dips or breakouts
Recommended new and conservative traders who are comfortable with buying on weakness
Lower risk
High risk but high profits
Max 10% into any stock
Aggressively start out positions with 10%
Close with full of ½ positions
Recommended for those who are comfortable traders not fond of buying dips
Potential larger loss on losing trades
Larger potential gain on winning trades
Max 10% into any stock
Open positions with 5-10%
Gauge position size on your comfort level with the stock as you may not get a chance to buy on a dip
Recommended for experienced traders
Medium Risk
Advanced Hybrid Aggressive Account
Max 15% into any given stock while utilizing leverage aka margin account
Max 2-1
10k with 2-1 leverage = 20K buying power
HIGH RISK: Gains/losses are double
Recommended for consistently profitable and experienced traders
Highest risk but highest profit margins
recommended for new traders to use passive account
1-5 years trading: Aggressive or hybrid
3-5 years trading Aggressive leveraged max 2-1 ratio
Step : 1 This step involves finding stocks that are moving or could breakout. Then analyzing what news is making the stock move. #
Starts by finding the right chart set up to trade: Force, Survival, Revival, Gold
#
Use Finviz, StockFetcher, TDAmeritrade, Yahoo Finance
Should only be minutes long
Whats pushing the stock? Whats the news? Is it significant? If not is it a technical breakout?
If there is news then it can go much higher
no news means its a technical breakout.
People might sell if it's just a technical breakout creating a false breakout
Step 2: This step involves analyzing what recent insider transactions have taken place. You can use insidercow.com to help you out.
Are insiders buying or selling?
Recent insider transactions means the company is more than likely to grow soon
Creates hype around stock
Adds confidence to your trade.
Step 3: Analyzing the stocks financials -- Is the company expected to grow? +30% is strong. But growth is growth
Amount of growth can be used as a gauge for confidence in the trade
#
OTCBB’s and small caps often don't have analyst estimates.
What has the past growth looked like leading up to now
Zero Revenue biotechs and resource exploration companies
Company does not have to be growing to make a good trade. Pure technical plays can and do work
Insider transactions
Buying means good for the stock
Strong technicals + strong fundamentals will likely result in your biggest gainers
Strong news + Technicals can result in huge short term returns despite terrible growth
Step 4: Valuation FFV aka Future Fair Value #
FFV > 100% above current share price + bullish stock chart = High probability trade
Don't need to have strong ffv to make trade just adds confidence to the technical set up
Step 5: Earnings Estimates and Announcements #
Estimates are just Estimates that create hype does not matter if they are right because we are not holding through earnings anyways
Always look to see when the company releases next earnings report
Avoid getting caught on a surprise bad earnings report sell off on missed estimates results
None of the research matters if the chart is not in the play
The trade should derive from a chart setup, then back it up with fundamentals if possible if the chart isn't talking, no need to listen
Step 6: Identify your entry point
Step 7: Identify profit target areas
Step 8: Identify initial stop level or when to sell if the stock goes against you
Step 9: Exiting your postion #
No right or wrong way to exit the trade.
Ride the 13 ema following the breakout
Sell on spikes and resistance areas to lock in heavy profits
Look to sell on bearish top signals such as bearish candlesticks and flag/pennant breakdowns
Success = the right patterns, disciplined stops, take your profits!
Taking your loss is equally as important as taking your profit
Finish Fous 4x2
Fous 4 Youtube videos
Timothy Sykes:
PennyStocking
PennyStocking part Deux
How to make millions
Trader checklist
Tim Gritani Trading Tickers
Time how to use level 2 quotes
Tim Fundamentals
Timfundamentals part deux
Tim raw
Tim tactics
ShortStocking
Watch all of his youtube videos.
Read books
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