Know The Tendencies Of Your Stock
- Posted by TheArmoTrader
- on January 26th, 2012
As a trader, one of the most important things to know about the stocks you are trading is the tendency of each stock. This only comes with screen time and research. By research I do not mean knowing the earnings, sales, and fundamentals of the company. Rather, it is knowing what I call the stock’s “Statistics”.
For Example, today I was trading Potash Corp. of Saskatchewan, Inc. ($POT, $POT.CA). What I do before I trade an “In-play” stock is that I find out the “statistics” of it. The statistics include: The Stock Float, The Short Float (%), the average volume, and the Average True Range (ATR). Also, since many of the “in-play” stocks are earning’s plays, I also find out the time the conference call is scheduled to take place. If the call starts after 08:45 am EST (I usually give calls 1 hour before trading them), then I make sure to take note of it, because I do not want my face ripped off as I am trading it (conference calls have the power to move the stock hard in both directions) .
So if you follow me, typically you would see me tweet out info like this (in a list).$POT (850m, 1%, 1.46, 1cc)
What the info above says is The Stock Float, the Short Float, the ATR, and the Conference Call (cc) time. Typically I do not note the Short float % if it is under 5% (this is done to save space and get under the 140 tweet character limit). Stocks with floats under 5% are not going to matter. However, if a stock has a short float above 5% (especially 10%), then that is useful information that will change the stock’s characteristic.
Even though the statistics tell you critical information which you can use to your advantage, the best way to get to know your stock’s tendency is through screen time. For example, today when I was trading $POT, I had tweeted that it had a tendency to overshoot on specific levels. So if 45 looked like a support level, it would overshoot to say, 44.85, then move back up. This came in very handy as I used that prior knoweldge to my advantage.
I took a quick scalp in the morning in Potash. 45 was holding but dropped, but knowing the stock I bought it at 44.86 and scalped it out for a quick 60 cent gain in 50 seconds (I took the scalp off a bit early though). Here is the trade:
http://www.tradervue.com/shared/trades/117892 (Chart below via TraderVue)
Knowing the tendencies of your stocks will not only give you a better advantage, but it will also make you a better trader over time.
Another way to improve on this critical component of trading is by reviewing your trades, which I do via TraderVue.com. Before trading a stock, I usually pull up my past trades in it, and see not only how it traded before but also how I traded it before. I highly recommend the site. It is a MUST, especially if you day-trade.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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