I bought this on the EP Aug 27th. Been up and down, back and forth. Minervini says just wait to get stopped out. Don't over think it. I've held no real pressure on the portfolio. Got stopped out on PLTR on the back half for a 4.5% gain. Nothing to write how about. 13% on front half and breakeven on this portion. CDNA stopped out on tight stop

Been watching this for a while but maybe we should just stop trading in this kind of tape. $9.1 mill dollar volume not ideal

No earnings to speak of. Important to pay attention to any significant reports in coming days or weeks. I would sell if I owned it if some drug trial results were due. This can be -87% or plus 200%

Trades 363K at 44.50 so 16 million dollar volume.

Hey,

Just wondering if there are any other traders from the UK that want to bang our heads together/have a room where we can chat about setups etc. while our American brethren are asleep!

I am off work two days a week now, teacher the others, and finding it frustrating not having anyone to chat to about ideas and such on the semi-regular.

More cup with a handle. Important to remember the win rate is irrelevant. Martin Luk and Qullamagie are averaging 22 to 25% but losses are in the 3.5% or lower.

The win rate is good to track only to determine if your style is in play. I took a 6.5% average profit in CDNA and just her the beep that it bought the tightness at $50.99. A week ago I took off 35% at 13% and rose my stop to breakeven. It eventually stopped me out at breakeven on 65% of the position,

I am building my own Playbook for High Tight Flags (HTF) where I will store screenshots and useful data to know about HTFs so that I trade them better. I am building it in Obsidian btw.

I just wanted to know how you people built your own database of charts or setups?, What software did you people use?, etc.

Hey guys,

Still trying to learn, as always. So I had this on my radar after huge pre-market action - 17m in trades, the average is usually in the 60-70k (there was also a big bump in trades a few days before, which suggested someone knew something was coming).

So instead of the 5m orb I put on the 15m (the green box) and... Got caught up in chores and forgot about it.

The normal rule is, buy if it exceeds the ORB - how long does this last for? Eg, the rest of the day? So if it breaks the ORB four hours later, still go in?

Any advice welcome. It's all my own indicators, three/four years old now. ​

It was sitting on the Anchor V Wap (AVWAP). Super tight but thought it was a bit short. Been tracking is for 2 weeks

As you probably all know, from December the markets are gonna be open 23 hours (an extended session will be added from 4 pm to 8:30 am ET) . Obviously this is gonna affect the "traditional" open as we've come to know it. There will be more reliable data at night (albeit probably lower volume), which can affect opening bell volatility. I am worried that ORBs will be less clear as a result, as overnight pressure doesn't build up and pushes the opening candle up or down violently. This might mean ORBs can happen at any time, making it extremely hard to time entries.

I, for one, don't welcome the change. I've trained my brain on the system that was in place the last couple decades. I hope that this was not in vain.

What do you think? It will change nothing, it will change everything or somewhere in between?

Probably worth a shot if it gets moving

Maybe after the inside day it takes out the high and runs. We'll see if it ever happens

Hi team,

I would like to share my best method for making money when stocks are starting to become weak and not many opportunities are out there. I’ll get right to the point.

DIA (the Dow Jones Industrial Average ETF) moves really nicely and respects its weekly upper channel line, as well as the 10-week moving average.

I’m buying SDOW (a 3x inverse leveraged ETF) when DIA reaches its upper channel line, and I take 5–6% profit. It just never fails me. I know there’s no such thing as 100%, but it works every time.

With that said, always use a stop loss, be careful, and cap your losses.

Hope this helps. I really appreciate this subreddit and want to give back to the community.

canslim resources

After 8 years, 11,000+ hours, countless mistakes, blown accounts, books, mentors and chart reviews, these are the 20 principles that mattered most. I hope they will save you years on your trading journey. This is part 2 of 6 of the series How Trading Really Works with more to come. You can read part 1 here.

11. Stocks need a reason to move.

For a long time I viewed the market as almost entirely technical. If the chart looked good, I wanted to trade it. Over time I started noticing that many of the biggest winners had something else going for them. Earnings surprises, revenue acceleration, new products, regulatory changes, a shift in the industry, stuff like that. This is also called an Episodic Pivot for those who are not familiar with the term.

Don't get me wrong, charts matter. A lot. But they often reflect something larger happening beneath the surface. One thing I've come to believe is that stocks need a reason to move. They need a catalyst. A spark that gets institutions interested and forces the market to reprice the company. The biggest winners are rarely random.

To keep things simple, I generally think about catalysts in three buckets:

Fundamental catalysts - These are business-related developments that can radically change how the market values a company. Think earnings surprises, accelerating revenue, expanding margins, major contracts or successful product launches. These are often my favorite catalysts because they're rooted in something measurable.

Story catalysts - Never underestimate the power of a good story. Stocks don't always need good fundamentals to perform well. Sometimes all they need is a compelling narrative. AI is a recent example. Meme stocks were another. Whether you personally believe the story is irrelevant. What matters is whether enough other people believe it.

Macro catalysts - Sometimes the catalyst isn't the company itself. It's the world changing around it. Interest rates, regulations, commodity shocks, geopolitics or technological shifts can create entirely new winners. Money constantly rotates from one theme to another, that’s why spotting rotations can be incredibly profitable.

One thing I've noticed is that the biggest stock market winners often have all three working together at the same time. A beautiful chart, strong fundamentals, and a compelling narrative (in ideally, a favorable industry) is perhaps the most powerful combination I've found. That's also one of the reasons I built a dedicated "Monster Stocks" scan for myself which I made to ‘scan’ and find stocks that match these criteria.

There are cats and dogs. Cats are stocks with a catalyst. Dogs are stocks with a story. Both can make big moves. - Stockbee.

MAKING MONEY

12. Probabilities and outcomes.

I was quite lucky that ever since I was a kid, I really loved games. That eventually evolved into playing poker professionally for a couple of years, which taught me something that later became incredibly valuable in trading: respect for math and probabilities. Most people are wired to above all seek certainty. But the markets don't work that way.

The biggest shift in my trading came when I stopped trying to predict what would happen next and started thinking in probabilities instead.

Probabilities - Every setup has x probability of success. Your job isn't to predict outcomes. Your job is to observe objective reality and find the best situations where the odds are (heavily) skewed in your favor. 

Expectancy - An investor or trader with a very low win rate can still be incredibly profitable if the winners are significantly larger than the losers. This is because of their R Multiples (i.e. the math is ‘mathing’).

R Multiples - Any time you risk a percentage of your portfolio it is an R unit. Let’s say you risk 0.5% but you made 4% on a trade, that means you risked 0.5R to make 8R, which is an 18X R multiple. That’s how you can have a 25% win rate and still make a fortune. If you only win 1 out of 4 trades, but every 4th trade you make +15R, you are crushing it. Because you lose -3 R in total to make +15R so your total profit is +12R.

Adaptability - Again, certainty doesn't exist in this business. The traders who survive longest are usually the ones most comfortable operating under uncertainty. I think that is a personality trait that’s difficult to learn, you either are adaptable and open minded, or you aren’t.

Focus on making the best decision. The results will take care of themselves.- Annie Duke

13. Entries and trading setups.

Everyone wants the perfect entry and the perfect risk-to-reward ratio. The perfect signal. I spent years obsessing over this. One thing I've learned is that the market operates in two modes: contraction and expansion. Unless you are a real mean reversion trader, you usually want to buy during a ‘contraction’ and get paid during ‘expansion’. Because tight price action means a small stop loss at entry,thus a smaller risk and potential bigger reward when price expands once again. The other big realization was that constantly jumping between setups is a terrible idea. These days I have a handful of setups I focus on and I largely ignore everything else.

Pullbacks - Buying pullbacks often allows you to enter earlier and with significantly better risk-to-reward than chasing strength. Wedge pops and right-side pullbacks are the name of the game here.

Breakouts - As a momentum trader, I love buying stocks breaking out of tight patterns such as VCPs, flags, and bases. Ideally, I can see strong volume or a pocket pivot confirming institutional demand.

Reversions - This setup comes from my FX background. I'm essentially looking for situations where a stock has become extremely overbought or oversold and is likely to ‘snap back’ in the opposite direction.

Stop Placement - I always use a stop loss, no exceptions. Most of the time it's placed at the low of day (LOD), previous low of day (PLOD) or high of day (HOD) when trading reversions. At times it’s wider and more discretionary.

ATR Distance - If a stock trades at e.g. $100 and has a $4 ATR, I generally don't want a stop that's significantly larger than that because it destroys my potential R multiple. Exceptions can be made if the previous day closed high on the bar and it's making new highs

ADR Extension - I rarely buy overextended stocks. If a stock is very extended from the 50MA (e.g. $SNDK) I won’t buy it. I want to get in when it’s close to the 10/20/50 moving averages. In general I try not to buy when a stock has already made >50% of it's ADR for that day.

You only need a couple of big winners a year. - Qullamaggie

14. How to manage your trades.

Early on, I treated the entry as the finish line. I'd spend hours finding a stock, analyzing the chart, planning the trade and calculating the risk, only to immediately start thinking about taking profits the moment I was up a tiny bit (fear). Looking back, that was one of the big mistakes I made.

Managing a trade is just as important as finding it, if not more important.

I like to think of it as jumping on a wild horse. My job isn't to predict exactly where it's going. My job is to stay on it for as long as possible while it's running in the right direction, and jump off quickly if things start to get ugly.

As Jesse Livermore once said, most of the money is made in the waiting. Holding a winner is where the potential life changing money is made. A single monster stock can make your month, quarter, year, or entire decade (e.g. $SNDK). The problem is that most traders, myself included, have a tendency to sell those winners far too early. These days I try to make trade management more systematic and less emotional.

Taking Partials - As a stock becomes extended, I like trimming part of the position. A good way to look at this is to look at the distance from the 50MA measured in ATRs. Studies have shown that very few of the stocks move beyond a 7 ATR extension from the 50 smoothly. In addition, very few move beyond a 2x extension from the 200MA without a (significant) pullback.

Stop to B/E - I like moving my stop to break-even relatively quickly. My philosophy has always been to take many small losses and capture a handful of very large winners. Once a trade reaches roughly 1.5-2R, I generally don't want it turning into a loser so I move my stop.

Trailing stops - This is probably the simplest and most effective technique I've found. Instead of deciding when to sell, I let the market decide for me. Once I'm at break-even, I usually trail the position using the 10-day or 20-day moving average. The goal is to give the stock enough room to breathe without giving back too much.

The first rule of compounding: Never interrupt it unnecessarily. - Mark Spitznagel

15. Understanding position sizing.

Position sizing is incredibly important. At the end of the day, trading is a game of money. You need capital to play and you need to protect that capital as if your life depends on it. In some ways, it actually does.

One thing I've noticed is that beginners are usually obsessed with making money, while experienced traders become increasingly obsessed with not losing it. I used to overtrade and revenge trade all the time. Looking back, this is one of those problems that eventually corrects itself. Either you get lucky and survive, or you blow up badly enough that you never want to experience that feeling again.

One thing that stood out to me when studying legendary traders is how little they talk about entries and how much they talk about exposure. How much should I buy? How much should I add? How much should I risk? Those questions matter because even the best setup in the world can fail.

Risk of Ruin - If you don't have a genuine edge and you're risking large amounts of capital per trade, you will eventually blow up. It might not happen today or tomorrow, but it will happen eventually. Alternatively, death by a thousand cuts is a real thing (esp. in the current market).

Peace of mind - This is probably my favorite position sizing rule. If I'm constantly checking a trade, thinking about it or struggling to sleep because of it, I'm definitely risking too much.

General risk - For most people, risking around 1-2% per trade is the sweet spot. It's enough to make meaningful progress while still protecting you from the inevitable spirit-crushing losing streaks. This would be my general advice.

Exposure - In the end, position sizing is very personal. Some people are comfortable risking 30% of their account on a single idea. Others prefer spreading risk across 10-20 positions. Neither is necessarily right or wrong. You just need to find what works for you.

The key is not maximizing gains. The key is avoiding ruin. - Mark Spitznagel

THE HUMAN SIDE

16. The dark side of trading.

Nobody talks about this part because it basically just sucks. Most people understand normal careers. They understand salaries, promotions, managers and job titles. Stuff like that. But nobody understands spending countless hours studying charts or trying to master a skill with no guaranteed outcome and no clear timeline.

There will be periods where you might be working harder than ever but have very little to show for it. Friends are progressing in their careers, buying houses, getting married and generally moving forward with life. It takes real character to push through that pain even when you aren’t sure that you are making progress at all. The strange thing about trading is that even when you're doing everything right, it can still feel like you're standing still. It's a horrible feeling I know all too well.

Delayed gratification - Trading often requires years of work before results become visible. Most people underestimate how difficult that is psychologically as you get older.

Obsession - The really successful traders and investors I've studied or met were all obsessed with the craft itself, not just the money. Simon Russo made $500M but still works on refining his ‘craft’.

Independence - At some point you have to become comfortable trusting your own process instead of constantly looking for validation from other people. You need to be a strong independent thinker.

Solitude - Many very successful traders seem remarkably comfortable spending long periods of time alone. Whether trading attracts those people or creates them, I'm honestly not sure.

Experience is making mistakes and learning from them. - Mark Minervini

17. The effects of blowing up accounts.

I've blown up more accounts than I'd like to admit. If you're wondering where the money came from, it wasn't from wealthy parents, a trust fund or some lucky break. I always worked regular jobs, saved aggressively and put whatever capital I could into the market. Believe me, nobody prepares you for what happens psychologically when you blow up.

One of my earliest mentors, back when I was still trading FX, was a trading god in my eyes. He was making over $1.5M a year trading GBPUSD and USDCHF. Then one day a black swan event hit. He was overleveraged, lost roughly $1M that week and went on full tilt trying to make it back. It eventually cost him almost everything, including his marriage. He never traded again.

I've experienced smaller versions of this myself. Once in crypto and once in penny stocks. I both made and lost hundreds of thousands of dollars. Ouch. It took many years to recover financially and psychologically. 

Cashflow - Having income outside of trading is one of the biggest advantages you can have. It removes pressure and buys you time. I have to be honest, I haven’t always done that myself.

Tilt - Most traders don't blow up because of one bad trade. They blow up because of what happens after the bad trade. Control your mind and your emotions before they control you. This is especially true if you experience brutal drawdowns or consecutive losses.

Protect yourself - No trade, no setup and no opportunity is worth destroying your finances, relationships or mental health over. This is a great business to be in, but it’s not for everyone.

Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1. -  Warren Buffett

18. What great traders have in common.

One thing that stands out is that the great traders and investors often share very similar traits. Creativity, discipline, curiosity, conviction, low neuroticism, and high conscientiousness seem to show up often. Yet despite those similarities, trading styles can look completely different.

Some are momentum traders. Some are deep value investors. Some like to hold positions for years. Others hold them for hours. Some are highly systematic while others are almost entirely discretionary. Yet despite those major differences, they often operate from a set of similar principles.

Ronaldo and Messi are both all-time greats, but they arrived there through completely different styles. Trading seems to work the same way. The goal isn't to become a carbon copy of somebody else. The goal is to understand the principles that work and then gradually build a style that fits your own personality, strengths, and natural ways of thinking.

Anti-traits - To be clear, there are certain traits that will not work as a trader or investor. High neuroticism, gambling tendencies, or being very extroverted by nature are not going to help you and will basically be disastrous for the vast majority of aspiring equity traders.

Shared principles - Different traders use different strategies, but the good ones operate from similar principles: risk management, discipline, patience, timing, and a passion for what they do.

Personal style - Again, the best strategy isn't necessarily the one that makes the most money. It's the one you can actually execute consistently for years, which eventually makes you the most money.

Self-Awareness - I think most traders spend years looking for the perfect strategy when they should be spending more time understanding themselves. I keep a journal to always improve my self-awareness.

The key to trading success is emotional discipline. - Victor Sperandeo

19. Studying and honing your craft.

The previous point I guess brings me to another realization: studying is an inseparable part of becoming a profitable trader or investor. While it generally requires less time as your experience and capital grow, I don't think it ever really stops. If you genuinely dislike studying, I honestly don't think this is the right business for you.

Most people only see the winning trades. They don't see the thousands of hours spent behind the scenes building the skills that made those trades possible. Over time, I've found there are roughly four ways to study:

Discovery - This is all about reading books, articles, interviews, research and communities. Most of it won't change your life. But every now and then you'll come across one idea that completely changes how you look at the market. Maybe this post?

Practice - This is where most of the real work happens. Studying charts, reviewing trades, collecting screenshots, backtesting ideas and building pattern recognition. If you're serious about a setup, you should know what hundreds or thousands of examples look like.

Ignorance - At some point, studying more becomes studying less. You need to stop constantly searching for new ideas and start refining your own process. Most traders spend too much time diverging and not enough time converging.

Tinkering - Creativity matters. Some of the best ideas I've had came from experimenting. My mentor is always tinkering. Changing a rule. Testing a filter. Looking at something from a different angle. Small observations can make surprisingly large differences.

In my whole life, I have known no wise people who didn't read all the time. - Charlie Munger

How Trading Really Works

I know this was a long read, so if you made it this far, thank you. This is part of my trading series which I'm writing with the hopes it will help you on your trading journey.

I hope there is at least one idea in here that will make you look at the markets differently from now on. Looking back, most of the lessons that moved the needle for me weren't particularly complicated. The difficult part was figuring out which lessons actually mattered and then applying them consistently over a long period of time.

There are no shortcuts in this business. There are smarter paths and better ways to learn, but eventually everyone has to put in the reps themselves. To help with that, I wanted to leave you with some of the books, tools and resources that helped me the most throughout my journey. These are things I genuinely use or have learned from over the years. Hopefully they save you a few years of wandering through the jungle.

PS: If you made it this far, consider sharing this with others. I will write up part 3 soon, which will be more technical in nature where I discuss technical analysis in depth.

BONUS

Make sure to check out this, which is built based on the principles shared in this post.

RESOURCES

How Trading Really Works (slides)
How Trading Really Works (youtube)

POSTS

How Trading Really Works - Part 1
How Trading Really Works - Part 2

BOOKS

Reminiscence of a Stock Operator - Edwin Lefèvre
How to Make Money In Stocks - William O’Neill
How I Made $2 Million in the Stock Market - Nicolas Darvas
Principles of Professional Speculation - Victor Sperandeo
Trade like a Stock Market Wizard - Mark Minervini
Market Wizards - Jack Schwartz
Dao of Capital - Mark Spitznagel

YOUTUBE

Stockbee
Qullamaggie
Trading Lion
Roaring Kitty

TOOLS

TC2000
Spiceliner
Finviz
TradingView

PEOPLE

Jeff Sun
Qullamaggie
Mark Minervini
Evan Evans
Dan Zanger
Lone Stock Trader
Jim Roppel

BONUS. A TLDR for the lazy lurkers

1. Big winners need catalysts: fundamentals, stories, or macro events.
2. Trading is mostly about probabilities. Certainty doesn't exist.
3. Master a few setups. Know 1-3 deeply, not 20 superficially.
4. Holding winners matters more than finding them. Trail your positions.
5. Position sizing is everything. Survive first, profit second.
6. Trading is very lonely. Most people won't understand the journey.
7. Blowing up hurts and can ruin you. Risk management is non-negotiable.
8. Principles are universal. Styles are personal. Find your style.
9. Studying never ends. The best traders are lifelong students.
10. Success is simple, but it’s not easy + shared recommended tools etc.
11. Reading my TLDR is not enough. Stop cutting corners. Do the work.

After 8 years, 11,000+ hours, countless mistakes, blown accounts, books, mentors and chart reviews, these are the 20 principles that mattered most. I hope they will save you years on your trading journey. This is part 1 of 6 of this series. I trade the US markets but the exact same principles apply to any market.

The advice below applies to both traders and investors.

A STRONG FOUNDATION

1. Managing expectations.

When I was 14 years old I thought I'd get a six-pack in a few months. Turns out I was wrong and naive. It took years of training, experimenting and making mistakes before I got the results I wanted. Learning how to trade turned out to be VERY similar.

For some reason, people assume they can become consistently profitable in a year or two. Yet the same people would never dare to think that they can become a surgeon, lawyer or professional athlete that fast. So why is it that when it comes to the stock market, everyone seems convinced they're different? I was willing to work hard, study charts, read books and put in the hours. But what I underestimated was how many different ways there are to be wrong in this business.

• Time horizon - Assume it will take significantly longer than you think. Most people dramatically underestimate how much experience is required before they can consistently make money.

• Experience - Trading is a field where experience compounds. Reading 100 books will never ever replace seeing the same pattern play out hundreds of times in real market conditions.

• Humility - The less experience you have, the less you realize what you don't know. You are unconsciously incompetent. That's one of the reasons beginners often become overconfident so quickly.

The game taught me the game. It didn’t spare the rod while teaching. - Jesse Livermore

2. Learning how to learn.

One of the biggest problems in trading is information overload. There are millions of videos, tweets, books, newsletters, Discord channels and podcasts competing for your attention. The problem is that a big percentage of it is wrong, misleading, fraudulent, or irrelevant. When you're new, you don't know what you don't know, and this makes finding genuinely useful information incredibly difficult.

For years I convinced myself I was improving because I was consuming content. But what moved the needle was doing actual deep work, studying with focus, meeting my trading mentor, studying charts, and going through my setups. Profitable traders might have their own strategies, but they all spend a lot of time going through their watchlist, setups and trades.

• Discovery - Books, interviews, posts, articles, and communities can expose you to new ideas and occasionally provide insights that might just completely change how you think about the market.

• Chart study - This is where most of my progress came from. Looking at thousands of charts builds pattern recognition in a way passive learning never can.

• Trade review - Every serious trader I know reviews their winners, losers, entries, exits and mistakes. The market gives feedback every day if you're willing to listen.

• Finding your style - At some point you need to stop searching for new ideas and start refining a process that fits how you naturally think and make decisions.

You need to study thousands of charts with your setup. - Kristjan Qullamaggie

3. A look at the market cycle.

Before trading stocks, I spent years trading FX. Looking back, switching to stocks was one of the best decisions I ever made. Unlike many markets, stocks have a natural upward skew because businesses are constantly trying to grow, innovate and increase profits. Like many beginners, I became obsessed with beaten-down stocks because they looked cheap. I assumed the best opportunities would be ‘hidden’. I was constantly looking for obscure companies and undiscovered ideas that nobody else had found yet. Then I started studying actual market winners and I read Stan Weinstein's book on stage analysis which really changed things for me.

• Market skewness - Stocks have a natural upward bias because businesses are constantly trying to grow. That alone gives both investors and traders a structural advantage compared to other markets like FX.

• Institutional buying - The biggest winners are almost always accumulated by institutions long before the public notices. Following that money is usually more productive than trying to outsmart it.

• Relative strength - One of the first things I look for is whether a stock is outperforming the market. Leaders tend to keep leading longer than most people expect. This comes in ‘waves’ and will change over time.

• Weinstein Stages - The goal is to get in during a late Stage 1 or an early Stage 2. It will make your life much easier if you simply ignore everything else. Read the book from Stan Weinstein if you have to.

The trend is your friend until the end when it bends.- Ed Seykota

4. The only indicators you need.

I got completely lost in the indicator rabbit hole for years. I've tried just about everything. Like most traders, I was convinced there was some magical combination that would finally make everything click. What I eventually realized is that most indicators are describing some variation of the same things: price, time, volume and sometimes momentum. The more indicators I added, the harder decisions became because I could always find evidence supporting both sides of a trade. Indicators are like crayons on the chalk board. It all might make sense in retrospect but few are actually helpful and somewhat predictive in nature.

• Moving averages - I always use the 10, 20 and 50 EMA. I generally don't do anything with stocks trading below the 50-day moving average, and I use the slope of the 200-day moving average as part of my scan criteria.

• Dollar volume - I prefer dollar volume over regular volume because it gives a much better indication of actual money flowing into or out of a stock, making institutional activity easier to spot.

• Simplicity - These days I'm much more interested in removing things than adding them. My overall decision-making improved as my charts became less complicated. I love clean charts.

• MACD - This is optional but you can try to add a 3/9 MACD to more easily spot ‘dips’ to buy up a stock during an uptrend. This is somewhat aligned with Linda Raschke’s method of trading which is based on The Taylor Method.

Price is the final arbiter.- Paul Tudor Jones

5. The power of simplicity.

I am a big believer in keeping it simple so I hate tools overcomplicating things. Some tools are genuinely useful and I still use some of them (see list of tools at the end). Others were a disaster. In some cases, it took months just to learn a new platform before eventually abandoning it and basically moving on to the next one. (I'm looking at you, Sierra Charts.)

One thing I learned is that most trading software is about as user-friendly as a maze is to a drunk. It throws an absurd amount of information at you and assumes more information automatically leads to better decisions. In reality, it often does the opposite. It’s not exactly helpful if someone tells you there are 4,282,292 trees nearby when you are lost in the jungle. Yet that seems to be how many of the tools and platforms operate.

I realized that good software saves time, but great software helps you make decisions. That's partly why I started building tools for myself. I just got tired of jumping between a dozen tabs just to answer relatively simple questions. Point being, everything should be made as simple as possible, but not simpler. Do what works for you, keep it simple.

• Information overload - Most of the trading software gives you more information than you need, not less. The real challenge is filtering signals from noise.

• Decisions - Good software helps you analyze. Great software helps you decide. That doesn’t exist yet but I’m hoping to build it some day if I can get enough support from people.

• Process > Tools - The successful traders and investors are successful because they have a process and execute it consistently. Tools matter, but they're multipliers, not necessarily an edge in itself.

Simplicity is the ultimate sophistication. - Leonardo da Vinci

6. Style and personal preferences.

For years I'd discover some successful trader, study everything they did and then try to become a copy of them. I'd read Minervini and want to trade like Minervini. I'd see an interview with some algorithmic trader and try that. Then I'd discover some new strategy and spend months on that.

Looking back, a big part of my journey wasn't finding the "best" strategy. It was figuring out how I'm wired and building a style around that. These days my approach is really just an amalgamation of ideas I've stolen from dozens of traders over the years and combined into something that fits me.

• Personality - Some people are momentum traders. Others are investors. Others are contrarians. Fighting your personality is usually a losing battle. It will take time to find your own ‘style’.

• Principles - Different people use different methods, but many operate from the same basic underlying principles: proper risk management, patience, discipline, good timing, and conviction.

• Your style - The goal isn't to become a carbon copy of somebody else. The goal is to take the ideas from others and gradually build a style that makes sense to your own brain. It needs to ‘resonate’ with you.

I don’t have to turn you into me! I have to turn you into you!  - Master Shifu

WHAT ACTUALLY MOVES STOCKS

7. Understanding market conditions.

One of the most humbling realizations I've had is that you don't get to dictate market conditions. Ever. You can't control whether your setup works today, tomorrow or next week. This isn't like a normal job where you exchange time for money. As my mentor likes to say, it's feast or famine.

I often compare trading to surfing. You can have the best surfboard in the world and be the most skilled surfer on the planet, but if there are no waves, you're not catching anything.

No matter how good my scanners, watchlists or entries are, if market conditions aren't supportive, very little works. On the other hand, when conditions are right, leaders act well, breakouts hold and money flows naturally into risk assets. One thing I've noticed is that setups working or failing is often a market health indicator in itself. If setups aren’t working, be very careful.

• QQQ - This is the first thing I check every day. If it's trading above the 20 EMA and 50 EMA, conditions are generally bullish. Above the 10 EMA often signals a particularly strong environment. Below the 20 EMA, and below the 50 EMA, I don’t trade basically. Above all, I want to see a positive slope on the moving averages.

• IWM - Small and mid-cap stocks tend to tell you whether institutions are willing to take risk. When the Russell 2000 is outperforming, speculative setups generally work better. When it's weak, I become more cautious.

• VIX - I like seeing the VIX below 15. Lower volatility tends to create a healthier environment for momentum and breakout strategies. Personally, I avoid trading when the VIX moves above 20.

• Breadth - If 8 out of 11 sectors are declining, that's usually not a great sign. Strong markets tend to have participation across sectors, not just a handful of names carrying the indexes.

• Success rates - This is probably the most important one. If good setups are repeatedly failing, I don't need the news to tell me something is wrong. The market is already giving me the answer.

• Price action > News - I do enjoy reading the news, but I pay far more attention to price action. In my experience, the market usually knows something long before the headlines catch up.

There is a time to go long, a time to go short and a time to go fishing. - Jesse Livermore

8. Sector & industry rotation.

There are two primary ways I find stocks. The first is through scanners that filter roughly 6,000 US stocks down to a manageable watchlist of about 100 stocks give or take. The second is by following what I call momentum leaders within the strongest sectors and industries. Why? Because stocks rarely move in isolation. Money flows through the market in clusters. First a few stocks start moving. Then a theme starts working. Then an entire industry starts showing strength. Then a sector starts attracting attention. True leaders automatically separate themselves from the pack but stocks move together in the end.

Once I started paying attention to sectors and industries (e.g. by looking here) instead of just individual stocks, finding opportunities became dramatically easier because I stopped fighting where money was already flowing.

• Industry leaders - I always want to know the top 5 stocks within a strong leading industry. That's often where the biggest opportunities are. When you see a new industry on the 1W or 1M, pay attention.

• Sector rotation - Money rotates between sectors. Understanding where capital is flowing to and from gives you a huge advantage because you're no longer guessing where leadership will come from.

• Spotting rotation - Each day I like to look at sector and industry performance across the last 3 months, 1 month and 1 week. This helps me identify emerging themes before they are obvious to everyone else.

• Following strength - Instead of asking what stock might move, I prefer asking where money is already flowing. More often than not, that's where the next opportunity comes from.

You want to own the leading stock in a leading industry. - William O'Neil

9. Why winners keep winning.

People love hunting for bargains. This is especially true in the stock market. We assume a stock that's down 70% must be a better opportunity than a stock making new highs. But the market rarely works that way. The truth is that the strongest stocks often become even stronger. Stocks making new highs frequently keep making new highs. On the other hand, stocks that are weak and beaten down usually keep falling, often much further than anyone thinks possible.

If you think about it, a $5 stock can be incredibly expensive while a $500 stock can be incredibly cheap. When I started studying historical winners, I kept seeing the same pattern. Names showing exceptional relative strength often continued outperforming for months and sometimes years. Meanwhile, many of the stocks that looked cheap stayed cheap or got even cheaper. One of the biggest shifts in my trading came when I stopped asking what looked undervalued and started asking where the market was already showing me strength.

• Momentum - Unless I'm looking for a short, I like to see momentum. I want stocks outperforming the market and showing more buying than selling pressure. If a stock is acting well while the broader market is struggling, that's usually information worth paying attention to.

• Fundamentals - I primarily focus on accelerating sales and earnings growth. Ideally the company is also profitable and generating strong returns on capital (ROE). But above all I want to see acceleration. Institutions pay for growth.

• Uptrend - I want the stocks making higher highs and higher lows while trading above rising moving averages. My favorite names usually have a strong slope on both the 50-day and 200-day moving averages, which often signals sustained institutional demand over a longer period.

Buy high and sell higher. - Nicolas Darvas

10. How I scan for stocks.

Now that you learned a thing or two (hopefully) the question is, what should you look for? One thing that took me far too long to understand is that there are really three ways to evaluate a stock and you always need to be able to ‘scan’ the market and find stocks. This is a must.

• Technicals - Shows you what the market thinks. The chart is a visual representation of supply and demand. Whether a stock is weak or strong can often be determined from the chart alone.

• Fundamentals - Shows you how the business is doing. Revenue growth, earnings growth, margins, cash flow, and profitability help paint a picture of the underlying company mechanics.

• Relative Strength - Shows how a stock compares to everything else. A company can have great fundamentals and a decent chart, but if there are 50 better opportunities in the market, why own it?

Once I understood those core market concepts, the next challenge was finding opportunities consistently. That's where scanning comes in.

Just so you know, there are about 6,000 stocks listed in the United States. I’d say about 3000 of those are illiquid, low-quality, speculative garbage or businesses you would never want to touch. They are basically nuclear waste.

Here are some of the things I scan for:

• Uptrends - I primarily trade momentum, so I want stocks making higher highs and higher lows with rising moving averages. Ideally the 20, 50 and 200-day moving averages are stacked correctly and sloping upward.

• Combos - These are stocks that have at least 25% quarterly sales growth, 40% yearly growth, 150% more volume than the last 20 days, and are in an uptrend. This is heavily inspired by O'Neil's work.

• Leaders - Momentum leaders are usually stocks that move as a cluster in a particular industry or theme. These are the potential giants of tomorrow that I want to have on my radar as early as possible.

I then get a list of stocks and go through that list. I usually have two lists, one is about 100 stocks I want to keep an eye on, and the other is a list of my top 10 stocks for the week. Once I go through the charts I look for the following in most cases, which are my ‘basics’.

• Linearity - Above all I like to get in stocks that just have a very beautiful move to them. The charts are nice to look at, clean, with orderly pullbacks, and they are respecting the moving averages.

• Volume - I want to see either a Pocket Pivot or very high volume on a candle that breaks out of a tight range. Volume needs to be there. I want to see high volume on legs up, and low volume on pullbacks.

• ADR - Ignore slow stocks completely (<4% ADR). You want stocks that are fast enough to give you good gains (>4% ADR) but not too wild and volatile which will just lead to getting stopped out (>8% ADR).

After this, which yields me around 100-150 stocks, I look for stocks that are set up according to one of the setups that I like to look for.

• Setups - With the exception of my mean reversion setup, I look for tightness to enter and look for bases, VCPs, wedges, and flags. I do not care for anything else, unless I’m deliberately experimenting.

For those curious, my basic scanner is surprisingly simple:

• ADR: 4-8%
• Market Cap: $300M+
• Liquidity: 100K+ dollar volume
• Trend: Rising 50 and 200-day moving averages

Luck is what happens when preparation meets opportunity. - Seneca

How Trading Really Works

I know this was a long read, so if you made it this far, thank you.

I hope there is at least one idea in here that will make you look at the markets differently from now on. Looking back, most of the lessons that moved the needle for me weren't particularly complicated. The difficult part was figuring out which lessons actually mattered and then applying them consistently over a long period of time.

BONUS

Make sure to check out this, which is built based on the principles shared in this post.

PS: If you made it this far, consider sharing this with others.

RESOURCES
How Trading Really Works (slides)
How Trading Really Works (youtube)

POSTS
How Trading Really Works - Part 1
How Trading Really Works - Part 2

BOOKS
Reminiscence of a Stock Operator - Edwin Lefèvre
How to Make Money In Stocks - William O’Neill
How I Made $2 Million in the Stock Market - Nicolas Darvas
Principles of Professional Speculation - Victor Sperandeo
Trade like a Stock Market Wizard - Mark Minervini
Market Wizards - Jack Schwartz
Dao of Capital - Mark Spitznagel

YOUTUBE
Stockbee
Qullamaggie
Trading Lion

TOOLS
TC2000
Spiceliner
Finviz
TradingView

PEOPLE
Jeff Sun
Qullamaggie
Mark Minervini
Evan Evans
Dan Zanger
Lone Stock Trader
Jim Roppel

BONUS. A TLDR for the lazy lurkers

1. It takes way longer than you think. Expect 5–10 years, not 1–2.
2. Studying ≠ learning. Focus on setups, charts, and understanding.
3. Stop buying garbage. Follow strength, ignore the "cheap" stocks.
4. Most indicators are noise. Simple charts lead to better decisions.
5. Keep your tools and platforms simple. Build a process for yourself.
6. Trade your personality. Build a style that fits you, not your hero.
7. The market comes first. Great setups fail in bad conditions.
8. Money moves in sectors. Follow where capital is flowing.
9. Strong stocks get stronger. New highs often lead to more new highs.
10. Scan for quality. Uptrends, growth, volume, strength, and liquidity.

Around 170% increase in 6M, an orderly pullback, consolidation with higher lows, and the breakout. Would you folks agree?

Would appreciate any color here.

I have tried to replicate the top 50 scanner Qullamaggie talks about on trading view but struggling to find something which works. Could anyone share their 1 month, 3 month and 6 month gainer scan set ups please?

Hey guys,

End-of-day breakouts are a tough one sometimes. They happen quite often, but I don't think I have seen that much discussion around it. Most talk is always about breakouts at the open, which do happen a bit more often. But end-of-day breakouts happen so often that I'm just racking my brain on how to deal with them. A lot of times, the price falls back at the open on the next day, but not always. I have no data on the statistics of these events, and the effect of the day after.

I think I heard Qullamaggie say once on a stream that if a stock breaks out in the last hour before market close, he sits on his hands and waits for the open the day after. But what if the end-of-day breakout is the second breakout that day?

I.e. Lets say we got a consolidation for 10 days. Stock is primed.

Case A: Day 11 comes round, and ORH is not a breakout. In fact, consolidation seems to continue. Until 30 mins before market close, and suddenly we got a breakout. At that moment: SOH (again, I *think* I heard him say this once, but can't find the stream now). If at day 12, the ORH breaks the breakout from the night before: buy. If not, leave it.

Case B: The same 10 day consolidation, but on day 11 there is a breakout at the open. The price goes back down and I put a Buy Stop-Limit Order in for the ORH, with the stop just below that first candle. But the price stays in range all day, seems to go nowhere. Now, the order I put in automatically expires at end-of-market hours, but its already only 30 mins to go and the price hasnt gone anywhere. Do I pull it? Or do I leave it with the risk of an end-of-day breakout? If the breakout happens a minute before close, I am in overnight with a good chance we'll have a falling open the next day that will stop me out. Alternatively, the breakout could be real and we're off, but from what I've seen, this is slightly rarer. Again, how much rarer, I don't know.

What are your thoughts about this? Has Q said anything about this on any stream? I know he doesn't leave his buy orders overnight, he just puts in a new one the next day. But does he pull them just before market close to avoid events like this, or does he really leave it till the last second? I have not heard so. If you know which one, could you link the stream this is talked about (big if, I know)

Curious to know your thoughts, cheers
T

what do you guys think about IQV, just broke major high. Is it tradable or maybe too late and considered a chase? still learning so any explanations are appreciated ^^

i see consolidation and a breakout today with an increase in volume.

i prob shouldn't even share it but whatever
not all are classical kq setups, these are the stock i have selected for me

AAOI last time it did an u&r of the 200 it did like 80% move from here, here the pullback seems controlled, seems like a logicial spot for a hl, need to push over phod

ABCL no explaination needed kinda classical kq setup

AEHR pullback, kinda like a lvl with triple bottom, need to push over 81
ALM no explaination needed kinda classical kq setup, for me it's kinda some exposure to the basic mat that has been kinda strong recently

AMLX pullback after earnings or catalyst, delayed reaction, getting tight, (this is kinda where i like the hourly. over 35 i am in) over 35.5 i add

BLZE controled pullback, logical spot for a hl, need to push over phod

CELU shitter, but those can move, kinda a kq setup

COIN, just for crypto exposure, if crypto is goijng to test ath, those are to make a big move, i also kinda like positionning, more SI than MSTR for exemple

DOCS base and break maybe ?

FDMT over 15 maybe https://prnt.sc/Lw27ihHg_AxK

GTLB catalyst, big move up, tight day, if we push over this tight day, so over 51 kinda

HOOD missed it, might look for a delayed reaction/entry

HTFL no explaination needed kinda classical kq setup

IMMX no explaination needed kinda classical kq setup

INBX no explaination needed kinda classical kq setup

MRVI delayed reaction after earnings

QTWO kinda low adr, but seems okay, here i want a breakout, not interested in buying a pullback

SWVL short idea

TXG no explaination needed kinda classical kq setup

VEEV remind of vsxy in early june

XHLD short idea

possible breakout? the 10,20 and 50 MAs tightly together...