Many love to trade stock picks, but most don’t have ever thought about a system for that. Traders look for a good stock picking source and that’s it. Often the quality of the stock picks is judged by the fun it makes to read the recommendation. That is an antisystem!
So, what is a useful system for picking stocks? In our opinion this has to be seen in conjunction with the method used to trade the picks. Searching for the perfect system to select a stock is simply the wrong goal or question.
It is much more profitable to pick potential and not probability. The trade must be made on average profitable by the trading system that gets after the picking process applied.
The reason is simple. Stock picking is similar to trading in that there is no guarantee, not even close. It doesn’t make sense to search for the no-brainer, as it doesn’t exist. If it were, the market would immediately respond and drive the price into a region where a possible trade becomes a 50-50 chance. Any stock pick bears risk.
So, there are no sure-fire bets in trading and the same is true for stock picking. That’s why it is much more advisable to look for a high potential.
The highest potential can be found in small cap stocks. There is even no real need to trade them, as TA works worse in markets with light volume. Investing in them with a short-term horizon is better describing how to make money with explosive penny stocks.
The trend trading stock picker needs a trading strategy that is in itself good enough to survive in the markets. That in turn has to be boosted by the right picking method.
What are the criteria for trend traders? It depends. If your trading method and world is absolutely technical, choosing stocks with crystal-clear swings and trends is the holy grail of the trend stock picker.
If fundamentals are also considered, things get more complicated. In any case, don’t expect the stock picking source to take the burden of risk management from your shoulders. Also, always opt for possible potential and not safety of the bet.
Finally, here are our recommendations for two stock picking sources. One is our own…
If you want to trade bigger stocks and need interesting trading ideas or stock picks, then it is this site. For lovers of smaller stock (but with bigger potential!) the pointer goes to this small cap stock picker who truly hammers out x-baggers.
The former needs sophisticated trading methods, which we also have, and the latter not…