Think & Trade Like a Champion
Think & Trade Like a Champion

Think & Trade Like a Champion

outcome; therefore, you are not fully empowered. Those who choose to win seek successful role models, develop a road map for success, and accept setbacks as valuable teachers. They put a plan into action, learn from their results, and make adjustments until they achieve victory. (Location 91)

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It’s not just putting in the hours that will make you successful; it’s the persistent intention to improve by examining your results, tweaking your approach, and making incremental progress. (Location 231)

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Those who succeed big at anything all have the same attitude: You keep going until it happens or you die trying. Quitting is not an option. If (Location 245)

Odds are that you won’t be good at value investing, growth investing, swing trading, and day trading. (Location 250)

Your goal as a stock speculator is preparedness, to trade with few surprises. To do so, you need to develop a dependable way to handle virtually every situation that may occur. (Location 416)

The best trades emerge and rally for several days on increased volume. This is how you differentiate institutional buying from retail buying. (Location 491)

Determining whether the stock is a tennis ball or an egg will tell you whether you should continue holding it or not. After a stock advances, the price at some point will experience a short-term pullback. If the stock is healthy, the pullbacks will be brief and soon met with buying support, which should push the stock to new highs within just days—bouncing back like a tennis ball. (Location 504)

Stocks under strong institutional accumulation almost always find support during the first few pullbacks over the course of several days to a couple of weeks after emerging from a sound structure. (Location 512)

His definition of “extended” is any stock that is up more than 10 percent from the most recent consolidation. (Location 554)

David warns against buying a stock solely on these characteristics if the stock is extended. (Location 574)

You should know the signs that a trade is problematic, which can tip you off it’s time to exit the stock or reduce your position—in some cases even before it hits your stop. (Location 582)

If a stock breaks out on low volume and then comes right back in on high volume on subsequent days, that’s a real reason for concern (Location 616)

“Winning horses don’t back up into the gate.” (Location 619)

To achieve superior results and survive the bear markets, you must control risk, every trade, every day. This starts with determining the stop-loss point. (Location 708)

Every huge loss starts as a small one. The only way to protect a trade from turning into a large loss is to accept a small loss before it snowballs (Location 732)

My stop-loss is actually an important part of my selection process. I may set my sights on a particular name, but I’m not going to buy a stock unless it offers me a low-risk (Location 798)

If you consistently buy stocks with more reward than risk, over time you’re going to be in good shape, because you will have an edge. (Location 801)

I’m looking for stocks that make big and fast price gains. The ego hurts investors time and time again. If you don’t believe that the ego is assertively at work in your trading, consider the following: (Location 834)

A strategy is only as good as your willingness to follow your own rules. A sound plan takes implementation, which takes discipline. That part I cannot do for you. (Location 846)

Not losing big is the single most important factor for winning big. As a speculator, losing is not a choice, but how much you lose is. (Location 867)

Long-term success in the stock market has nothing to do with hope or luck. Winning stock traders have rules and a well-thought-out plan. Conversely, losers lack rules, or if they have rules, they don’t stick to them for very long; they deviate. (Location 870)

Your actual results encompass not only your strategy, but more important, your foibles, idiosyncrasies, and emotions that often override a portion of even the best laid-out plans. (Location 1013)

In the early stages of a new bull market, a new emerging leader could make a huge price move. If you give the stock more room on a portion of the shares, even a small position in a big mover could make a big difference in your bottom line. The key to using staggered stops is to try to maintain your line without getting knocked out of the entire position. (Location 1024)

return. In the end, it all comes down to having your gains on average be larger than your losses, nailing down a profit, and repeating the process. This is the basic objective of any business endeavor. (Location 1290)

Pros play the percentages; they’re consistent, and they avoid the big errors. Most of all, they avoid risking money on low probability plays. (Location 1494)

If I’m not profitable when I’m 25 percent or 50 percent invested, why would I move up my exposure to 75 percent or 100 percent invested or use margin? (Location 1593)

I know from experience that “calling an audible” and making on-the-spot snap decisions can get me into a lot of trouble, simply because I haven’t done the full research. So, I don’t do it! (Location 1671)

My general rule of thumb is never hold a large position going into a major report unless I have a reasonable profit cushion. If I have a 10 percent profit on a stock, then I could usually justify holding into most earnings reports. However, if I have no profit, or worse I’m at a loss, I usually sell the stock or cut down my position size to guard against the possibility of a 10 to 15 percent gap against me. Regardless of how well you know the company, holding into earnings is always a crapshoot. (Location 1685)

There are many distractions that can cloud your judgment when trading. Your job is to keep your thinking pure and focused on what matters within your own circle of competence. The hallmark of a pro is to operate within this circle and ignore everything else. (Location 1705)

You have your watch list containing the best possible candidates for your next potential trades. Let’s say that one or two appear to be setting up nicely according to your criteria. (Location 1725)

The bigger problem with a lucky shot is that it reinforces bad habits. You tell yourself, this is easy. You take bigger risks, buying stocks for no other reason than having a “hunch” or because of “something” you heard. It might even work on occasion. (Location 1751)

The most common characteristic shared by constructive price structures (stocks that are under accumulation) is a contraction of volatility accompanied by specific areas in the base where volume recedes noticeably. (Location 1913)

During a VCP, you will generally see a sequence of anywhere from two to six price contractions. (Location 1917)

Typically, most VCP setups will be formed by two to four contractions, although sometimes there can be as many as five or six. (Location 1924)

formed. I refer to each of these contractions as a “T.” (Location 1926)

Similarly, with each contraction in a VCP, the price of the stock gets “tighter”—meaning, it corrects less and less from left to right on successively lower volume as the supply diminishes. (Location 1931)

Tightness in price from absolute highs to lows and tight closes with little change in price from one day to the next and from one week to the next are generally constructive. These tight areas should be accompanied by a significant decrease in trading volume. (Location 1946)

When a pivot aligns with the line of least resistance, a stock can move very fast once it crosses this threshold. As a stock breaks through this line, the chances are the greatest that it will move higher in a short time. (Location 2038)

Every correct pivot point develops with a contraction in volume, often to a level well below average. (Location 2050)

structure. In fact, we want to see volume on the final contraction that is below the 50-day average, with one or two days when volume is extremely low; in some of the smaller issues, volume will dry up to a trickle. (Location 2052)

Under most conditions, stocks that correct more than two and a half or three times the decline of the general market should be avoided. (Location 2075)

Keep in mind that the only way a stock can become a superperformer—moving from, say, $20 to $80 and then to $180—is for that stock to make a series of new highs all the way up. (Location 2112)

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Ultimately, opinions mean nothing compared with the wisdom and verdict of the market. Let the strength of the market, not your personal opinion, tell you where to put your money. (Location 2235)

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