Welcome to trendsigma.net, a new trend trading site trying to find systems for stock picking. It aims to be more analytical, investigating trading systems that have something to do with stock picks, checking out stock picking services and testing software for the stock market.
So, while real stock picks and other trading ideas will get published through our main blog, this one acts as a reference or guide how to do it yourself and how to trade the picks then.
Why trend trading? Look at this chart from Apple Inc and you see why. Rising fundamentals are the driving force and the price has to follow.
So the short answer is, and I am sure you already know it, the trend is your friend. This is also true for picking stocks. Many investors believe otherwise, especially value investors, but what do they hope for after buying dirt cheap into a stock? At its best it should start to move immediately after our value investor is in. In their subconscious value investors are trend riders.
The trend is eventually the best way to make money. It sounds logical since something is going on there and that in the right direction. So, where is the problem?
It is the sustainability of the trend. And that’s exactly where the stock picking part comes in. We really want to pick the true trend of a stock, which needs some driving force, some true reason behind it. Trend stock picking is the combination of stock picking and trend trading. It should be possible to combine the strengths of both worlds. That’s the basic idea of trend trading.
Another fine advantage of stock picks is that they can be used with second guessing. In that case they are just trading ideas and you pick from the picks. That’s not always possible. The typical trading system that produces signals should better not be second-guessed. As the collective trading experience of legions of traders knows, the result will always be spoiled by second guessing. I know it better, the stock is oversold at this point…
Stock picks are different here. You can apply your own criteria to the pick and be selective. That is some sort of trading freedom that a mechanical system doesn’t offer. Use it to your advantage!
What about the trading? Do stock picks need a trading system or not? This depends on the size of a stock. The smaller the stock is the less important a sophisticated trading system becomes. Small stocks simply behave differently.
Small cap or penny stocks show action, that is, their price and trading volume rises or spikes and that is automatically the trading signal. Bigger stocks create more efficient markets. A real trading system is necessary unless you want to buy stock picks as a value investor. Look here about the distinction of picking small and large stocks.
Is there something else? Yes, namely money management. Stocks allow for large gains. You don’t need margin, and you shouldn’t use it. You want to be a stock picker that sells short? Holy cow, you are giving up potentially thousands of percents of gain and limiting yourself to hundred percent. Dump move. So, read our about page how to do the money management right. It is easy for the stock market enthusiasts.