A couple friends of mine recently expressed their interest in the financial markets on social media recently, so I wanted to take this opportunity to share a few thoughts.
One was looking into the Robin Hood app, and the other was looking into trading Forex.
For the average person, it is my personal belief that the single best way to build wealth is through stock market speculation.
When I personally refer to stock market speculation, I am referring to trading with a strategy that seeks to capture “the big swing.”
That is why I included the quote from Jesse Livermore above.
Too many people (myself included years ago) get to wrapped up in the idea of trading for a living so they can quit their day job.
Most people who invest in the market really have little belief that it is possible to make big money in the market without some type of inside information, or some secret trading strategy.
As a result, they either just stick with mutual funds, maybe play a stock tip now and then, or they turn over management of their money to an investment advisor that usually gets trounced by the S&P 500.
I personally have been studying the markets for over 25 years, so I’ve learned a thing or two.
Legitimately, some people ask me why I am not filthy rich with the knowledge I have.
My answer? Some bad choices early in my adult life, coupled with some bad luck later on. As a result, I have not had the capital to exploit my knowledge for a long time.
But, that’s neither here nor there. You can always take what I say with a grain of salt… it doesn’t offend me.
Just read what I say, and if it makes sense, do some further research.
Two characteristics of stocks that are about to take off
Through the use of the TC2000 product I use, I have tracked the stock market closely for years. I’ve identified two key characteristics of stocks that have the potential to double in price, or more, in twelve months or less.
Characteristic #1
The first major sign that a stock is going to make big gains in the foreseeable future is that they’ve already made a significant price move over the last six months.
Quite often, before a stock actually moves substantially higher, it will already have risen 100% or more above its 52 week low. It is not unusual for this to happen in a matter of just a few weeks to a few months.
Characteristic #2
At some point in the six months prior to a stock taking off, there has been a spike in volume on a particular day or over the course of a few days.
That spike in volume usually is accompannied by a significant price move.
What this signifies is that someone with some big money believes that the stock price is likely to go much higher in the coming months.
This could be some company insiders, or possibly some institutional money that has the inside skinny.
Nonetheless, whenever you see these two characteristics in place, there is a good chance that the stock is going to move much higher over the next six to twelve months.
Let’s look at a popular stock that is a great example of this.
This is the chart of TSLA year to date in 2020. In February, the stock had surged to new all time highs on very heavy volume. That was a key indicator that the stock, despite its high price, was under heavy accumulation.
However, as a result in the early economic shutdowns related to the Covid-19 outbreak, the stock sold off sharply with the rest of the market.
TSLA then began clawing its way back, and by July, it was more than 100% above its 52 week low.
If you look closely, you may see the shape of a cup from the high hit in February, down to the March low and over to the “handle” formed in June. This is the classic Cup with Handle pattern described by William O’Neil in his book “How To Make Money In Stocks.”
Once TSLA broke out above its handle in July, it was off to the races. The stock has nearly tripled in price since. Not a bad return in less than six months.
The key is you need a methodology for identifying these types of stocks, and a strategy for exploiting these moves if and when they occur.
There is no foolproof strategy. Most of your trades will likely lose money.
However, the key to successful trading is that you make way more money on your winning trades than you lose on your losing trades.
That’s called cutting your losses short and letting your profits run.
If you are serious about learning more, check out my trading education site here… Tactical Trading Research.
Thanks for reading!
Leave A Comment