The Secret to Stock Selection

Do you ever catch yourself looking at the trading screen, sifting through your scans and telling yourself “it doesn’t look like a sure thing”.

I used to do this all the time.

I’d run the daily scan and be presented with 40-50 opportunities with my entry signal present. I would then proceed to look through every single chart and be disappointed with what I found.

Nothing looked like a sure thing to me.

Nothing jumped out at me and said “buy me, I’m going to win”.

It was impossible to tell them apart.

It was like being at the dog races. I’ve been a few times over the years for a bit of fun. Never serious. I remember looking at the programme with a tenner in my hand and needing to pick a dog. But to me, they all looked the same. It was sheer luck for me if I picked a winner. There was no skill in the selection process.

Indeed I realised, the only way I could win if I did this regularly would be to have a system that didn’t rely on me knowing anything. A system that controlled my losses when I was wrong, but maximised my profits when I was right.

And I took that same approach into my trading when I realised I was unable to predict the markets.

Eventually I ran a little experiment.

I looked back over historical charts and found all signals on my system that lead to huge winners. As many as I could find.

I had over 50 examples.

On each one I used a piece of paper to cover up the part of the chart that showed the trend, and looked at the signal.

I asked myself.

Is there anything about these particular signals that shows me this trade was about to kick off on a big run?

I looked at MACD, RSI, Moving Averages, Support and Resistance and even candlestick patterns.

I spent months on it. Again and again looking for patterns.

Would you like to know what I found?

NOTHING

Yep….. Nowt. Zip. Zero.

There was no consistency. Nothing that stood out to tell me this was going to be a winning signal.

None of these signals looked like a sure bet. Some looked pretty damn ugly too. Signals that hand on heart I never would have touched.

So what did this tell me?

That sitting there, staring at chart after chart looking for that “sure bet” was a complete waste of my time.

I had no means to identify any winner from any loser. Just 50 signals a day which met my systems entry criteria.

Today I don’t care what the market looks like. Afterall, if I’m wrong it’s only going to cost me peanuts, and on the 34% of occasions when I pick right, I make sure I let them run to their full potential. I wait for that exit signal.

This is how I’ve made consistent returns over the last few years.

I have gone from a losing trader struggling to pull the trigger, desperately looking for the secret to stock selection, to a trader who has realised the secret isn’t in the stock selection.

It’s in what you do when you win and what you do when you lose.

And that for me was one of the most refreshing weight-lifting realisations I ever had in my trading.

I urge you all to run your own research and see for yourself just how fruitless searching for “sure bets” actually is.

P.S. If you are not a member of my FREE Facebook Group ‘Trading the Trend’ please come and join us.

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