Playing the Stock or Playing a Scenario?

Everyone’s approach to the markets is different.

Today I speak about two approaches.

One can choose to play the stock.

Here, one decides to follow the same stocks everyday. One decides to learn their nuances. The number of stocks that one follows is manageable. As a thumb-rule, one should be able to count them on one’s fingers. No more. One should be able to recall the stocks one follows in a jiff, with no sweat at all.

The chart of a stock begins to make sense. Trading plays emerge. One needs to then follow the progress of the same stocks everyday, and take trades as and when entry setups make themselves available. This methodology requires following the action everyday, live, during market hours.

What if we don’t want to be glued to our screens everyday?

Can we still get one action?

Yes.

How?

Simple.

We then don’t follow any stock in particular.

We define a scenario which contains all that we want to see in the chart of a stock at that point of time, when we decide to follow the markets and perhaps take a trade.

We then convert this scenario into an algorithm.

Again, don’t let the word algorithm scare you.

You don’t need to know how to programme. Your market software should allow you to put your algorithm together by combining chunks of simpler algorithms which define singular pieces of your scenario. These simpler algorithms are visible in your market software. You then need to copy, paste and combine your copy-pastes together with mathematical symbols. This is a vital statement. This is technology-power at its peak. This practically puts a very powerful weapon in your hands.

From this point onwards, trade identification is a piece of cake. Your let your algorithm run through the gamut of stocks quoted on the markets. Your software does this for you in under a few minutes. Your algorithm picks those stocks that are currently exhibiting your scenario, and opens their charts for you. You need to define your algorithm in such a way, that not more than 50 charts open up. You then sift through the 50 in about 5 minutes. Just pure eyeballing. You narrow the 50 down to 5, which are showing good entry setups. You pick the stock with the best setup. Then you feed in a trigger entry order in your trading account. The whole exercise take less than 15 minutes.

Isn’t that wonderful?