Stock Trading System

The key to successful trading in the stock market is to have a clear stock trading system and consistent execution.  You should have a defined trading methodology and stick to it.  During time you can refine and enhance your model as your experience and knowledge grows.

Stock Trading System Summary

The following stock trading system is based on picking quality stocks that are in a basing pattern that would indicate a breakout is possible.  You buy on the breakout on volume and add to your position.  You hold this position until the chart indicates the run is done.

Stock Trading System Tools

This stock trading system requires the following:

• Ability to read stock charts and recognize basing patterns.
• Patience - ability to wait for patterns to develop rather than buy early
• Intra-day stock chart updates or alerts
• Ability to take out emotions.  Understand that you will not pick winners all the time.  In fact, if you can pick winners only 50% of the time and follow the principles, you will make money.

1.0 Stock Market Trading System Principles

1. Follow the money - institutional investors, not the retail traders, drive the market.  They are the 800 pound gorilla on the trading floor.  They have to be in the market and they know how to pick stocks.  It may take an institutional trader days or weeks to load or unload their position in a stock while a retail investor can do the same immediately.  This is also know as momentum trading.
2. Buy stocks that are leading their sector and industry.
3. Each stock position has a buy and sell order in place.  Profits at 20% and stop loss at 8% or less.

2.0 Overall Market Direction

The first thing you must be aware of before you can should make a stock purchase decision is the overall stock market index’s conditions.  Information on how to determine the overall market condition.

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