OUR FUNDAMENTALS
Mastering "Our
Fundamentals" will help you recognize your trading potential. They are
your foundation, your base, and the basics. I am not aware of a good trader who
has not mastered these principles. To consistently make profitable trades and
to recognize your trading potential you will must learn and then master these
basics. They say that the Chinese bamboo plant takes ten years for its root
structure to establish itself properly, but once established, it can soar a
hundred feet in just one year. You cannot become a great trader until you
develop your base, until you master “Our Fundamentals”.
"Our
Fundamentals" are: (1) proper preparation, (2) hard work, (3) patience,
(4) a detailed plan for every trade, (5) discipline, (6) sharing your best
trading ideas, (7) replaying your important trades. Judge the success of each
trade by how closely you follow "Our Fundamentals". When you begin,
your primary focus should be on learning and then mastering these principles.
After years of trading it
has become apparent to us that almost all of our bad trades emanates from
disregarding one of "Our Fundamentals". We all still make mistakes. A
profitable trader’s work is littered with many small mistakes. But we quickly
correct our flaws. And we keep our mistakes and losses small. We return to
doing the basics well, securing our foundation, following "Our
Fundamentals". When replaying a losing trade, you will often recognize
your mistake emanated from failing to follow one of “Our Fundamentals”. Learn
and master them.
At the end of “Our
Fundamentals”, we discuss One Good Trade. Focus on making one good trade at a
time. After you make one good trade, then focus on making one good trade. Judge
your trades based upon how closely you followed “Our Fundamentals”, as is done
in ONE GOOD TRADE. Doing so will help you recognize your trading potential.
We wish you the best of
luck.
Mike Bellafiore
By failing to prepare you
are preparing to fail.
Ben Franklin
PROPER PREPARATION
We compete against the
brightest of minds, those better capitalized, and sometimes those with better
information. Many fail attempting to become a successful trader. Shouldn't we
put ourselves in the best position to compete against the above by preparing
properly? Failing to prepare properly is preparing to fail. Below are the
things that you can do to put yourself in the best position to compete against
others in the markets. This job is what you make of it. We offer these ideas
for your benefit.
1.Read briefing.com or
bloomberg.com before bed and start thinking about some stocks to trade for the
a.m. Where are they trading in the after-hours? Jot down these prices and
compare them to their premarket prices.
2. Get in early. Every
once in awhile around 8 there will be an opportunity to make quick money on a
breaking news story. Also, valuable information can be obtained by watching
stocks trade in the premarket. What are the ranges of the stocks you are
watching? How much volume are some stocks doing?
Further, the earlier you
arrive the more time you have to leaf through news. Sometimes in those extra
minutes you find the stock of the day that you wouldn't have if you had spent
less time researching. Moreover, you have extra time to ask members of our desk
about a stock in play and obtain their feedback.
Look.... there is no
mandate as to when you ought to come in. And certainly experienced traders with
a system, like Andrew and Josh, can stroll in later. And NYSE traders can
stroll in later than NASDAQ traders. 8:30 on most days and 8:00 during earnings
season is the time when most serious traders have arrived during my trading
career.
3. Use the "SMB
Scanner" to see what is moving in the pre-market and review the catalyst
for each stock.
4. Think about your style
and determine the best two stocks of the day for you.
>5. Set price alerts
for stocks that did not make the cut, but are worth some attention.
6. Consider the different
ways the stocks you have picked might trade. Will they sell off first and then
be bought for the rest of the day? Will the stock quickly climb in the morning
trading session and search for a seller? Will you be completely wrong and the
stock will just trade lower? Under what scenarios should you aggressively buy
the stock? Just spend a few minutes thinking about the different ways the stock
may trade.
7. Create a roadmap for
your morning. Develop some plans as to when you might take a position in one of
your stocks. If you see xyz then you will buy at this price.
8. Are there easier
stocks to trade? After you have narrowed your stocks to a few and have gathered
all the information necessary, keep asking yourself if there are easier stocks
to trade.
9. Review your index
cards before the open.
10. Review the a.m. sheet
with the best ideas from each group member. You may find an even better idea.
11. Prepare mentally.
Visualize a great trading day. Perform your visualization exercises. Today will
be a great day.
12. Prepare physically.
Drink some water to hydrate yourself during the a.m. Stretch. Get comfortable
in your seat. Breathe.
13. Review charts. After
the close, review the charts of top price and volume gainers and losers. Also,
check the charts on the stocks that are hot. Find excellent entry points and
set your alerts for such prices. Consider developing a basket of stocks.
Regularly review the charts of the stocks in your basket.
14. Visualize. Steve will
teach you how to use visualization techniques to improve your trading. Complete
these exercises.
Little things make big things happen. It’s
these hundreds of small things done the right way, and done consistently that
will help you succeed as a trader. Little things, done well, make big things
happen for you.
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