What Companies Should I Trade?

Volume tells us how many shares a day are traded on this stock. Ideally, in a perfect and great world I would not want to see anything under 1 million shares, and that’s my personal, bottom of volume is a million. I am okay for newer traders if they find stocks they like to go down and to maybe 750,000, but for me it’s a million, so that’s number two.

Those three pieces are going to be critical to choosing your options and your stocks and your components for what you’re looking to trade in your positions. Instead of just plucking from air a stock and saying, “Ooh, I’m going to trade this one because my buddy said it’s a good stock to trade you,” need to make sure you make an educated decision.

The first thing I want to say about it is you can’t trade everything. You’re not going to find the average person trading in Amazon at almost $2000 a share and trailing Sprint at $10 a share. You’re going to have a range of stocks that you’re comfortable with that you can afford to trade.

The second one, the ask is this is how much money we’re asking you to pay to buy it for us. If you look at an option and, let’s say, the option has a price of $2 by $2.10, so that’s the bid is $2 the ask is $2.10. Which one would you rather sell it for?

Now, part of that will be predicated on what you can afford to trade, and what you’re comfortable to trade. You may say, “Rob, you know, I’ve done this for a little bit now, I’ve traded a few stocks, and when they get up above $50 or $70, yeah, I get a little bit worried about that,” then you know you need a range lower than that. You see, I may look at the stock and a stock is trading at, let’s say, $35, but I see the option is trading at $14, $15– that price may be too way too expensive for me, so that stock may work, but it may not be the right one for you. Their options are a little expensive for the average person that wants to trade because they get up into that $15, $18, $20 range, and that might be more than the average individual, especially if you’re newer, is willing to put in the trade. Instead of just plucking from air a stock and saying, “Ooh, I’m going to trade this one because my buddy said it’s a good stock to trade you,” need to make sure you make an educated decision.

Number three is the options price. You see, I may look at the stock and a stock is trading at, let’s say, $35, but I see the option is trading at $14, $15– that price may be too way too expensive for me, so that stock may work, but it may not be the right one for you. Their options are a little expensive for the average person that wants to trade because they get up into that $15, $18, $20 range, and that might be more than the average individual, especially if you’re newer, is willing to put in the trade.

I’m asked all the time by traders, “Rob, what companies should I trade? Today, let’s discuss the process for you to find candidates for you to trade.

Now, part of that will be predicated on what you can afford to trade, and what you’re comfortable to trade. You may say, “Rob, you know, I’ve done this for a little bit now, I’ve traded a few stocks, and when they get up above $50 or $70, yeah, I get a little bit worried about that,” then you know you need a range lower than that. Trade Navigator has a great scanning feature to do that just that.

I want you to look at whatever the price is and ask yourself, those two prices $2 by $2.10, which one do I want? Ask yourself the question, which one do I want? The difference of that bid ask is what the market maker keeps for their fee, their VIG for the putting the seller and the buyer together in that trade.

Market Cycles

Short term trading typically uses a 3-6 month daily chart, a 30 or 15-minute chart, a 5-minute chart and a 3 or 1-minute chart to spot a high potential trade and time the entry.

When the momentum slows down and markets channel sideways, look at other strategies to sustain your trading business. All of these strategies are taught at WealthBuildersHQ and are available at the beginning level to the advanced.

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* The third quarter, everyone “Goes on Vacation:” and the market is basically flat or drifting sideways or slightly downwards This might be considered the lazy, hazy days of summer.

Directional trading strategies do well in a trending market. You will find larger momentum moves in the futures markets in a trending market.

Take a look at the fiscal year as a time frame too. The market is cyclical.

Not all strategies have the same potential rate of return, but sometimes a strategy with a lower rate of return is better than no rate of return. Something to consider.

* The fourth quarter rolls around and all are “back in school”. The market momentum picks up and we start into more trends.

As traders in the ever-changing market(s), it is always wise to look at different time frames.

* Typically the first quarter of the fiscal year has the most momentum creating trends to trade.

An even grander view of the financial markets can be measured from decade to decade or in Bull and Bear market cycles.

* The second quarter brings us the earnings from the first quarter which continues some of the momentum but you can see the beginning of slowed momentum.

When the momentum of the market changes, it makes sense to change trading strategies.

When the momentum slows down and markets channel sideways, look at other strategies to sustain your trading business.

In a trending market, shorting or buying stock works well. Directional trading strategies do well in a trending market. You will find larger momentum moves in the futures markets in a trending market.

Long-term trading or investing uses a 12-36 month daily chart, some may look at fundamentals as far back as 10 years, and look at 6-3 month daily chart to spot good trade candidates and time the entry.