Ed Note: Due to the Juneteenth holiday in the U.S., the market will be closed as well as our office and customer service today, June 19. The office and customer service team will be open again for business tomorrow, June 20. That said, when you’re learning to trade, the most important thing you can do is cultivate discipline. Which means keeping your education on schedule – even when markets are closed. Today, I’ve got Part 2 of my Patterns & Profits Cash Course…
Last week, I introduced you to my Patterns & Profits Cash Course. I created this five-part course for anyone who’s sick and tired of playing by Wall Street’s “rules.” And every week, on Wednesdays, we’re going to cover one section of this course.
But before we move on to Part 2, I want to take a step back and talk about the most important lesson we covered in Part 1. This is one of the top secrets to making money in the stock market – something I wish I had known when starting out as a twenty-year-old trader – so it’s worth repeating.
It’s the kind of market intel that levels the playing field and gives you, the “little guy,” a real shot at making some serious cash… the kind of cash that can pay off all your debts, send your kid to a nice four-year college, or cover that dream vacation you’ve been wanting to go on.
And here it is…
Most stocks and ETFs are trash.
That’s right… pure junk.
Now I realize that this probably goes against everything you’ve ever been told. In fact, I’m willing to bet that at some point in your life, you’ve probably been told to dump your cash into a bunch of different stocks, mutual funds, and even annuities to make the most of your portfolio.
But here’s the problem…
Right now, there are over 4,000 public companies listed on U.S. exchanges and over 25,000 different stocks to trade worldwide. And the big banks and brokerage firms want you to gamble your money on all of them. The worst part is… they don’t actually care which ones you buy and sell, and they definitely aren’t trying to help you minimize your costs (and broker fees) and maximize your profits.
Whether you’re buying stocks, mutual funds, or even annuities – the Wall Streeters want you to spend your hard-earned cash on investments that’ll take 10, 15, or even 25 years to give you a mere 10%. And that’s 10% in a good year – if you’re lucky. Most of the time, the returns are far less than that, and they don’t even begin to factor in current inflation levels.
It doesn’t matter if your trade is a winner or a loser, your broker gets paid in fees and commissions. And even if your investments actually make you some money, the big investment banks are taking the thousands of dollars you’ve worked your entire life to save and are putting it to work on risky speculative investments to enrich themselves.
That’s how they rig the game against you.
They’re not looking out for your financial interests or your financial future. And that’s exactly why it’s time for you to take back control.
But with 25,000 stocks… where do you begin?
It starts with getting rid of the junk – you know, the 98% of stocks and exchange-traded funds (ETFs) out there that simply aren’t worth even a penny. Even that latest IPO that’s getting everyone’s attention, that hot stock tip from your friend, and that company you’ve spent hours researching and are convinced is a sure bet most likely belong in the junk pile.
Let’s dive deeper…
How to Find the Top 10 “Movers” to Trade
With so many “junk” stocks and ETFs out there, the last thing I’d ever recommend is trying to sort through all the optionable stocks (stocks that offer options) one by one – that will eventually drive you crazy. Fortunately, I’ve developed a great method to whittle it down to the 10 best stocks at any given time.
Now I use my proprietary tools to run a scan that searches for what I call my “Top Movers.” First, I look for only the stocks with options that trade in penny increments, typically within a $0.05 bid/ask spread. That narrows it down to around 250 stocks in total.
You can find that list of stocks without your own software by looking at the Options Penny Pilot list here and clicking on the “MIAX Options Penny Class List” CSV file under “Classes in Options Penny Pilot Program on the MIAX Emerald Exchange.”
But even though you know exactly where to go, sifting through 250 stock charts to look for the most volatile ones is still a lot of work.
So, these are the three parameters to cut that number down even further:
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Look for stocks over $100 per share
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Look for stocks that move an average of 1% a day between the high and low
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Look for stocks that correlate to the market
Here is a snapshot of the stocks that meet the criteria above and have been on the move over the previous seven days. Keep in mind that this list changes daily, so these results could be different from what you’re looking at when you open it:
You’ll often see exchange traded funds (ETFs) in a few of the top spots, but we’ve got a solid collection of stocks here, including Apple Inc. (AAPL), AbbVie Inc. (ABBV), Amazon.com Inc. (AMZN).
Now the two most important numbers to use in combination with this list is the stock’s percentage move over the last seven days and how well the stock correlates to the SPDR S&P 500 (NYSE: SPY). With those two numbers, you can figure out how well a stock moves, and if it’s moving with or against the markets.
Once you have this list of stocks, you can run any number of screens and filters to assess which of these “Top Movers” would make the best option play.
And now that you know exactly how to get rid of the junk, I want to give you the first step of my three-step process to successful trading.
Click below to get started.
To your continued trading success,
Tom Gentile
America’s #1 Pattern Trader