The post shares a simple tip to make your stock chart reviews more productive.
The Problem
How many times have you realized that you missed a big move in a stock but also remember looking at the chart a month or two earlier? It’s demoralizing and disheartening to know that you took the time to review the chart, forgot about it, then missed the move. It used to happen to me too.
First things first – Set up a process
Like anything else, setting up a process to review charts is an important part of achieving consistency as a trader. Set aside a block of time each day or week to do some prospecting.
Some traders develop sorting routines based on technical factors they deem important to generate their list. Others methodically sift through both the top performing and bottom performing stocks looking for long and short ideas. Still others prefer to go sector by sector. What ever works for you. Probably a good topic for another blog post.
Here’s the Tip: Force yourself to set Alarms
In my old way of doing things if I didn’t like the chart I simply moved on to one’s that looked more productive or close to a technical trigger. The problem of course is that those dozens of skipped charts will eventually be primed for a move that I typically missed.
Now, as part of my chart review process, I force myself to take the extra 30 seconds to set both a top side and down side alarms at places of technical interest in my trading / charting platform.
I have see enough charts to visualize key support and resistance levels. In my mind’s eye I say to myself “Where would I be interested in re-evaluating this stock?” Is there an identifiable trend? A breakout level you can spot? Again, you’re just trying to eyeball locations of interest that you can fine tune once the alarm triggers. It’s important to set a bull alarm and a bear alarm; after all, stocks move in both directions.
Once you’re dialed into this routine it will only take you a a minute or two to complete the process and move onto the next chart.
What to do when the alarm triggers
Keep in mind the purpose of the exercise which is to refocus you on a stock at or near a location of technical interest. It may be months and months since you last looked at the chart and set the alarms. So when one of your alarms go off you go back to the chart and fine tune it. Drop in your trend lines, support / resistance, and size up your indicators. Most of the time at this point, I fine tune the alarm to a true buy / sell alarm. Often I will drop it into a new watchlist of charts I am particularly interested in.
If you are a busy professional and are not at your trading desk during the day, take a few minutes to look at your alarm log. It will show you which, if any, alarms alarms triggered during the day. You can then re-visit the charts after dinner or whenever.
When the moment of truth comes and a buy / sell alarm goes off, I ask myself these questions. Do I want another long or short position? Would it make sense to sell an existing position that isn’t performing and replace it with this stock? If these answer are yes, I take the trade.
Remember, the alarm is simply an opportunity to make an informed decision. You will still make mistakes by letting good opportunities go or taking trades that don’t work but that’s trading. One thing that wont happen is missing complete moves without you even knowing about them. There is real power in setting alarms. You’ll get many more timely opportunities teed up for you. More and better chances should result in better trading.
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