How to pick individual stocks

We will list up to 30 trades each week for Weekend Stock Trader. There are two 10 slot strategies and two 5 slot strategies for up to total of 30 trades. Some of the trades may, and will overlap. For most of you, you will trade a single portfolio strategy and stick with that each week that is what Cesar will do. For me, and others of you, you will choose to pick several stocks from the list. I will share some insight on what some good strategies are to pick from the lists if you like to choose stocks individually and not trade a set portfolio.

Here are two important concepts,

The Higher the HV100, the higher the p/l (and higher volatility), the trade is on average.
The bigger the pullback, the higher the p/l is (this is true both in terms of weekly and daily charting–we use the RSI to measure this.

Given this information, if you would like to create a framework of picking stocks individually that will most likely give you a higher compounded average return (CAR), I would pick either the 5 highest HV100 stocks, or lowest either RSI(2 or, a combination of both. Remember, although it seems obvious that you would want the highest CAR–this will come at a price of bigger drawdowns and account volatility. If you have a tendency of this affecting you emotionally -this is a bad idea. Many people choose more aggressive/volatile strategies and when they have a 15% drawdown-they tend to switch to something more conservative.–READ THIS ….that will destroy your overall performance. So, if you know that you can’t handle volatility, don’t do this.

On the other hand, you may want something more conservative. In that case-I would do just the opposite. For instance-I would create a 10 slot trading strategy. I would not take stocks from the same sector (for diversification), and I would pick stocks that have low HV100’s and, I probably wouldn’t even look at the RSI.

Overall, this is a fun way to trade and it has worked fantastic for me. If you have questions on this please email me at steven@tranquilitytrading.com

Good trading,

Steve