GIRI – Peaks of Success

Selecting stocks to trade from a screener with predefined conditions and logic has helped a great deal in realizing good trade opportunities. It has also helped in avoiding potential pitfalls. Such as technical traps, news failures, direction failures, etc.

However, selecting stocks to trade is a lot different from trading in stocks. In a trade, precision plays a key role. But when shortlisting stocks, the same streamlining process doesn’t always work the same.
For example, shorting a smaller company than a market leader can have a different outcome. Similarly, when going long, a sector-wise correlation among stocks can improve the odds for success. There are numerous examples like these where simple, unquantified decisions help improve profitability. These are some considerations:

1. Regarding News and Current Affairs: Most entry-level algorithms cannot keep track of news and opinions and at the same time work on interpretation and inferences. To trade or avoid? One way to take the benefit of news is to trade all screened stocks or none at all.
2. Regarding Sector and Industry: Correlation can sometimes work to great advantage. Multiple screened stocks of the same sector can be a good indicator of momentum building in that sector or industry.
3. Regarding Upside or Downside: Expectations and price targets for stocks trading at different levels in their trajectory are different. For example, stocks near their 52-week high can be bullish even when the system screens them otherwise. Vice versa for bearish stocks. Prices in a reversal or retracement can be difficult to gauge for the length of the move. Similar uncertainty can accompany targets for an all-time high stock.

One way to be able to guess better is by fine-tuning existing criteria.

Observation and market watch via participation opens the mind to new learning of patterns, skills, strategies, and insights. More patterns and parameters would keep on surfacing along the path of trading. Any system cannot accommodate all without the scrutiny of attentive curiosity and command. No algorithm can imagine the scenario. “Forecast” is an overrated term in the stock market. Learning is the best trading tool.

Incidentally, bias is leading to non-bias and vice versa. That’s when we know that something is right, when randomness comes into play and starts making sense. Most sense is made when we realise our own expectations with trading outcomes and adapt according to the market conditions. We should follow the market with necessary subjectivity to avoid the pitfalls created by its participants.